9:52 am
Good Morning!
Yesterday was noteworthy in the fact that the Cycle Top, at 5264.65, formerly support for the past two months, became resistance in the SPX. Once that was tested, SPX declined sharply to Intermediate support at 5140.62, where it bounced. SPX may now test the trendline near 5200.00, although it may reverse short of that target. The next level of support is the 50-day Moving Average, at 5074.05. Beneath that lies the 1987 trendline and the 100-day Moving Average, at 4875.02. The Cycles Model suggests a possible month of decline ahead. Trending strength may switch to the downside early next week.
Today’s options chain shows Max Pain at a very crowded 5200 for both puts and calls. While clls occupy a small majority above that level, puts now dominate the options chain beneath 5200.00.
ZeroHedge reports, “US futures rebounded from yesterday’s late day rout even as European stocks slumped the most in almost two months and Asian markets tumbled the most in a month, tracking Thursday’s broad market retreat as oil prices held near five-month highs above $90 and investors braced for today’s jobs report where the whisper is of a hotter than expected print. As of 7:30am, S&P futures rose 0.3% after tumbling 1.4% yesterday; even with the modest gain the index is on track for its biggest weekly decline since mid-February. Europe’s Stoxx 600 slid more than 1%, following the previous session’s sharp retreat on Wall Street and losses in Asia earlier on Friday. US and euro-area bond yields inched higher as fears of an escalation in the Middle Eastern conflict kept Brent crude futures near $91 a barrel, fanning inflation concerns. The USD is stronger, bitcoin has resumed selling, commodities are higher led by Energy products and base metals. From a macro perspective, NFP is the focus, survey is +214k survey vs. BBG whisper +230k; both are down from the +275k prior.
VIX is consolidating near the upper end of yesterday’s trading range. The Cycles Model suggests that a burst of trending strength may be imminent. The February high is likely to be overcome.
Wednesday’s op-ex shows Maximum Investor Pain at 14.00. Negative gamma beneath that level is scarce, while positive gamma is building near the October high.
ZeroHedge observes, “What started to be a rather stable and uneventful session, ended in some turbulence after a sharp reversal lower triggered by Middle East geopolitical headlines (a spike in oil) and hawkish fed speak.
All sectors finished in the red, with 430 S&P names finished lower (NVDA, GOOG/L, AMD, and AMZN contributed to 30% of move lower). Momentum, AI & New Technology, and Retail Favorites were among the hardest hit all down -2%. NDX broke through its 50dma (17,903…keep an eye on 100dma = 17,134).”
TNX may be consolidating, although at a higher level today. The Cycles Model suggfests trending strength building over the next two weeks. The Cycle Top at 48.28 appears to be an appropriate target.
BKX is pressing down on its 4.5-month trendline at 100.00 this morning. Loss of upward support will be critical and lead to a confirmed sell signal. This is also a clear sign that liquidity is drying up.