2:50 pm
The NDX has been down nearly 8% in the past month, 2.25% in the past day. An ugly week for those who were FOMOed into buying the all-time highs. The problem is, this may continue for another two weeks or possibly longer. Take note. It may get worse before it gets better.
ZeroHedge remarks, “For all the “big tech”, momentum, hype; for all the “all-time highs”; this has not been a great year for tech…
Based on closing prices, the only day since January 19th, that you could have bought the Nasdaq 100 index and be profitable, is January 31st (and unless I type quickly, that might not even be true).
Had you came into the year long the Nasdaq 100, you would be up just over 2%.
Think about how many people got “FOMO’d” into buying markets at levels they weren’t comfortable with?”
1:30 pm
SPX bounced from the 1987 trendline as it tests overhead resistance at 5000.00. The trendline may not hold on the next decline. The Cycles Model suggests more bad new may be revealed this weekend, so this is not the time to buy the dip.
8:00 am
Good Morning!
NDX futures tumbled to 17038.70 overnight on news of a battle between Israel and Iran. A partial recovery brought the NDX back up to test the 100-day Moving Average at 17349.76 where it remains now. Yesterday afternoon’s call on the Market was prescient as we may not see those levels again for quite a while. The overnight action may be called an irregular correction, where yesterday’s high at 17590.00 marks the top of a new Cycle.
Today’s options chain has the potential to be a train wreck, as Maximum Investor Pain lies at 17500.00. Anything beneath that is in short gamma, which may feed on itself.
ZeroHedge reports, “SUMMARY:
- Iran says its nuclear facilities remain unharmed: Reuters
- Situation in Iran’s Isfahan is normal, no explosion taken place on ground: PressTV
- CNN: Two US oficials say Israel indicated they would not attack nuclear targets. US didn’t “green light” this attack.”
SPX futures declined to 4927.10 before a bounce ensued. It has recovered back to 5009.00 thus far, near yesterday’s close. However, participants are shaken and low liquidity may exacerbate a further decline. The Cycles Model indicates a strong reaction over the weekend, regardless whether the SPX is stabilized for options expiration or not.
Today’s morning expiration shows options are tilted toward the short side on all strikes beneath 5100.00.
ZeroHedge reports, “While US futures are still modestly in the red, they are not only well off the worst overnight levels, but they are almost unchanged since yesterday’s close following a performative Israeli retaliation. which followed a performative Iranian attack, which appears to be the end of the story. For those who missed it, early on Friday local time, explosions echoed over an Iranian city on Friday in what sources described as an Israeli attack, but Tehran played down the incident and indicated it had no plans for retaliation – a response that appeared gauged towards averting region-wide war. The limited scale of the attack and Iran’s muted response both appeared to signal a successful effort by diplomats who have been working round the clock to avert all-out war since an Iranian drone and missile attack on Israel last Saturday. And so, after a whole lot of nothing overnight, as of 730am, S&P futures are practically unchanged at 5,045, Brent is actually lower compared to Thursday’s close after briefly rising above $90 earlier, gold is unchanged, bonds are modestly firmer though have pared the majority of the overnight advances, and bitcoin is higher after aggressively dumping late on Thursday. There is nothing of significance on today’s calendar.”
VIX futures spiked to 19.73 before ratcheting back down to 17.28. That move may have completed an expected correction, allowing the VIX to move much higher over the weekend.
Next Wednesday’s op-ex shows Max Pain at 16.00. Short gamma resided between 13.00 and 15.00. Long gamma begins at 18.00 and runs to 39.00.
ZeroHedge remarks, “Implied volatility of traditional havens such as the Swiss franc and US Treasuries remains remarkably subdued despite the situation in the Middle East, even as the former has outperformed most other havens, including the dollar. However, vol is beginning to pick up, in a sign risks are beginning to be more fully priced in.
Volatility is typically episodic. Most of the time it is low or falling, but then punctuated by episodes of extreme fear when it spikes, before beginning to trend lower again. It is a good metaphor for human behavior: ignore a potential risk up until the last minute – either believing it’s not really a danger, or pretending it’s not there at all and hoping it will go away, i.e. the ostrich effect – and then panic when said risk does turn out to be major problem (the UK government’s response to the pandemic is a good example).”
TNX futures dipped to 44.94 overnight before recovering back above 46.00. The Cycles Model suggests a final probe toward the Cycle Top at 48.40 before a reversal in the next few days.