3:32 pm
Although SPX began today in a panic decline, it was rescued out of short gamma (beneath 5050.00) by a bounce at the 2-hour Cycle Bottom support at 4994.69. The close may be near the options neutral zone from 5050.00 to 5070..00.
8:20 am
Good Morning!
SPX futures sank to a morning low at 5032.90 thus far. The reversal yesterday came right on time, but unrecognized by many due to a (barely) positive close. While buy-the-dip activity is muted, selling may not gather strength until a decline beneath 4950.00, where panic may set in.
Today’s Maximum Pain level lies at 5070.00. Long gamma may begin at 5080.00 with short gamma starting at 5050.00.
ZeroHedge reports, “The three-day rebound from last week’s rout ended with a thud after the close yesterday when Meta imploded, plunging as much as 17% and losing $200 billion in market cap, after the company revealed disappointing revenue guidance coupled with higher capex projections. The report sent US futures lower, and as of 7:50am, S&P futures are down 0.6% with Nasdaq futures sliding 1% (Meta accountied for more than half of the decline) dragged by Mag7 names (META -12.6%, AMZN -2.2%, MSFT -1.5%, GOOGL -2.8% but Semis are broadly stronger, buoyed by META’s capex spend (at least $70bn over next 2 years). Bond yields are flattish with the 10Y trading at 4.65% and the curve slightly steeper as the USD is moving lower but not for the yen which continues its historic implosion as the hopeless BOJ sits in shock and watches its currency collapse (there is a BOJ meeting tonight where we expect nothing from the headless chickens). Commodites are rising today with strength in Energy and Metals. In macro, we get Q1 GDP numbers today with an update on March inventories and the normal jobless claims, but tomorrow’s s PCE is the more impactful number. After the close we get earnings from GOOG/MSFT which take on heightened importance given META’s price reaction.”
VIX futures rose to 16.25 this morning thus far, as they consolidate in preparation for the great reversal. The Cycles Model suggests that VIX may advance in strength over the next 1-2 weeks before the current Master Cycle is complete. Reported jobless claims continue to ignore reality.
The May 1 options chain shows Max Pain at 16.00. Short gamma resides between 12.50 and 15.00. Long gamma has weakened somewhat, but may begin at 16.00.
TNX futures surged higher today on the report of (lack of) jobless claims, reaching a high thus far at 47.17. The Cycles Model shows yields strengthening through the end of the week. The rally target may be the Cycle Top at 48.55. The administration is being backed into a serious corner.
ZeroHedge reports, “One day after the US sold a record amount of 2 Year paper in a very strong auction, the Treasury has followed that up with a record amount of 5 year paper, this time in a less than impressive sale.
The $70BN in 5Y paper was up $3BN from $67BN last month and was the highest amount on record offered for the tenor. But don’t worry there will be plenty more record auctions in the future: after all, the US has now crossed into the Minsky Moment and it is now issuing debt just to pay the interest on its existing debt.”
ZeroHedge advises, “If the Biden admin was to have any hopes of the Fed cutting rates and monetary easing ahead of the election, the tires would need to start falling off the US economy right… about… now… Which is why we didn’t find it at all surprising that moments ago the Biden Bureau of Economic Analysis reported that in Q1, US GDP unexpectedly collapsed to just 1.6%, down more than 50% from the Q4 print of 3.4% and a huge miss to the 1.6% estimate.”
