May 9, 2024

11:15 am

The same liquidity impulse that is raising BKX higher is also allowing the broader markets to go higher.  SPX has now been elevated above the Fibonacci zone at 5200.00.  I put the next “stop” at 5250.00.  A rally above that level implies a possible new ATH.  A possibility that I had not considered until now may lead to a Key Reversal today or Friday, since Trending Strength (due on Friday) can work in both directions.

ZeroHedge comments, “Stocks and bonds have been rising together again, with investors getting longer of both assets. Inflation fears are taking a backseat for now, allowing lower yields to boost stock prices.

Positioning data for equities shows that investors have been getting longer US stocks all year and are now net long as they have been since late 2021.



10:15 am

BKX, our liquidity proxy, has broken above its previous high at 105.06 and is currently at a 45% retracement of the 2022-23 decline.  A 50% Fibonacci retracement may take BKX to its Cycle Top at 109.39.  However, thee is a massive turn this week in the world markets, so a probe that falls short of that potential target would be no surprise.  The Fed and the Treasury are both keen on keeping banks afloat.

ZeroHedge observes, “In 2009, 140 banks failed, and a recent report from financial consulting firm Klaros Group says that hundreds of banks are at risk of going under this year. It’s being billed mostly as a danger for individuals and communities than for the broader economy, but for stressed lenders across America, a string of small bank failures could quite quickly spread into a larger bloodbath — especially in an economy with hot inflation and a feverish addiction to ultra-low interest rates.”

ZeroHedge remarks, “Billionaire Barry Sternlicht, Founder, Chairman and CEO of Starwood Capital Group has issued an ominous warning about America’s regional banks, which he says will fail at a rate of ‘one or two’ per week.

Speaking with CNBC on Tuesday, Sternlicht says he thinks that primary real estate lenders – community and regional banks – are about to get whacked.”



8:15 am

Good Morning!

SPX futures made a morning low of 5170.80 thus far, challenging yesterday’s intra-day low at 5165.85.  The rally has stopped, but a meaningful decline has not yet emerged.  Support lies at 5133.97, the 50-day Moving Average.  A sell signal awaits beneath that level.  Additional Intermediate support lies at 5126.22.  Should the decline continue, strength to the downside may emerge today or tomorrow with a potential panic decline on Monday.

Today’s options chain shows Maximum Investor Pain at 51990.00.  Long gamma may start at 5200.00 while short gamma may begin at 5180.00.  There is not a lot of conviction in the options market, as clear directionality is not apparent.

ZeroHedge reports, “US equity futures are weaker as yields resume their rise and the USD strengthens after the BOE signaled it was ready to cut rates. As of 7:45am, S&P futures were down 0.2% and Nasdaq futures dipped 0.3% as all Mag7 names and most semis were red in the premarket. Most European markets are lower, tracking US futures and Asian stocks in what appears to be de-risking in a catalyst-light week. 10Y treasuries ticked lower for a second day, pushing the yield about 2bps higher to 4.51% after a $42 billion sale of 10-year notes received tepid demand. Commodities are stronger with Ags/Energy outperforming Metals. Jobless data is not expected to be market moving but keep an eye on the 30Y bond auction.  ”



VIX futures are consolidating this morning, having reached an overnight high of 13.29 and no new low.  Trending strength is returning and we may see an upward explosion in the VIX today or tomorrow.

The May 15 options chain shows Max Pain at 15.00 with no short gamma.  Long gamma begins at 17.00.

ZeroHedge observes, “The VIX roundtrip

It took VIX 15 sessions to go from 13.5 to 21.3….and it took it 13 sessions to go all the way down to 13 again.

Source: Refinitiv

Exhausted selling

“We estimate >$80bn of outflows in the last month across equity ETFs and systematic strategies. Whilst that doesn’t mean a full positioning washout has taken place, it suggested to us an entry point for tactical bullish trades. In the case of a continued rally in equities this week, we expect to start seeing CTA inflows. Our model suggests that if equities were to rally back through YTD, we could see >$15bn buying of US equities from CTAs.”


TNX continues to hover near the Intermediate support/resistance at 44.88.  A possible early Master Cycle low may have been put in on Tuesday, on day 249.  Yesterday TNX closed above Intermediate support/resistance, creating a probable buy signal for TNX.  Trending strength may appear next week.  Nonetheless, the overall trend is higher.

ZeroHedge reports, “After yesterday’s stellar 3Y auction kickstarted refunding week, moments ago the Treasury sold a 10Y paper in an auction that left a bit to be desired.

Starting at the top, the 10Y auction size rose from $39BN in April to a record-matching $42BN in May, and surpassing the record auction sizes sold during the peak of the covid crisis.

The high yield was 4.483%, down modestly from last month’s 4.56% but tailing the 4.473% When Issued by 1basis point, the third consecutive tail in a row.”


USD futures declined to 105.28, approaching Intermediate support at 105.09.  The USD has another 1-2 weeks of potential correction where the target may be the mid-Cycle support at 104.23.  However, a rapidly rising TNX may jolt USD higher.


The Ag Index peaked on Tuesday and is in decline.  A violation of the Head & Shoulders neckline at 385.39 may produce a panic decline lasting 5-6 weeks in the next installment.  This decline may provide some relief for our beleaguered consumers.

SuccessfulFarming reports, “A longtime customer called and said, “I have never seen basis collapse like this before.” He said he had watched the corn futures market rally over $1.00 per bushel, but the local cash market went up only 20¢. Soybeans rallied $2.00 per bushel and the cash market went up only $1.00 per bushel. “Why?” he said. “Why such a gap?”

I explained that the spring rally in the grain markets was very different in 2023 than in the previous two years. In both 2021 and 2022, the grain market rally was driven by demand. This year, the rally was driven by weather scares. The futures market went higher while cash prices struggled to move up at all. “

ZeroHedge remarks, “If you are like most Americans, the cost of living has been going up much faster than your income has been.  Right now, millions of Americans that were once prospering are now deeply struggling.  When I was growing up, most of the population could afford to live “the American Dream”, but now that is no longer true.  At this point, the basics of a middle class lifestyle are out of reach for most Americans.  Poverty and homelessness are steadily rising, and the economy has become the number one issue during this election cycle.  Most of us just want things to go back to the way that they once were, but thanks to the very foolish decisions of our leaders that simply is not possible.”




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