10:05 am
The breakout in the Ag Index that I warned you about last week has now come to pass in the GKX. There can be no better buy signal than this. In addition, the Cycles Model shows trending strength developing over the weekend and extending the next week. The longer view shows that food prices may double in the next year or so.
9:55 am
BKX bounced off Intermediate support at 103.04 yesterday and may be offering a retracment to sell into. The Master Cycle high was made early on May 15. While the BKX may be on an aggressive sell signal, confirmation of the sell signal may come beneath the supports located at 102.50 to 103.00. Volatility picks up hugely next week, suggesting it will not be a good time to remain long in this index.
8:00 am
Good Morning! Have you prayed yet?
SPX futures have risen to 5285.10 this morning after making a Key Reversal yesterday. Should it complete an impulsive fractal, it may yet decline to short-term support at 5245.46 before a more significant bounce back to 5300.00. The Memorial Day weekend has traditionally bee a quiet one, so a move to 5300.00 may allay some fears over the holiday. However, now that a reliable reversal has been made, we must interpret the possible path of the Market going forward. The next obvious support beneath the 50-day Moving Average lies at the 1987 trendline, just beneath 5000.00. However, the Cycles Model suggests the real target lied below it at the Cycle Bottom at 4945.10.A decline beneath the trendline would be a real blow to bullish thinking.
Today’s Options Chain shows Maximum Investor Pain at 5290.00, offering the least payout to options investors. Long gamma begins at 5300.00 and remains strong to 5400.00. Short gamma comes in strong at 5250.00.
ZeroHedge reports, “After Thursday’s rout, which saw the overbought S&P first hit an all time high before traders suddenly dumped everything (following hotter than expected PMI and Initial claims reports has further delayed expectations for the Fed’s first rate hike ostensibly to December) to buy Nvidia, whose market cap soared by over $200 billion to a record $2.55 trillion, on Friday US equity futures and treasuries have staged a modest rebound. As of 7:30am, S&P 500 and Nasdaq 100 futures rose 0.3%, led by premarket gains at Micron, Microchip Technology and Advanced Micro Devices all of which continue to benefit from bullish sentiment around artificial intelligence following Nvidia’s blockbuster earnings. Europe’s Stoxx 600 index slipped 0.4%, playing catch-up with Wednesday’s Wall Street drop, which was the biggest this month. 10Y yields dropped 1bp to 4.47% after surging the previous session by as much as 8bps ahead of a half-day trading session for the US bond market; the Bloomberg Dollar Spot Index was headed for its first drop in five days, but still on track to post its best weekly gain since April 12. Oil continued its decline despite the signal from macro data that the economy is actually growing quite strong, in what appears to be accelerating CTA liquidations. Today’s macro events includes the April prelim Durable Goods report, the Kansas City Fed and the May final UMich report.”
VIX futures are consolidating after also making a Key Reversal. After the Master Cycle was stretched by a record number of days, it is bound to snap back. The Cycles Model agrees, with a possible volatile move anticipated over the weekend. The move of the low doesn’t indicate a sufficient amount of fear…yet.
The May 29 options chain shows Max Pain at 12.50. There is a single deposit of short gamma at 12.00, while long gamma erupts at 15.00, but only ventures to 20.00.
TNX futures rose to 45.05, while the cash market has stalled at 44.97 thus far. While yields appear subdued, the Cycles Model seems to predict a regular eruption over the weekend. We can only link a cause to the proposed effect in hindsight.
Gold futures declined to 2326.35 this morning before a small bunce. It may test the underside of Intermediate resistance at 2361.00 before resuming its decline toward the 50-day Moving Average at2310.00. Gold is on a confirmed sell signal after having made an early reversal from the May 20 high. It may experience a bout of volatility over the weekend, according to the Cycles Model. The new Master Cycle has about 6 weeks to go, giving gold time to change its trend into a decline.
Crude oil futures have declined beneath the May 20 low this morning, signaling a breakdown and continued sell signal. The Cycles Model is not encouraging for the bulls, as new lows are indicated. The Cycle Bottom and Head & Shoulders neckline at 68.68 loom large on the horizon.
RealInvestmentAdvice remarks, “As we discussed recently, Wall Street economists increasingly believe the risk of recession has fallen sharply. To wit:
“Economists don’t think the economy will get even close to a recession. In January, they, on average, forecast sub-1% growth in each of the first three quarters of this year. Now, they expect growth to bottom out this year at an inflation-adjusted 1.4% in the third quarter.” – WSJ
