3:32 pm
SPX has made a reversal after making a marginal new high near 3:00 pm. While there is no discernible sell signal, but it would not be wise to stay long. A reversal has appeared that may develop legs.
11:55am
SPX has reached 5446.26, where Fractal Analysis shows Wave (5) is 1.5 times the length of Wave (1). The usual relationship is 1 to 1. That means Wave (5) is extending. It is possible that this may be the ATH, but a friendly report from the FOMC could extend the SPX even further, to as much as 5531.00 (where the Wave relationship is 2 t Remember, the Fed does not control rates. They can only make policy decisions. There is an extraneous force at work to keep the market elevated…for another day. It has quite possibly the driving force in pushing the market higher over the past two weeks. That is, stock buybacks. Tomorrow is the last day before the blackout period begins. The dynamic is that corporations are not buying stocks because they are a bargain. Instead, they are buying back stocks to provide liquidity for insiders to exit their shares.
ZeroHedge comments, “As we expected in our preview calling for “optimism for a low print“, today’s CPI delivered the kind of downside surprise that bond bulls and the Fed have been waiting for, as both headline and core came in a tenth lower than expected, largely driven by a 3.6% drop in gasoline prices – the biggest reason why the headline CPI was flat on the month – and as Bloomberg adds, “the miss looks legit, given the shortfall in the actual indices relative to forecast.” Indeed, at 0.16% the rise in core nearly rose just 0.1% when rounded. Meanwhile, in what may have been the biggest surprise, supercore services ex housing fell by 0.04%, the first negative reading since September 2021!”
8:00 am Have you prayed for our country?
Good Morning!
NDX futures have risen to 19248.80 thus far this morning. A possible all-time high target may be near 19458.00. Today is day 285 of the Master Cycle. It is being stretched due to a larger Annual Cycle consisting of 4.3 years. The exact landing date of that Cycle was Saturday, June 9, so Monday would have been an appropriate ending, had it been timely. As usual, Cycles may be affected by extraneous items, such as political and economic announcements that may influence investor sentiment. Today is an example with a morning announcement of the CPI and an afternoon release of the FOMC outlook. While investors have increasingly held the view that the markets are at a permanent plateau, their high expectations may easily be shattered.
Today’s options Chain shows Maximum Investor Pain at 19190.00. Long gamma may begin at 19225.00 while short gamma may start at 19170.00.
ZeroHedge muses, “Coming just hours after the May CPI print, tomorrow’s – and the month’s – main event is the FOMC decision due at 2pm ET, when the Fed is widely expected to leave rates on hold at 5.25-5.50%, and the statement will likely also largely be reiterated after slight tweaks in the May statement. Attention will fall on the Summary of Economic projections, and more specifically, the Dot Plot, where the number of projected rate cuts in 2024 will be trimmed from 3 to 2. After a string of hot inflation reports in Q1, the Fed has been stressing that the luxury of a strong economy gives the Fed time to be patient before acting, and the hot NFP released (assuming of course that a drop of 625,000 full-time jobs is viewed as “strong”), last week only gives the Fed more time. Therefore, it is likely the 2024 median FFR will be revised up from the 4.6% – or equivalent to 3 rate cuts over the remainder of 2024 – pencilled in at the March meeting.”
SPX futures have risen to 5385.30 thus far. Should the CPI come in favorably, we may see the SPX reach 5440.00 today. However, this is the end of the line.
UPDATE: Here is the CPI News Release.
Today’s op-ex shows Max Pain at 5350.00. Long gamma begins at 5375.00 while short gamma starts at 5340.00.
ZeroHedge reports, “Futures are up modestly after another record close on Wall Street heading into today’s double whammy of CPI, and FOMC Dot Plot update, with Nasdaq leading and small-caps lagging. As of 8:00am, S&P futures are up 0.1% to 5,390 and set to extend the stretch of record highs as traders position for the potential disruption from US inflation data landing just hours ahead of Federal Reserve’s interest rate decision on Wednesday; Nasdaq futures rose 0.2%. Bond yields are flat to down 1bp after a stellar 10Y auction yesterday; the Bloomberg Dollar index rose again after four days of gains. Commodities are higher, led by Energy, despite with metals lagging. Today’s focus will be on the doubleheader of CPI and the Fed (our previews can be found here and here).”
VIX futures dipped to 12,22 before a slight recovery. Investors see no risk here. What could possibly go wrong?
Today’s options expiration shows Max Pain at 12.00. While short gamma is practically nonexistent, long gamma may begin at 13.00 to 15.00.
TNX declined to 42.73 this morning following the CPI report. In doing so, it may have completed its correction and brought the Master Cycle to a close. If so, TNX is capable of a sharp reversal. Those looking to the European Central Bank’s rate cut as a model should be advised that it was a purely political, not economical, move.
ZeroHedge observes, “The headline consumer price index was unchanged MoM in May – the smallest change since July 2022 – just less than the +0.1% MoM expected. On a YoY basis, headline CPI rose 3.3% (less than the 3.4% exp) – but very much stuck in a range well above the 2% target for over year now…”
Source: Bloomberg
USD futures are pulling back to test the mid-Cycle support at 104.24 this morning. I am neutral the USD since it is only days away fro another Master Cycle Pivot/reversal.
GKX (the food index) is nearing completion of its Wave 2 correction and its master Cycle low. Ag prices are up nearly 6% since March and are due to rocket higher, possibly near 900.00 in the next year.
ZeroHedge observes, “Our world is witnessing apocalyptic events so frequently that many of us are starting to become numb to it all. Major wars are raging all over the globe, children in Africa are literally dropping dead from starvation as hunger spreads like wildfire, and “billion dollar disasters” are hitting us more frequently than we have ever seen before. But as long as these tragedies are not affecting us directly, most people don’t really care too much. As the level of worldwide suffering rises, it seems as though hearts are getting colder at the same time. ”
ZeroHedge further states, “The Food and Agriculture Organization of the United Nations (FAO) reported that global food prices increased for the third consecutive month in May. This rise was driven by higher prices for cereals and dairy products, which outweighed declines in sugar and vegetable oil prices. The re-acceleration of food price growth should be a cause for concern among policymakers.”