7:30 am 2 Chronicles 7:14
“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”
Good Morning!
NDX futures dropped to 19573.00 in the early morning hours, but bounced back to the red Ending Diagonal trendline near 19750.00. While the bounce may go higher, the larger picture shows the NDX may still be on its way to test the 50-day Moving Average at 19242.89, where there is a likelihood of more corrective behavior.
Today’s options chain shows maximum investor pain at 19700.00. Long gamma may start at 19750.00 while short gamma may begin at 19650.00.
ZeroHedge reports, “Early Friday, a global IT outage caused by an issue with cybersecurity firm CrowdStrike disrupted flights, banks, retailers, stock exchanges, 911 call centers, and media outlets. Experts say this could be one of the largest IT outages in modern history.
Bloomberg reported that CrowdStrike warned customers that its Falcon Sensor threat-monitoring product was the source of the chaos, causing Microsoft’s Windows operating system to crash. There was no mention of what triggered the issue, and there were reports of disruptions in Microsoft’s Azure cloud and 365 Office software. ”
SPX futures declined to 5524.70 in early morning hours, then at the bounce hesitated at 5560.00. SPX is on an aggressive sell signal with confirmation beneath Intermediate support and the Ending Diagonal trendline at 5467.76. While a further bounce may be imminent, the bigger picture shows a probable bounce at the 50-day Moving Average at 5393.01. Most critical support lies at the 1987 trendline at 5080.00.
Today’s options chain shows Max Pain at 5525.00. However, Long gamma has a huge presence at 5550.00 (32,825 contracts reflecting over 180 million in morning trades alone.). Dealers may prefer short gamma instead, with a much more manageable presence down to 5500.00.
ZeroHedge reports, “Global stocks, already hammered by several days of relentless selling in mega-cap tech shares, struggled on Friday as an unprecedented, worldwide computer systems outage hit travel, trading and support services, threatening to exacerbate a pullback in technology stocks. As of 7:00am ET, S&P futures were flat, paring earlier losses, while Nasdaq futures dropped -0.1%. Global markets are also mostly in the red: FTSE -45bps, CAC -55bps, DAX -65bps, Nikkei -16bps, Hang Seng -2.03%, Shanghai +17bps. Cybersecurity firm Crowdstrike plunged as much as 21% in US premarket trading after warning its software was causing computer systems to crash. Its chief executive later said the issue was being fixed. Microsoft shares dropped 2%, though it said it had resolved the cloud-services outage that was blamed for disrupting flights and banks globally. Even the Russell is red this morning as the rotation takes a break. US Treasury yields were unchanged, with the 10Y trading at ~4.21% while the Bloomberg dollar index modestly higher as the yen reverses shallow overnight gains. There is nothing on today’s economic calendar so attention will focus on the fallout from the global IT outage and Trump’s RNC speech.”
VIX futures rose to 16.70 this morning, on a relentless path higher. The Cycles Model shows VIX rising through mid-August. Sentiment on the VIX is so poor that recognition of its presence may not register with investors until it breaks out above the April high at 21.36. Currently, half of all VIX positions are 0-DTE, where the index measures the average 30-day positioning.
The July 24 options expiry shows short gamma at 13.00, with long gamma stronger above 14.00. However, there is little hedging going on, which shows the decline in equities has not generated much in the way of put buying. Options are still cheap until the dealers start changing positions.
TNX has risen from its trendline and Master Cycle low at 41.44. TNX may be on an aggressive buy signal (UST sell). Confirmation may be obtained above the Intermediate resistance at 43.12. Meanwhile Powell remarks that a “soft landing” may be in the cards. (See below)
.ZeroHedge remarks, “The Federal Reserve’s Federal Open Market Committee (FOMC) left the target policy interest rate (the federal funds rate) unchanged at 5.5 percent last week. The target rate has now been flat at 5.5 percent since July of 2023—as the Fed waits and hopes that everything will turn out fine. In his prepared remarks at Wednesday’s FOMC press conference, Powell continued with the soothing message he has generally employed at these press conferences over the past year. The general message has been one of moderate but sustained growth, and an economy marked by “strong” employment trends and moderating inflation.”
USD futures are consolidating above the July low. The current Master Cycle may allow the USD to trend higher for the next month.
BKX made a Key Reversal yesterday, on day 267 of its Master Cycle. It has given a Cycle sell signal which may be considered aggressive. However, critical support is at 104.71. Quite a distance from its extended top. The channel trendline is near 102.50 for a potential confirmed sell signal. I would consider this a difficult but potentially very profitable short position.
The Ag Index may have reached its Master Cycle low at 348.52 yesterday, on day 261 of its Cycle. While a decline beneath a 3.5-year trendline may be considered bearish, it has already retraced 73% of its 3-year rally ending in early 2022. In addition, the structure indicates the finality of this decline in a Cyclical 2.15 years. This indicates that food prices may have started a long-term, multi-year rally.