2:36 pm
SPX has corrected to the 50% retracement at 5585.00 and has resumed its decline. I stand corrected on this morning’s analysis. I mentioned the 50% retracement was at 5592.00. For those wishing certainty, the trendline is near 5525.00. A decline beneath it confirms the new sell signal.
7:30 am 2 Chronicles 7:14
“If my people, which are called by my name, shall humble themselves, and pray, and seek 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 rose to 19831.20 thus far this morning. It may test the trendline near 19850.00 this morning. Should it go further, the 50% retracement value is at 20075.00. Time is running out for this correction. It may peak later this morning. The strategy this morning is to sell the bounce.
Thus far the NDX has seen nearly a 6% pullback. Most pundits suggest that this may be an average pullback with a nominal decline of ~10%. The message is to buy the dips. A 10% pullback may put the NDX near the 100-day Moving Average at 18646.00. Would that it be so. However, critical support lies near the 200-day moving average at 17403.00, nearly a 16% pullback. Furthermore, the 1987 trendline which has given support to this uptrend since November 2008 lies near the Cycle Bottom at 14827.00, a 28% decline. While the 200-day Moving Average defines the intermediate trend (months), a break of the Cycle Bottom may indicate a change of trend lasting years.
Today’s options chain shows Max Pain at 20000.00. Long gamma may appear above 2000.00 while short gamma arises beneath 19970.00. Dealers would likely make an effort to rise above that level.
SPX futures rose to 5573.70 thus far this morning. The next resistance is the 50% retracement value at 5592, followed by round number resistance at 5600.00. The bounce may be over this morning. Bears may be selling the bounce. A decline beneath Intermediate support and the Ending Diagonal trendline at 5484.13 offers investors a confirmed sell signal. Should the trendline be broken, the next support may be the 1987 trendline just under 5100.00. A decline to the ’87 trendline offers a 10% decline. However, a break of the trendline may offer the Cycle Bottom at 4295.13 as a target for this decline, a 25% loss.
Today’s op-ex shows Max Pain near 5565.00. Long gamma may begin at 5590.00 while short gamma may start under 5535.00.
ZeroHedge reports, “US equity futures reversed earlier losses and were modestly in the green with small-caps leading and Tech lagging, following the partial retracement from yesterday and weaker Semis earnings last night. As of 7:30am, S&P futures are up 0.1%, while Nasdaq futs are 0.1% in the red with Mag7 stocks mostly flat/up ex-NVDA which is -80bps, lower with most other Semis names after disappointing earnings from NXP Semi which dropped 9% in premarket after giving a third-quarter revenue forecast that was weaker than expected. Reports after the close from GOOG/TSLA/TXN are important for the Tech trade. Bond yields are lower, USD is flat, and commodities are weaker though WTI is higher. Macro data is primarily regional activity indicators ahead of tomorrow’s Flash PMIs. There is a 2Y bond auction today; rates traders are looking for a modest concession.”
VIX futures made a nominally lower correction to 14.86 this morning. Currently it is in the green. Last Friday’s anomalous low may be keeping the 0-DTE investors plugged into their puts while smart money is beginning to hedge long in the VIX. Trending strength may resume over the weekend.
Tomorrow’s options chain shows Max Pain at 16.00 with short gamma starting beneath 15.00 . Long gamma is nowhere to be found, suggesting the 0-DTE still holds the majority of shares.
TNX is pulling back after testing Intermediate term resistance at 42.85. TNX emerged from its Master Cycle in strength and may continue to exhibit strength, especially over the weekend. The Cycles Model suggests rising rates through the week of August 19. A breakout above the trend channel may occur above 44.00. The Treasury auction schedule shows $70 billion 5-year notes going on the block tomorrow. There may not be fireworks, but a steady rise in rates may be problematic for equities.
BKX, our liquidity proxy, has made an aggressive sell signal beneath its upper trendline at 113.00. Critical support lies at 106.22, where confirmation of the sell signal may be made, while the lower trading channel trendline lies at 102.50. The Cycles Model suggests the decline may continue through the week of August 26. If so, the intended target for this decline may be at the Head & Shoulders neckline at 72.50. Banks, especially regional banks, are still experiencing outflows. Combined with rising rates, we may see the façade start to crumble. We usually don’t see the bank reports until after the Friday close.
Last Friday, Zero Hedge reported, “After last week’s plunge, total US bank deposits (SA) rose a modest $9BN…
Source: Bloomberg
But, as we have grown accustomed to, on an NSA basis banks saw $27.6BN in outflows from deposits last week…
Source: Bloomberg
Which meant that, excluding foreign deposits, The Fed’s magic turned a $23BN deposit outflow (NSA) into a $34.5BN deposit inflow (SA)…”
Gold futures consolidated inside yesterday’s trading range. Critical support lies at 2368.30, beneath which gold may obtain a sell signal. Declining beneath it offer no support until it reaches mid-Cycle support at 2182.20. Final support may lie at the Cycle Bottom at 1858.82. The triple top structure suggests that gold may have run out of buyers for the time being. The price may have to fall to become attractive to investors again. Liquidity may play an important factor in this equation.