1:00 am
SPX bounced at 5300.00 (round number support). However, it may not hold. The choices this afternoon are, (1) continue consolidation beneath the short-term Cycle Bottom at 5376.00, or (2) resume its decline to the next support level just beneath 5200.00. The 1987 trendline is very near 5100.00. The target appears to be 5200.00, either today or Monday. That may not be the final bottom. Monday and Wednesday are both panic days, which could allow the SPX to decline much further.
ZeroHedge Proclaims, “It didn’t take long after today’s dismal jobs report to spark what Wall Street hopes will be a Fed panic. Indeed, just moments after a catastrophic jobs report which “nobody’ could have possibly predicted, well some notable exceptions, some of the biggest Wall Street analysts are already tearing up the soft landing playbook they were all pitching just, well, 24 hours ago and are urging the Fed to not just cut but panic while it’s doing it.”
9:51 am
BKX has declined to test its 50-day Moving Average at 106.52. The bounce may be short-lived. Beneath that level is a confirmed sell signal. Further confirmation lies at the trading channel trendline at 102.50. The Cycles Model infers a potential month-long decline that may challenge the Head & shoulders neckline at 72.50.
8:00 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 have declined to a new low at 18519.00 beneath the 100-day Moving Average at 18726.71. Mid-Cycle support lies at 17867.07 and the 200-day Moving Average lies at 17627.00. NDX is beginning its third Wave, which may take it beneath those supports. The minimum decline for a third Wave may take NDX beneath 17500.00 over the next week. NDX leads the other indices in the decline. The damage may be so great that it may not be capable of a new all-time high. Should the July payrolls be inadequate, a further sell-off may be in order.
Today’s options chain shows Maximum Investor Pain at 19200.00. NDX is deep in short gamma, making it vulnerable to a further sell-off with pockets of puts every 100 points. There may be some support at 18500.00, depending on the July Payrolls..
ZeroHedge observes, “Heading into Amazon’s Q1 earnings, we said earlier that the investment thesis will be driven by i) e-commerce share, margin expansion and the potential for AWS growth recovery through the year; ii) directional commentary around AWS growth/optimization; iii) signals of retail margin improvement as suggested by management commentary on “cost to serve”, iv) progress with fulfillment regionalization and broader cost containment efforts, v) directional commentary on fiscal year capex for ecommerce (up with business) and ongoing AWS investments, vI) commentary on adoption of Prime Video with ads and ad industry broadly, and last but not least, 6) positioning around GenAI investments. We also noted that the key bogeys for this extremely popular – among hedge funds – position were the following:
- Q2 Total Sales: $149-150 bn
- Q2 EBIT: $14 bn+
- Q2 AWS Growth: 18%
- Q3 Total Sales: guide high end of the Street at $158 bn
- Q3 EBIT: $15 bn+ (freight rate dynamic)”
SPX futures declined to 5344.70 after the announcement of the July Payrolls Report. SPX has declined beneath the 50-day Moving Average at 5443.63, which may now be resistance on a potential bounce. Whether a bounce occurs or not, the Cycles Model calls for a panic decline to develop over the weekend. July mutual fund statements may be out as early as Monday, fueling bearish sentiments. The Cycles Model calls for two more weeks of selling before a tradable bottom may be found.
Today’s op-ex shows Max Pain at 5485.00-5490.00. Long gamma may begin at 5500.00. Short gamma may start at 5475.00. There are large pockets of puts at 50-point intervals starting beneath 5425.00.
ZeroHedge reports, “It is a global selling carnage this morning, as risk-off extends across worldwide equity markets but nowhere more so than Japan where the point (if not percentage point) drop in the Nikkei has surpassed Black Monday 1987.
8:35 am
VIX futures have risen to a morning high at 21.51, a 15.7% advance before the open. It has surged above the April high and may challenge the October 2023 high. In the process, it has broken through a 4-year declining trendline, putting it firmly into bullish territory. I will show the weekly chart (with breakout) after the open.
The August 7 options chain shows Short gamma between 14.00 an 16.00. Long gamma begins immediately at 17.00 and is strongest at 20.00. Once it clears 20.00, we may see a surge in long options above it. This morning appears to be a total surprise.
9:40 am
As promised, the weekly chart shows a breakout above the declining trendline originating in March 2020. This opens the way to a panic rally to the 2020 high shown at the top of the chart. No guarantees, but you may wish to buckle your seatbelts.
TNX futures plunged to 37.82 (cash at 37.90.00) before bouncing. Support is at the December 27 low at 37.85. This may be the Master Cycle bottom on day 282 of the Cycles Model. Pundits interpret this move that the Fed now has to “catch up” with 4 rate reductions. However, they may be reading too much into this as the sell-off in equities may have produced a “knee-jerk” flight to bonds.
On the contrary, the Cycles Model suggests that rates may now rise through the end of the year. Wave [4] may have performed a “flat” correction by not declining beneath the December low. There is a potential buy signal for TNX above the Cycle Bottom resistance at 38.68.
ZeroHedge exclaims, “Just as we warned earlier in the week, the macro playbook has shifted to “bad is bad and good is good” as ‘growth scare’ narratives now dominate the set-in-stone rate-cut scenarios.
This morning’s payrolls data was ‘bad news’ and so we see rate-cut expectations explode higher with over four full cuts now priced in for 2024…
Source: Bloomberg
This prompted a massive plunge in Treasury bond yields…”
The Jobs Report may have also caused the USD futures to decline to 103.15 this morning. The Cycles Model suggests about two more weeks of decline with a probable target near the Cycle Bottom and trading channel trendline at 101.72. An alternate view suggests a lower decline to the area of 95.00.