7:45 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 18551.00 in the overnight market, but have receded since then to the flat line. It may be winding up its 3-day correction in a complete round trip from last Friday’s close. Structurally, the NDX may have yet another decline ahead of it. The amplitude of the declines/bounces is growing, adding to market instability. Despite these massive bounces, the NDX Hi-Lo has remained below 0.00 the entire week, closing at -137.00 yesterday.
Today’s options chain shows Maximum Investor Pain at 18500.00. Long gamma may begin at 18600.00 while short gamma may start at 18460.00.
ZeroHedge remarks, “Bear markets
The quicker they are, the faster they recover.
Source: Barclays
Tactical bounce
Citi strategy writes: “we find that US equities are apt to rebound… a tactical timing tool based on implied vs realized volatility is showing an abundance of caution in the market; this has typically led to short-term positive (if volatile) returns.”
SPX futures rose to 5346.40 in the overnight session, then pulled back into the red. A negative open beneath 5300.00-5310.00 may be actionably short. The Cycles Model for the NYSE shows the Master Cycle ending next week. However, there are indications of yet another panic decline, should the market begin making new lows. Despite the positive bounce, the NYSE Hi-Lo Index closed at -13.00, showing very weak internals.
Today’s op-ex shows Max Pain at 5330.00. Long gamma may start at 5400.00 while short gamma kicks in beneath 5300.00.
ZeroHedge reports, “With both Goldman and JPMorgan asking the question on everyone’s lips, namely whether the market has bottomed, so far the answer remains elusive with futures flat on the last trading session of the day, but erasing earlier gains as sentiment remains on edge thanks to a VIX around 24 and the yen, the currency at the basis of the carry trade, failing to drop. Perhaps the only good news is that the wild week is ending on a subdued note, with Friday trading seeing light equity volumes and small moves across stocks, bonds and currencies as even traders are exhausted from the week’s fireworks. Remarkably, US stocks are close to wiping out all the losses from the Monday’s market meltdown, with S&P 500 futures unchanged as of 7:45am, fading an earlier gain of 0.5%, after markets roared back on Thursday as data showed much fewer American filed for jobless benefits, alleviating fears of a looming recession. Nasdaq futures were modestly in the green led by Mag7 and semi stocks. European stocks are already positive on the week as investors hunted for bargains from the selloff. Treasury yields dipped and the dollar weakened. The VIX Index hovered around 23. Otherwise it will be a quiet data on the data front with no macro releases scheduled as investors now wait for next week’s data, which includes reports on the all important CPI and retail sales.”
VIX futures dipped to an overnight low at 23.12, but has since become positive. Investors may be forgetting that August and September constitute the weakest season for stocks. Yet they are crowding back into their old haunts.
The August 14 op-ex shows investors crowding back into short gamma between 13.00 and 22.00. There is little conviction to the upside. Hedging has already been forgotten.
TNX has pulled back after a clear breakout propelled by yesterday’s debacle of a 30-year bond auction. The intended target for the pullback may be the Cycle Bottom support at 38.45. The upcoming T-bill auctions early next week are massive (over $200 billion). Yellen’s attempt at managing yields by shortening maturities is bound to backfire. The Cycles Model suggests yields may “pop” over the weekend.
ZeroHedge reports, “After yesterday’s dire 10Y auction, which sent yields surging and stocks tumbling, the last thing the market needed was another debacle of an auction, but that’s precisely what it got moments ago when today’s 30Y auction tailed by 3.1bps, the exact same as yesterday’s 10Y sale, and predictably yields spiked after both.
Stopping at a high yield of 4.314%, today’s sale of $25 billion in 30Y paper saw the lowest yield since January’s 4.229% and was down sharply from the 4.405% in July. And, like last month, today’s auction tailed and by a substantial amount: with the When Issued trading at 4.283%, this was the biggest tail since November.”
USD futures show it rising from an overnight low at 102.92. The Cycles Model shows the USD rising for yet another week, or possibly longer. It also shows a possible double dose of trending strength starting this weekend.