10:00 am
BKX, our liquidity proxy, has retreated from its Master Cycle high and trendline at 114.50. Today it has declined beneath its Cycle Top support at 114.15. This may create an aggressive sell signal on day 256 of the Master Cycle. The reason for the strong recovery in August is that hedge funds rotated out of AI into financials. That may be regrettable as a strong decline may be imminent.
8:45 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!
SPX futures consolidated under yesterday’s correction high at 5651.62, declining to 5604.40 this morning. Today is day 267 of the Master Cycle, being stretched by Powell’s pivot and the potential NVDA earnings The Cycles Model suggests a high volatility day today and tomorrow. Considering the lateness of the pivot, the volatility may be actuated in either direction. Traders estimate that NVDA may have a potential 10% move in either direction at the earnings announcement. SPX, which came within 20 points of its all-time-high, has the potential of rising above its July high, whereas, NDX may not have that capability.
Today’s options chan shows Maximum Ivestor Pain at 5610.00. Long gamma may begin at 5625.00 and strengthens at 5650.00. Short gamma may start at 5600.00.
ZeroHedge reports, “Ahead of tomorrow’s Nvidia earnings fireworks, it’s another quiet session with most asset classes close to unchanged and US equity futures flat in a muted overnight session. As of 8:00am, S&P futures were unchanged after trading in a narrow range, and erasing modest earlier gains, while Nasdaq futures rose 0.1% with tech leading as NVDA/TSLA edge higher after lagging the Mag7 yesterday. Bond yields continued to rise amid a steeper curve, pushing the 10Y 3bps higher to 3.85%, while the USD is weaker and commodities are lower ex-base metals and natgas. Today’s macro data focus is on Consumer Confidence, Housing Price updates, and regional activity indicators. There is a 2Y bond auction.”
The DJIA futures fell to 41109.10 after making its new A-T-H yesterday. The so-called rotation out of tech stocks to blue chips may be over. There is a potential aggressive sell signal beneath the Cycle Top support at 40961.27.
VIX futures are rising again above the 50-day Moving Average at 16.10, placing it on a potential confirmed buy signal. Traders are repeating the same mistakes made before the August 5 sell-off, making the vol landscape more dangerous than ever. Only 3 of 11 hedge fund strategies are short the market. The rapid recovery may lead to short memories of the risk embedded in the market.
Tomorrow’s op-ex show Max Pain at 17.00. Short gamma resides between 14.00 and 16.00. Long gamma may begin at 20.00 and strengthens at 23.00. Unfortunately, NVDA earnings are reported after the Market close on Wednesday.
TNX futures rose to 38.70 this morning after finding support at the Cycle Bottom at 37.73. This action implies at least an aggressive buy signal after the August 21 Master Cycle low. The next hurdle is the trendline near 39.00.
ZeroHedge explains, “According to some commentators, to counter inflation interest rates in the US must increase to a level that effectively restrains the economy. It is held that this increase in interest rates does not have to cause a recession if Fed’s policy makers could orchestrate a “soft landing.” The economy is portrayed as a spaceship that occasionally deviates from a path of “stable” economic growth and “stable” prices. All that is required to fix the problem is for the central bank to give a suitable “push” to the economy (i.e., the spaceship) to bring it back to the right growth path.”
USD futures may be consolidating after its strong reversal from it Master Cycle low at the trendline. The Cycles Model shows a surge in strength may be imminent. Dollar bears have had their heyday. What happens next may be a universal surprise to investors who have been counting on a cheaper USD.