8:15 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 sank to a new low at 18780.90 this morning after crossing the 100-day Moving Average at 18934.34. The next support appears to be the mid-Cycle at 18261.61 and 200-day at 18086.20. The tenor of the market has changed. As more sellers offer their shares, buyers retreat, creating gaps in the price action that may not be filled. Add margin calls to the mix and utter chaos may reign by the end of the day.
Today’s options chain sows Maximum Investor Pain at 19200.00. NDX options are in short gamma beneath 19020.00 with short concentration beneath 18950.00.
ZeroHedge observes, “That’s gross
Looking at leverage for “all hedge fund categories” we can see that gross is close to maximum (and nets a little high too). A lot of de-grossing potential if this volatility continues.”
Source: JPM PI
SPX futures declined to a morning low at 5494.30, increasing the likelihood of a probable gap down at the open. While the SPX would normally bounce at the 50-day (5503.00), it appears that the bounce was muted. Once the SPX declines beneath the 50-day Moving Average, selling may redouble as recognition of no support is realized.
Today’s options chain shows Max Pain at 5560.00 with short gamma beginning at 5550.00. Short gamma explodes at 5490.00 (this morning’s low) leaving no hope for sellers to find buyers beneath that level.
ZeroHedge reports, “US stock-index futures fell, pointing toward a continued selloff on Wall Street after a slump Tuesday, when dire manufacturing PMI and ISM data led to renewed concern that a recession may be looming. Futures on the S&P 500 dropped 0.4% while contracts on the Nasdaq 100 Index declined 0.8% at 8.00 am ET, as NVDA extended its record losses which saw a historic $280 billion in market cap wiped out in Tuesday’s session, after a Bloomberg report hit just after the close that Kamala’s DOJ sent subpoenas to the chipmaker. NVDA sparked Nasdaq’s 3.2% Tuesday rout: the stock has been falling since the company’s earnings last week failed to live up to the highest expectations. Losses in Europe and Asia were deeper, with traders still rattled by the speed and severity of the US retreat while the VIX climbed above 22. Treasury yields dropped 2bps to 3.82% while the dollar weakened for the first time in six as the yen extended gains and the USDJPY traded at 145. On the macro front, we have mortgage applications (1.6% vs 0.5% last week), trade balance, JOLTS job openings, as well as the final July factory orders and durable goods reports.”
VIX futures vaulted to a morning high at 23.28, exceeding yesterday’s high at 21.99. The Cycles Model suggests the rally may accelerate through the weekend. There may be a repeat of yesterday’s 7-vol spike that prompted margin calls for the shorts and dealers. If so, VIX may exceed 30.00 today, beginning to make the August 5 volmageddon look like child’s play.
Today’s options chain shows long gamma beginning at 20.00. Fortunately, the options chain isn’t very populated, considering today is the weekly op-ex. However, many 0-dte speculators may be testing which way the wind is blowing, ready to propel the VIX even further.
TNX futures made a new low at 38.03 but recovered before the open. The Cycles Model suggests higher volatility through the rest of the week, with the outcome being a possible low at the Cycle bottom at 37.49 later this week or early next. However, the rise in yields may resume next week, prior to the FOMC meeting.
Japanese Yen futures rose to 69.20 this morning, coming out of its Master Cycle low on August 19. I am currently neutral on the Yen, but that may soon change. A breakout above the high at 69.51 may lead to a sharp acceleration higher, crushing the Yen carry trade once and for all. AI and tech stocks have benefitted from the carry trade, so a resumption of the rally in the yen may bring down the whole tech complex.