10:30 am
XDN broke out above its retracement high and may threaten the Cycle Top resistance at 70.86. The carry trade is being threatened by this rise in the Yen and may force a significant unwind of leveraged positions in the market held by hedge funds. In addition, this may shake the banking index, which has benefited from a declining yen. Credit card companies that have been offering “zero interest” incentives will have to shut them down or suffer losses.
10:09 am
SPX is making a final test of resistance at 5560.00, which happens to be the 38.2% Fibonacci retracement level. An alternate level may be the 50% retracement at 5580.00. Afterwards, the decline may begin in earnest.
ZeroHedge observes, “After the disaster that was the Manufacturing surveys earlier in the week, the Services surveys are the ‘soft landing’-narrative-believers last great hope ahead of tomorrow’s all-important payrolls print to save the day.
- S&P Global’s Services PMI jumped from its flash print of 55.2 to a final August print of 55.7 (up from the 55.0 in July) – that is the highest since March 2022.
- ISM Services rose from 51.4 to 51.5 (barely beating the 51.4 expectations)
And all that ‘soft’ data improving as ‘hard’ data languishes…
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 consolidated overnight at the 100-day Moving Average at 18940.47 but may have lost that support in this morning’s action. The next levels of support are the mid-Cycle line at 18277.28 and the 200-day Moving Average at 18101.72. A decline to that level may wipe out all gains since early June. The Cycles Model calls for rising volatility over the next week, suggesting that not all is well.
Today’s options chain shows Max Pain at 19075.00. Long gamma may start at 19200.00 while short gamma begins at 19010.00.
ZeroHedge remarks, “The dumpster fire at Intel under the direction of CEO Pat Gelsinger, who is doing his best to replace Marissa Mayer as most overpaid and useless ‘turnaround’ CEO in tech history, looks like it could finally wind up being put out as a result of the company assessing strategic alternatives.
But the damage has surely been done. Intel stock has fallen about -56% this year so far while competitor Nvidia has soared more than 141% over the same period. Over a 5 year period, it gets even uglier: Intel has plunged -53.4% while Nvidia is up an astounding 2,750%.
However, past performance is not indicative of future results, and CEO Gelsinger is looking to finally try and claw some value back into Intel shares by proposing a number of strategic transactions to the board later this month, Reuters reported last week. ”
SPX futures declined to a morning low of 5503.80, challenging the 50-day Moving Average at 5504.02. A potential gap down may be developing, creating a firestorm of selling in anticipation of a dismal non-farms payroll report. CTA selling thresholds begin below 5500.00 and redouble beneath 5350.00. The next support may be the 100-day Moving Average at 5371.59. After that is a toss-up between the rising trendline originating last October near 5300.00 or the 1987 trendline near 5150.00. The ISM and PMI data being released today may give us a handle on just how bad the recession risk has become.
Today’s op-ex shows Maximum Pain at 5550.00. Long gamma may begin at 5600.00 while short gamma appears in strength at 5515.00.
ZeroHedge reports, “After several days of rollercoaster volatility and uniform pain across global equity markets for bulls, US equity futures are flat as the global sell-off stabilizes into the most important macro data releases. As of 8:00am ET S&P futures are up 0.1% and Nasdaq futs are flat, with NVDA +40bps premarket, TSLA rising 2.3% while the balance of Mag7 is weaker and Semis under pressure, too. Europe’s Stoxx 600 index dropped 0.3%, with China-facing luxury stocks such as LVMH again among the biggest losers. Asian equities erased most gains after declines in Hong Kong and Japan. Bond yields are 1bps higher, but the USD is weaker as the yen gained overnight following unexpectedly strong – if transitory – Japanese wage data. Commodities are stronger led by Energy and precious metals while iron ore slumped to its lowest level since 2022 and traded near $90 a ton as China’s main steel industry group advised mills to be cautious in boosting output too quickly to avoid snuffing out a post-summer recovery. Looking at the coming FOMC decision, 50bps bets are increasing, rising as high as 50% after yesterday’s dismal JOLTS report, as the growth component of the Goldilocks narrative is challenged. ISM-Services today and NFP tomorrow are key facets of the narrative and we should leave for the weekend with a stronger sense of 25bps or 50bps.”
VIX futures challenged the Cycle Top support/resistance at 20.77 before moving higher. The Cycles Model shows the VIX rising with a potential burst of momentum early next week. The speed that investors re-shorted the VIX since August 5 has been remarkable. However, the jump in the VIX on Tuesday was mainly from dealer and market-maker short-covering and not re-hedging. The sentiment is not yet consistent with an economic downturn but may change over the next two days as a clearer picture of the economy develops.
The September op-ex shows Max Pain at 18.00 with short gamma between 15.00 and 17.00. Long gamma hasn’t yet appeared with any conviction.
TNX has declined to its trendline at 37.25. That may have accomplished its Master Cycle low on day 253. If correct, yields may start rising again. The Cycles Model suggests the implied rally may last to mid-October.
ZeroHedge remarks, “Initial jobless claims continues to ignore the ‘other crappy data’, printing 227k (in line with 230k exp) and basically unchanged at two-month lows…
Source: Bloomberg
On a non-seasonally-adjusted basis, initial claims are at their lowest in 10 months!! Of course! Why not.
Continuing claims also dropped (to three month lows)…”
Crude oil futures tested the Head & Shoulders neckline near 68.00 yesterday and may be consolidating today. Should it go beneath the neckline, a firestorm of selling may take place. The Cycles Model suggests that crude oil may continue its decline through mid-October. Warning, there is a larger Head & Shoulders formation that may take crude down to the end of December.