1:15 pm
SPX has spent the required amount of time on this rally. While it may take another hour or so to finish the top, a reversal may be imminent. The first support is the upper trendline of the rising wedge formation that provides support for this melt-up. Once the throw-over is complete, there may be an opportunity for an aggressive sell signal as it declines beneath the trendline at 5670.00. Note that monthly options expiration occur tomorrow. Since Cycles are organic, they may allow the melt-up to reach for the Cycle Top near 5768.72 over the next several hours or into tomorrow. However, all the pieces of the puzzle are in their place for a reversal.
8:30 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 19778.40 this morning. The Wave structure calls for a final probe above the August 20 high at 19938.89. It is not likely to make an new all-time high. Analysts tell us that equities typically rally following the first Fed cut if no recession. While the consensus is that the NDX will go higher, the Cycles Model calls this the end of the line, as this may be the last day of the rally, day 258.
Today’s options chain shows Max Pain at 19420.00. Long gamma may begin at 19440.00 while short gamma may start at 19400.00.
SPX futures rose to 5716.50 this morning. Earlier this week I mentioned that 5750.00 may be possible. While this may be the final day of the rally, it may have time to do just that, as the Cycle Top is at 5756.55. Unfortunately, this action is drawing in weaker hands that have been reluctant to participate until now. Market decline come when the last dollar is put into the market. From that point, there is no liquidity to buy as the market decline. Experts recognize this as a low liquidity rally. So, despite the favorable optics, equities are skating on thin ice. The Cycles Model suggests a turn by mid-day. An aggressive sell signal resides beneath Short-term support at 5660.00.
Today’s options chain shows Max Pain at 5625.00. Long gamma may begin at 5650.00 while short gamma may start at 5600.00.
ZeroHedge reports, “The Fed’s first (jumbo) rate cut since the depths of the covid crash resulted in mixed reaction in markets, with initial gains for stocks fizzling and ultimately tepid moves in Treasuries, corporate bonds and commodities. However, this reversal to the kneejerk reaction has also since reversed, and US stock futures are bouncing this morning, rising to new record highs, amid gains across Europe and in Asia, while gold is heading back toward a record high and copper prices hit the strongest level in two months to lead a broad rally in base metals in what appears to be a gradual awakening of the reflation trade. As of 8:00am, S&P futures are up 1.7%, and Nasdaq futures surged more than 2.1% as part of a global risk-on trade. Similar to past rate cuts in slowing macro environments, the Nasdaq and Russell are outperforming. Pre-mkt, Mag7 names are all higher by at least 1.6%, Semis are stronger too with NVDA +3.3%. Europe’s Stoxx 600 index advanced as much as 1.4%, while Asian stocks were a sea of green, as a basket of Asian currencies notched up a 14-month high even as the Japanese yen plunged with traders once again eyeing yield differentials. The yield curve is bull steepening though 30Y is unchanged and USD is flat. Commodities are higher led by the Energy complex with precious metals outperforming base (Gold +1.3%, Silver +4.0%). The macro data today (Jobless Claims, Home Starts) will be ignored given the dovish press conference from Powell; expect multiple indices and sectors to make ATHs today.”
VIX futures are lower this morning, sliding to 18.00. Should the 50-day Moving Average at 17.93 hold, the VIX may begin its trek higher. Today is day 252 in the Current Master Cycle. It is capable of making a moderate new low before a turn higher.
The September 25 op-ex shows Max Pain at 17.00. Short gamma may start beneath 16.00, while long gamma may begin at 18.00 and strengthens above 20.00.
TNX futures have broken out above the Cycle Bottom support/resistance at 36.74, reaching a morning high at 37.70. The Fed may have just lost “control” of the bond market. (They didn’t have control in the first place.) The trendline beneath it is solid and the Cycles Model suggests a new uptrend in rates has begun. Strength may return to the 10-year yield by the weekend. Powell may have made a tactical error in releasing a jumbo rate cut.
ZeroHedge comments, “The day after The Fed slashes rates by a crisis-like 50bps, jobless claims data plunges to multi-month lows signaling an economy that is anything but ‘soft landing’ let alone landing at all…
Adjusted initial claims tumbled from 231k to 219k (lowest since May) while unadjusted claims continued to tumble to 12-month lows…
Source: Bloomberg
Continuing claims also continued its (economically positive) downtrend, sliding from 1.843mm to 1.829mm Americans…”
Japanese Yen futures sank to a morning low at 69.70. The Yen is in a retracement pattern that may decline to the mid-Cycle support at 66.22 over the next two weeks.