9:58 am
BKX is declining from its Cycle Top at 116.23, on its way to the 50-day Moving Average at 111.45. It is currently on an aggressive sell signal with confirmation beneath the 50-day. We have been given hints of distress from the Fed and the SEC. The Cycles Model suggests that the situation may heat up in the next week, with possible panic through mid-October (earnings reports).
ZeroHedge remarks, “94-year-old Warren Buffett’s Berkshire Hathaway has been steadily offloading Bank of America shares over the past several months.
The latest data from Bloomberg reveals that Berkshire sold millions more in recent days, bringing its stake closer to the 10% regulatory threshold, after which it will no longer have to report sales.”
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!
SPX futures remain in a very narrow range between 5717.00 and 5737.00. Overhead resistance remains near 5735.00. Should it break out, the next resistance lies at the Cycle Top at 5777.00. There is no assurance that it may reach the upper limit. Today is day 264 in the Cycles Model. From the prospective of the Model, there are other forces at work influencing the equities Model at this time. Should the SPX reach its Cycle Top, an aggressive sell signal may be introduced upon the reversal from that resistance. Otherwise, the aggressive sell signal may be obtained beneath trendline support at 5680.00.
Today’s options chain show’s Max Pain at 5720.00. Long gamma may begin at 5750.00 while short gamma appears strong beneath 5650.00.
ZeroHedge reports, “US futures are weaker but off overnight lows, as euphoria over China’s latest monetary bazooka stimulus fizzles with Asian shares paring gains into the close (traders now await the far more important fiscal bazooka) and as attention turns to the deteriorating US economy. As of 8:00am, S&P futures are down 0.1% after the index finished with its 41st record closing high on Tuesday, while Nasdaq futures drop 0.2% with weakness in Semis as US-listed Chinese tech stocks fell in premarket trading. Bond yields are mixed, and the USD has a slight bid as the yen trades just off a 3-week low. Commodities are mostly lower as it appears there is muted follow-through to China’s stimulus-induced buying. Today’s macro focus is on New Home Sales, Fed speakers scheduled Kugler at 4pm and Chair Powell (who is slated to make pre-recorded opening remarks at the 10th annual US Treasury Market Conference Thursday at 9:20am with a text release expected) and the 2Y and 5Y bond auctions.”
VIX futures are rising from their Master Cycle low made yesterday. VIX options have been overwhelmed by short gamma the past month and today’s expiration may give equities a release fro the “tail wagging the dog” syndrome through the manipulation of VIX options.
Today’s options expiration shows Max Pain at 16.00. Sort gamma is fading beneath 15.00 while long gamma is strong between 17.00 and 22.00. There does nto seem to be an incentive to hedge under the current market conditions.
TNX is up against Intermediate resistance at 37.88 after challenging it yesterday. The Cycles Model shows the uptrend being re-asserted. We may expect to see Intermediate resistance and the trendline at 38.00 being overcome by the end of the week. The Fed’s 50 basis point cut has amplified price and liquidity risks in the market, but also increases volatility and the threat of inflation making a comeback.
ZeroHedge remarks, “By dropping rates dramatically only a month and a half before an election, the Fed is playing with fire. The election, by all visuals, would seem to pit the establishment against an insurgent populist movement. Regardless of the countercyclical motives, it’s a move that has been widely seen as deeply political. And that invites resentment and retribution.”
The Shanghai Composite is approaching round number resistance at 2900.00 and may be likely to pull back to Intermediate support at 2814.94 before moving higher. Yesterday was a short covering day with hedge funds and mutual funds making an appearance. The SSEC has about a week to complete its retracement, which may ultimately reach the mid-Cycle resistance at 2958.28. Should the Bank of China shoot its liquidity bazooka again, the retracement may go as high as the Cycle Top at 3186.20.
The Japanese Yen futures reached an overnight high at 70.15 before reversing down. During the next week we may see the Yen decline to the 50-day Moving Average at 63.82, under normal circumstances. However, the Cycles Model suggests a double dose of trending strength, which may propel the Yen down to the mid-Cycle support at 66.20. Those in the carry trade should not ignore this move, since the uptrend may renew in about a week’s time.