2:38 pm
SPX has broken its short-term trendline, putting us on high alert that the reversal may have been made. It bounced off round number support at 5700.00 and that level may serve to demark an aggressive sell signal. The SPX high was already a week later than average, so a decline beneath 5700.00 may serve to guide us to reduce longs and begin layering in short positions.
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! We are back again as hurricane Helene took down a critical internet relay in Atlanta on Friday morning. My blog was cut off before being able to save my work.
SPX futures chopped lower to 5719.20 this morning on day 269 of its old Master Cycle (day 4 of the new Master Cycle), leaving Thursday’s high at 5767.37 as its all-time high. An aggressive sell signal lies beneath round number support at 5700.00. Intermediate support lies at 5591.20, beneath which the sell signal becomes confirmed. To most market watchers, the uptrend is still intact. The 50-day Moving Average at 5531.72 may be the final arbiter for the uptrend.
Today’s options chain shows Max Pain at 5735.00-5740.00. Long gamma may begin at 5750.00 while short gamma may start at 5725.00.
ZeroHedge reports, “US equity futures reversed earlier gains and are now down at session lows, tracking European market weakness as we close the quarter even as Chinese stocks have their best day since Sept 19, 2008. As of 8:00am, S&P futures are down 0.2% after last week’s record highs on Wall Street, while both Nasdaq (-0.4%) and Russell (-0.6%) underperform pre-market with Mag7 names lower ex-AAPL and TSLA, and semis weaker with NVDA -1.8% as traders look forward to Friday’s jobs data and its impact on Federal Reserve interest-rate cuts. Treasury yields climbed 2-4bps, led by the policy-sensitive two-year note, the USD is weaker though. Commodities are mixed with base metals the standout, moving higher on the China trade while oil tumbles as the usual (record) shorters emerge in force despite epic chaos in the Middle East. This heavy data week kicks off with regional indicators and 2x Fed speakers. As JPM notes, economic strength with a Fed tailwind pushed markets to shrug off both negative seasonality and JPY carry unwind. But given the reflationary China growth reboot, can positive US data push this trend into Oct/Nov, or do we see Election uncertainty/vol spike create another downdraft before rallying into year-end as concerns emerge about the Fed’s easing cycle when overlaid on China’s historic stimulus bazooka? This week’s data may help answer those questions, but the medium-term trend appears to be higher.”
VIX futures are edging higher to a morning high at 17.37 after making its Master Cycle low on Thursday. The Cycles Model calls for a new high by the end of October. This may afford the last chance to hedge the equities market.
Wednesday’s options chain shows Max Pain at 16.00. Long gamma begins strongly at 17.00 and is well populated to 35.00. Short gamma resides at 14.50-15.00 but tapers off quickly.
The Shanghai Composite rocketed to a morning high at 3358.59, above its Cycle Top at 3188.83. It is also day 257 of its Master Cycle, suggesting a top in the making may be today. This 24.8% rally in 8 market days is one for the records. However, the Cycle Top has been exceeded and the current Master Cycle is about to end. Should the reversal occur in the next couple of days, the ramifications may be world-wide.
ZeroHedge observes, ““We need to establish a strong benchmark for selecting and employing people, conscientiously implement the ‘three exemptions,’ and support those who take responsibility and get things done.” This statement from the extraordinary Politburo meeting left no doubt about the leadership’s intentions.”
TNX has reversed after reaching its trendline at 38.21 last week. The trendline defines the throw-under that marks its oversold condition for the past month. A rally above the trendline at 38.00 or the 50-day Mocving Average at 38.77 may give a confirmed buy signal for TNX. The Cycles Model suggests the rally may continue through mid-October. Volatility may pick up this Wednesday and Thursday.
The Japanese Yen rose to a morning high at 70.71 before reversing. The Cycles Model gives the Yen about one more week of decline, with the mid-Cycle support at 66.19 as the potential target.