11:25 am
BKX bounced rom its 50-day Moving Average at 111.50. Beneath that level is a confirmed sell signal. The Cycles Model suggests an alarming development. There may be a Master Cycle low by the end of the week. The possibilities are staggering, given the increased volatility in the VIX and in the Banking Model itself.
The perfect storm may be brewing. With liquidity conditions already favorable, the central banks have unleashed a torrent of…more liquidity. Most analysts welcome the gushing increase in money supply, thinking only of the prospects of a rising equities and real estate market. The more sober view is, that with the PE of most equities indices over 20, what rot lies beneath the surface that causes the authorities to boost liquidity? The Cycles Model suggests we may know the answer shortly.
10:30 am
SPX has declined beneath 5700.00, our demarcation line. It is now on an aggressive sell signal. One should not be long here.
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 rose to 5767.20 this morning, short of the all-time high at 5767.37. Thursday’s high remains intact after yesterday’s closing stick-save. Volatility may now rise to break the SPX out of its range. 5700.00 is where an aggressive sell may take place. Once underway, the declining Master Cycle may last to late November. One may deduce the reason for this decline.
Today’s options chain shows Max Pain at 5730.00 Long gamma may begin at 5745.00 while short gamma may start beneath 5700.00.
ZeroHedge reports, “US equity futures are down a touch as we enter Q4 after trading overnight in a narrow range, with NDX leading and RTY lagging, a familiar pattern from the first half of the year. So far in 2024, S&P is +20.8%, NDX +19.2%, and RTY +10.0% (a full YTS performance return in a latter post). As of 8:00am ET,. S&P futures are down 0.1% after the index notched a fresh record Monday, the 43rd of the year, following a third-quarter rally that capped the longest such winning stretch since 2021; Nasdaq futs are unchanged with Mag7 names mixed as Semis hold a slight bid. FTSE +35bps, CAC -20bps, DAX +30bps, Nikkei +1.93%, the record China market juggernaut (Hang Seng/Shanghai) is closed for the next week due to holidays. Bond yields are lower as the yield curve bull steepens, and USD is higher. Commodities are mixed with Ags/Energy under pressure and Precious Metals are leading Base metals. Overnight news focused on Israel “targeted ground raids” into Lebanon (Israeli security official said a wider operation into Beirut is not on the table) and the US Dockworkers strike starting on the East Coast with economic costs estimated to be up to $5bn/day; hurricane recovery continues in the Southeast. Today’s macro data focus is on ISM-Mfg, JOLTS, Construction Spending, and Vehicle Sales. There are five Fed speakers today.”
VIX futures consolidated this morning, but may be waiting for a burst of energy to kickstart the new Master Cycle. Both the Cycle and the structure appear complete, or nearly so. The Cycles Model shows the new Master Cycle going higher through the end of October. However, a resurgence of a new Cycle may carry the VIX higher into December. The entire 4th quarter may be chaotic.
Tomorrow’s op-ex shows Max Pain at 16.00. Short gamma resides at 14.50-15.00 wile long gamma may begin at 17.00 and remains strong to 35.00.
TNX is pulling back, gathering strength for th enext probe higher. Trending strength may be rising through the end of the week, as well. With it may come the realization that yields are going higher.. Investors have become complacent, expecting the wind (yields) at their back. Stormy weather ahead.
ZeroHedge remarks, “Stocks and bonds took a hit today around 1400ET when Powell said that he “doesn’t feel like The Fed is in a hurry to cut quickly.”
Additionally, Powell said “sometimes people pay too much attention to The Fed’s SEP [Dot Plot],” noting that the SEP shows two more 25bps cuts this year (less than the market).
That sent rate-cut expectations lower (hawkishly), with less than 3 cuts now priced in for 2024…”
The Shanghai Composite futures stopped going higher for the first time in nearly two weeks after carrying out the shorts on stretchers. The message from the PBOC is clear. Speculating on the short side is not allowed. In doing so, the SSEC has become extremely overbought just as liquidity from short covering runs out. What becomes more evident is that the only liquidity to propel the Shanghai higher may have come from short covering. Monday’s high at 3358.59 may have become the end of the Master Cycle. The new Master Cycle now suggests all of the short-covering gains may disappear, as the move was artificially induced. Beneath this year’s low is a potential neckline of a Head & Shoulders structure with a minimum target of 15000.00. The Cycles Model suggests the SSEC may be testing that neckline by the end of October.