2:19 pm
SPX crossed beneath the upper trendline of its Rising Wedge formation and beneath its daily Cycle Top support at 5837.86. This is a good time to reduce long exposure as an aggressive sell signal has been given. The next support is the trendline at 5775.00 where a sell signal may be confirmed. Further confirmation lies at 5755.00 for those demanding a double indicator.
2:03 pm
BKX made its Master Cycle high at 122.73 on day 271 of its current Master Cycle. One of the reasons for this is that the 5 largest banks have all posted their 3rd quarter earnings. Of course, their profits were buoyed by their investment portfolios. Yet their bread-and-butter interest earnings and loan portfolios are giving them a massive headache. And it may get worse as time goes on. No one is taking into account the huge liquidity drain about to take place in the hurricane-hit regions.
ZeroHedge remarks, “It wasn’t just Goldman Sachs that reported better than expected Q3 earnings this morning: on the surface, Bank of America surprised to the upside as well, and in fact its FICC division reported an even better results than Goldman’s. The bank, which had gotten Warren Buffett’s seal of disapproval, after the billionaire investors dumped much of his shares in what was once a Top 5 position, performed better than expected as it benefited from volatile markets while net interest income topped analysts’ estimates. On the other hand, there were also quite a few red flag, with the company’s Net Interest Yield sliding to a cycle low even as charge offs and credit losses jumped to the highest in years.”
1:15 pm
NDX is the first to challenge its short-term trendline at 20200.00. This may be considered a confirmed sell signal, since the NDX failed to make a new ATH. The next support lies at 20050.00, giving additional confirmation to the sell signal. Equity funds gurus are all trumpeting a higher market by the end of the year as the buyback blackout comes to a close and equity fund managers are being “forced” to buy back in. However, “fundamentals” don’t tell the whole story as smart money stays out. It’s the leveraged hedge funds and ETFs that may be affected first by an “unexpected” sell-off.
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!
SPX futures were flat in the overnight session. Citigroup, Bank of America, Wells Fargo and Goldman Sachs. have all released their third quarter earnings, beating (lowered) estimates. Later today will see investor meetings and press releases on the future outlook. Of course, all made profits on their trading department, but net interest income fell and loan loss reserves were increased. Should the market decline, the fourth quarter may be a stark contrast to this blow-off. The SPX Cycle Top is at 5832.00, where an aggressive sell may reside. A short-term trendline lies at 5775.00 where the aggressive sell becomes more imperative. A confirmed sell signal lies beneath Intermediate support at 5660.00.
Today’s options chain shows Max Pain at 5850.00. Long gamma may reside above 5885.00 while short gamma may begin beneath 5835.00.
ZeroHedge reports, “US equity futures pointed to an unchanged open as earnings from Bank of America and Goldman Sachs beat expectations while megacap tech stocks showed modest moves. As of 8:00am ET, S&P futures were unchanged after closing at a 46th record high on Monday, while Nasdaq futures dipped 0.1% as Nvidia shares fell 1% in premarket after Bloomberg reported Biden administration officials have discussed capping sales of advanced AI chips from Nvidia and other companies. Bond yields are lower and USD is weaker; 2-, 5-, 10-yr yields are down 0.36bp, 1.75bp, 3.53bp respectively. Oil tumbled as much as -5% from yesterday close after the WaPo reported that Israel may avoid targeting Iran’s crude infrastructure, although Israel later denied the claim. Chinese stocks slumped: HSI and CSI closed -2.6% and -3.7% lower today after the WSJ reported that the motivation behind the recent policies is not “massively stimulate demand but to fend off a brewing financial crisis.” Aluminum and Copper are both more than -1% lower this morning. On the macro front we get October Empire manufacturing (8:30am) and September New York Fed 1-year inflation expectations (11am), and three Fed speakers. All eyes on earnings from BofA and Goldman today.”
VIX futures declined to a marginal new low at 16.60 this morning, approaching the 50-day Moving Average at 18.84. This is the highest level of support since last October. The Cycles Model suggests a new high may be made by the end of the month.
Tomorrow’s op-ex shows Max Pain at 20.00. Short gamma lies between 14.00 and 19.00. Long gamma. Long gamma intensifies at 25.00 and runs heavy to 55.00.
TNX declined to 40.51 this morning after breaking out above its declining trading channel. The Cycles Model suggests a corrective low may be made by the end of the week. Following that, TNX may rally until the first week of January with a potential target near 53.00.
The Japanese Yen futures are emerging from its Master Cycle low at 66.66 and may be poised to take out the neckline of the Head & Shoulders formation at 71.50. The Yen carry trade is about to become a thing of the past. The Cycles Model suggests aa possible panic rally above the neckline by the end of the month.
Gold futures are consolidating after a bounce from its Master Cycle low on October 10. The Cycles Model infers a possible rally to the Cycle Top at 2726.89 by mid-November. An alternate view may arise should the Cycle Top be made in the next week or so. The reason is that the current Cycle may show weakness until the end of the month.
Crude oil futures declined to 69.72, at the Cycle Bottom and Head & Shoulders neckline, then bounced. The Cycles Model shows another week of possible decline, suggesting it may trigger the Head & Shoulders formation. This is not good at two levels, the first is tha it shows a declining economy. The second it that the price of oil may be an advanced indicator of the equities market. Pundits claim there is no longer term trend. However, their focus is too short. Crude oil has just emerged from a time-consuming Triangle formation that is breaking to the downside.