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 are consolidating beneath Cycle Top resistance at 5837.58. Crossing beneath it gave the first aggressive sell signal. The next support is a short-term trendline (not shown) at 5780.00, which offers a second, more insistent aggressive sell signal. Aggressive sell signals imply a lightening of long positions and employing partial short positions, with a possible risk of a retracement. Intermediate support lies at 5665.77, giving the first confirmed sell signal. No longs should be owned and short positions may be actively employed. Beneath that is the 50-day Moving Average at 5593.80, broadly recognized as a confirmed sell signal. The Cycles Model had suggested a top on September 26, which I had inferred to be the all-time high. That was not so. Instead, the Cycles demurred to the Wave formation, a Cycle Inversion that required a marginal new high. This created a throw-over above the Cycle Top for a new all-time high. Now that it is beneath the Cycle Top, there is a possibility of reaching the Cycle Bottom over the next 6 weeks.
Today’s options chain shows Max Pain at 5825.00. Long gamma may begin above 4845.00 whjile short gamma lurks beneath 5800.00.
ZeroHedge reports, “Futures are mixed as chip stocks recover partially from Tuesday’s rout and as traders looked ahead to more major earnings. As of 8:00am ET, S&P futures are up 0.1%, a day after a profit warning from Dutch chip equipment maker ASML rattled sentiment, and boosted by an across the board beat from Morgan Stanley which jumps 3%, Nasdaq 100 futs are up 0.2% with Nvidia rising 0.8% after sinking nearly 5% on Tuesday. Global equities trade mostly lower on follow through after ASML’s booking miss weighed on Semis and in turn broader markets (ASML call 9am EST today // Tokyo Electron -9%/SK Hynix -2% etc/Taiwan Semi -2% overseas overnight // watch for TSM earnings tomorrow). FTSE +55bps/DAX -35bps/CAC -50bps/Shanghai +5bps/Hang Seng -16bps/Nikkei -1.83%. Bond yields are lower with the 10Y yield dropping to just above 4.00%, the Bloomberg dollar index is unchanged. Commodities are mixed: precious metals are higher, while base metals are lower; oil edged higher as Israel said it was keeping options open in how to attack Iran: UST10yr -3bps @ 4.00% // WTI -$0.35 @ $70.20 // Bitcoin +2.10% @ $68,055. Main event for now is still earnings with ABT, CFG, FHN, MS, PLD, SYF, USB reporting pre open // AA, CCI, CSX, DFS, FR, KMI, PPG, REXR, SLG, STLD post close. Focus today in US will be earnings (ABT, MS, PLD); ASML earnings call will be at 9am ET.”
VIX futures are consolidating within yesterday’s trading range. There is a small risk of a new low near the 50-day Moving Average at 18.48 today. The Cycles Model then calls for strengthening trend over the next week. There is a potential for a new high above the August 5 high by the end of the month. Other experts (see below) imply that the VIX may stay rather range-bound.
The October 23 options chain shows Max Pain at 20.00. There is a dearth of short gamma as today’s options expiration takes out the shorts. However, long gamma is not highly subscribed.
RealInvestmentAdvice opines, “The financial media frequently opines on what the daily gyrations of the VIX (implied volatility index) signal regarding investor sentiment. Despite how often it is quoted and discussed, many investors do not truly appreciate what implied volatility measures.
We take this opportunity to help you better understand implied volatility. Furthermore, we discuss other lesser-followed measures of implied volatility that help better assess whether implied VIX readings infer bullish or bearish sentiment.”
The Shanghai Composite Index fell to 3167.64 in the overnight market, reinforcing its confirmed sell signal. The Cycles Model suggests a possible panic decline to the Cycle Bottom in the next week or so. In fact, should it fall beneath the neckline at 2700.00, it may trigger that formation. Currently, there is still a 50-50 possibility of a bounce at the neckline.
ZeroHedge remarks, ” Two weeks ago, when the world was still enamored with Jim Cramer’s idiotic idea that Chinese stonks can magically double in just a few weeks simply because Beijing had some soothing words to say and because when it comes to greater fools, China has more than anyone else, and when Goldman laughably upgraded Chinese stocks after the 30% runup had already taken place,we warned that the party was about to end.”
TNX may have made its Master Cycle low this morning at 40.10. The futures dipped to 40.00 before reversing. If so, it should waste no time rising back above the trading channel trendline at 40.70. The mid-Cycle resistance and 200-day Moving Average lie at 41.73 to 41.84. Above that, traders will have no doubt that yields may be on a secular rally. The target may be the Cycle Top at 47.25. In fact, the Cycles Model projects the rally in yields to continue to the first week of January.
Gold futures rose to a morning high at 2701.05 as it nears its Cycle Top resistance at 2730.30. While gold appears to be on a gravity-defying, never-ending rally, the fact is both Cycles and the Wave analysis say it is on its last legs. Today is day 266 of the Master Cycle. This implies the rally in gold may end this week. The implied target for the decline to follow may be the October 31, 2023 low at 1618.00. The Cycles Model suggests the first leg of this decline may not terminate until late November.
Crude oil futures dipped to 70.06 this morning before a bounce. The wild swings in price hides the long-term decline in oil. Oil volatility is even leaving the VIX behind. Note that crude is often a leading indicator of what may come in equities. The Head & Shoulders neckline lies at 69.56, in conjunction with the Cycle Bottom. Should that be broken, the Head & Shoulders formation may be activated, sending prices to a possible low near 40.00.