1:32 pm
SPX has fallen deep into short gamma territory beneath 5830.00. In addition, it has declined beneath short-term support at 5798.00. Should it bounce above this new resistance , it may rise back to 5820. However, the aggressive signal is clear…it’s time to unload those longs. The next possible bounce area may be Intermediate support at 5723.42. If the decline goes further, there may be a confirmed sell signal.
8:30 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 consolidated this morning within its very tight range. A decline beneath 5820.00 breaks the pattern to the downside. SPX is on an aggressive sell signal, having declined beneath the Ending Diagonal formation. A confirmed sell signal lies beneath Intermediate support at 5706.0.
Today’s options chain shows Maximum Investor Pain at 5850.00. Long gamma may begin above 5870.00 while short gamma lies beneath 5830.00.
ZeroHedge reports, “US equity futures are lower for the third day in a row on a busy earnings day with yield and the dollar both extending gains as the prospect of a Trump presidency sparking more inflation and leading to less aggressive rate cuts continued to weigh on markets. As of 8:00am ET S&P and Nasdaq futures are down 0.3%, with megacap tech names mostly lower: NVDA -0.4% and TSLA -0.6%. SBUX fell -5.3% as it missed revenue expectation; MCD is -6.0% lower given the E. Coli headlines. Global stocks trade mostly lower ex China with attention remaining on the micro before NFP next week and the Election/FOMC the week after. Bond yields are 2bp higher pushing the 10Y as high as 4.24%, the highest since July 26. USD surges while the yen plunges as low as 153 as yields on Japan’s 40-year notes reached the highest in 16 years. Commodities are mixed: base metals are higher, oil and precious metals are lower: oil fell 1.0%. Today, key macro data includes Existing Home Sales and Fed Beige Book. We will have a busy earnings schedule across sectors, including BA, IBM, KO, T, TMUS, TSLA, and VRT.”
VIX futures are consolidating at the high end of its trading range, but hasn’t yet broken out. The Cycles Model indicates that VIX may get a dose of trending strength over the next few days as it breaks higher. It has already pulled back to the 61.8% Fibonacci retracement level with a completed declining Wave formation, so the likely direction is “higher.” Thus far, VIX has been remarkably calm, given the exploding bond volatility.
The Shanghai Composite Index rose to 3331.08 today, a very weak bounce in an extended Master Cycle (261 days). Time is running out for the retracement. A normal minimum bounce would be targeted for 3350.00. The Cycles Model suggests that, once the bounce is finished, the Shanghai Composite may resume its decline until early December. Note the Head & Shoulders neckline at 2700.00. Should it decline beneath it, the target may be 1500.00.
ZeroHedge remarks, “One week after China’s military launched massive encircling drills around Taiwan, widely dubbed in international press reports as ‘record-setting’, another round of smaller drills has kicked off Tuesday.
These new drills by the People’s Liberation Army (PLA) are ‘live fire’ exercises and are taking place in the disputed Taiwan Strait. Reports day they have been scheduled to last for four hours and are around China’s Niushan Island.”
TNX has reached a new high (thus far) at 42.46 on day 265 of the current extended Master Cycle. It is above the mid-Cycle resistance and 200-day Moving Average at 41.85. Should TNX reverse back beneath the mid-Cycle support, it may pull back to the trendline at 40.50. However, an alternate view may emerge, called a phase transition, where rising rates may continue through the end of the year. Wall Street is still in denial. See below.
RealInvestmentAdvice claims, “The Mayo Clinic defines Post Traumatic Stress Disorder, or PTSD, as “a mental health condition that’s caused by an extremely stressful or terrifying event — either being part of it or witnessing it.” Within the field of PTSD research is a concept called “memory inflation.” Memory inflation occurs when memories of traumatic events become more intense over time.
Memory inflation of past events amplifies one’s emotions and behaviors. As we will discuss, distress from recent price inflation is causing many investors to overly fear that a similar situation will reoccur.”
The Japanese Yen sank to the 61.8% Fibonacci retracement level this morning and may be reversing as I write. Today is day 253 of the new Master Cycle and the price target may have been met. The prior Master Cycle landed on day 258. Should the reversal materialize, the new uptrend may continue through late November.
Gold futures rose to 2772.55 this morning, above the Cycle Top resistance at 2750.96 on day 273 of its extended Master Cycle. It has since reversed beneath the Cycle Top, giving a possible aggressive sell signal. The sell signal may be confirmed beneath Intermediate support at 2644.01. The Cycles Model suggests a decline that may last approximately 4 weeks.
Crude Oil was repelled from the 50-day Moving Average at 72.13 in the overnight market and has declined to 70.13 thus far in a day of strength. Crossing the Head & Shoulders neckline at 68.50 may trigger that formation. The Cycles Model suggests the decline may last until year-end. This is no joke.