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!
NDX futures bounced to 20269.30 this morning, reaching its retracement target at 20231.00. It is poised for a third Wave decline that may take it to its two-year trendline at 18500.00. Should it surpass that target, a potential Head & Shoulders formation awaits, with an even deeper target. Currently, the Cycles Model suggests another 4 weeks of decline. Surging rates are putting pressure on the highly leveraged tech sector. That being said, the largest source of financing has been from the Bank of Japan with its deeply negative loan rates and growing instability in the Yen carry trade. (read my report on the Yen)
NDX is on an aggressive sell signal, suggesting lightening the longs. There may be a potential confirmed sell signal at Intermediate support at 19825.00. Hedging may be employed at this time while hedging is cheap.
Today’s options chain shows Max Pain at 20100.00. Long gamma may begin above 20200.00 while short gamma starts beneath 20050.00.
The Shanghai Composite Index declined to its Cycle Top support at 3265.26 after having reached its Master Cycle high at 3331.08 yesterday on day 261. A decline beneath 3265.00 may trigger a decline to its Cycle Bottom at 2703.16. A further decline may trigger a massive Head & Shoulders formation with dire consequences. Stay alert! This could have political as well as economic consequences.
SPX futures rose to 5830.30 this morning, above yesterday’s target for a bounce. It has overlapped its prior Wave structure, suggesting the next decline may extend to the 50-day Moving Average at 5659.48. An aggressive sell signal lies beneath Short-term support at 5800.00. An aggressive sell signal implies lightening the long positions at the very least. Keeping profits is the first and foremost rule of the market.
Today’s options chain shows Max Pain at 5800.00. Long gamma may begin above 5835.00 while short gamma lurks beneath 5750.00.
ZeroHedge reports, “.After three straight days of selling, US equity futures are higher with tech stocks leading gains as Tesla surged 13% in premarket trading after it posted its biggest quarterly profit in more than a year. Contracts on the S&P 500 rose 0.5% as of 8:00 a.m. in New York, while futures on the Nasdaq 100 advanced 0.8%, setting up the tech index to rebound from its sharpest decline in almost seven weeks as traders look ahead to earnings from the rest of the “Magnificent Seven,” kicked off by Tesla’s strong performance. The benchmark has yet to fully claw back a summer slump. Overnight, NVDA supplier SK Hynix posted record profit amid strong AI demand; BA fell 2.7% as its bid to end strikes fails while IBM slumped after the it posted underwhelming revenue in the third quarter. Bond yields are lower and the USD is weaker; 2-, 5-, 10-year yields are 3bp, 5bp, 5bp lower. Commodities, including oil, metals and Ags, are mostly higher: Oil +1.9%, Silver +1.8%, Aluminum +1.8% but Palladium is the standout, surging 10% on news the US may impose sanctions on Russian palladium exports (the country produces 38% of global palladium). The main data highlight will be the October flash PMIs from around the world. In the US, we’ll also get the weekly initial jobless claims, along with new home sales for September.”
VIX futures are consolidating above the 50-day Moving Average at 17.98 after yesterday’s surge. Rising bond volatility may spill over into the VIX, as the traditionally close relationship has recently widened.
The October 30 VIX options expiration shows Max Pain at 19.00. Short gamma prevails at 17.00 to 18.00. Long gamma may begin above 25.00, but the strength of conviction is still not there.
TNX has pulled back from its Master Cycle high at 42.58, made on day 265. The first line of defense for the pullback may be the upper trendline near 40.50. However, trending strength returns next week, suggesting a possible expanded correction, where the TNX may make a new high before completing the retracement. This may be a wild and confusing time for bond traders as Treasury liquidity deteriorates.
ZeroHedge observes, “n a day when stocks are dumping, having finally noticed the surge in yields, one would have expected today’s 20Y reopening auction (of 19Y, 10M Cusip UD8) to be solid. It wasn’t.
Stopping at a high yield of 4.590%, this was 55bps higher than last month’s 4.039%, the highest yield since May and also tailed the When Issued 4.574% by 1.6bps, the second consecutive tail in a row (if not as bad as last month’s 2.0bps tail).”
If you have read my blog this far, congratulations! You will now see why equities and especially the NDX is in such danger of failure.
The Yen has reversed its decline this morning after making its Master Cycle low yesterday, day 253. It rallied to 66.07. There is a potential for lingering near the low for a few more days. However, once it rallies above its mid-Cycle resistance at 66.09, the carry trade party is over.