12:00am
Watch out! BKX may be about to break down beneath its Cycle Top at 120.50, which gives investors an aggressive sell signal. A confirmed sell signal lies beneath Intermediate support at 115.67. The 10-year Treasury yield is back above 42.00, threatening bank investment portfolios. Regional banks are closing branches in the Mid-West to lower expenses. Warren Buffett may be right.
11:50 am
SPX has just completed its first mini-Cycle from the ATH. The next week may see a stiff decline to the 50-day Moving Average at 5678.21. It may be deeper. In the meantime, commentators are claiming we aren’t long enough.
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 bounced back to the lower trendline of its 2-month Ending Diagonal near 5835.00 this morning. The Cycles Model suggests the bounce may be over by mid-day. From thee, the decline may extend to the 50-day Moving Average at 5668.44. SPX is on an aggressive sell signal, suggesting lightening up the longs on the bounce. The 50-day Moving Average is the most common recognition point that all is not well with the bull.
Today’s options chain shows Max Pain at 5835.00. Long gamma may begin above 5850.00, while short gamma may prevail beneath 5800.00. Today’s options are a mixed bag and same-day options may affect the outcome.
ZeroHedge reports, “US equity futures are higher for the second day in a row, trimming their weekly drop to less than 1.0%, and led by small caps as investors looked past a jump in borrowing costs that cooled market sentiment earlier in the week. As of 8:00am ET, S&P futures are up 0.3% with Nasdaq futures up 0.2%. Megacap tech are mostly mixed: META +1.0% and AMZN +0.7%, while TSLA -1.7% after its second biggest one day gain in history following blowout earnings, and AAPL is down 1% after China Q3 smartphone sales decline. Treasury yields drop for a second day, down 1-2bps, and leaving the rate on the 10-year note up about one tenth of a percentage point in the week at 4.18%; the USD is flat. Commodities are mixed with oil higher, base metals mixed, and precious metals lower. Today, the macro focus will be Durable/Cap Goods Orders, as well as the final revision to Mich. Sentiment.”
VIX futures continue to consolidate above the 50-day Moving Average at 18.02. While the Master Cycle may have made its low on October 18, there is room for yet another low in the very near term (caution is advised). In other words, there may be a “forced calm” in the VIX until after the election. A possible target may be as low as the mid-Cycle support at 15.54, although the VIX has already “touched” that support twice since August. Should that new low be made, the Cycles Model suggests an extended uptrend until early December.
The October 30 options chain shows Max Pain at 19.00. Short gamma resides at 17.00 to 18.00, while long gamma may begin at 20.00.
TNX futures are challenging the 200-day Moving Average at 41.79 this morning. The Cycles Model “allows” TNX to go lower for another day or two. However, there may be a burst of strength by mid-week to elevate TNX to a new high. This promises to make the next couple of weeks very confusing for traders, as bond volatility continues to rise.
The Japanese Yen is challenging its mid-Cycle resistance at 66.09 this morning. The 200-day Moving Average is just above it at 66.35. Those investors employing the Yen carry trade may be finding that the extremely low interest rate (.10%) is a mixed bag, since the Yen has already risen 1.25% in two days. While there is a (diminishing) probability of a lower low in the next few days,, the Cycles Model warns of a violent reaction in the Yen by mid-week.
USD futures declined to 103.80, in a pullback that may test the mid-Cycle support at 103.65. While the USD may correct to a lower level over the next week, the Cycles Model suggests a veritable explosion of strength in the first week of November.