1:30 pm
SPX challenged Intermediate-term resistance (now at 5772.68) and reversed back beneath it, fulfilling both time and price for the retracement. The market has now become fragile.
ZeroHedge remarks, “In yesterday’s Global Daily we speculated that the rapid tightening in prediction markets for the US presidential race might have been a head fake. Over the course of yesterday, we saw momentum shift in those markets with probability on a Trump win again building. As of this morning President Trump leads by 18pts on PolyMarket, 8pts on Kalshi and 1pt on PredictIt. The PredictIt figure is especially interesting, given that it awarded a lead to Vice President Harris this time yesterday.”
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 made an overnight high at 5730.20. The Cycles Model suggests a possible bounce to Intermediate resistance at 5768.21, as the need for retracement in the market corresponds with the need for calm during the election. The 50-day Moving Average lies at 5699.43 and is the line in the sand for traders. Beneath that lies a confirmed sell signal. Today’s bounce may be the last chance to lighten the longs.
Today’s options chain shows Max Pain at 5750.00. Long gamma may begin above 5800.00 while short gamma lies beneath 5700.00.
ZeroHedge reports, “Futures are higher led by tech as voting gets underway in a very tight presidential race between Donald Trump and Kamala Harris (full election day guide here). As of 8:00am S&P futures are up 0.1%, off session highs; Nasdaq futures are 0.3% higher with Mag7 names mostly higher as Semis also have a bid. DJT is +6% pre-mkt; BA is +2% after the company secured a labor deal ending an 8 week strike. Palantir surged 13% on record profit and high demand for its artificial intelligence software. The dollar was steady, while 10-year Treasury yields advanced four basis points to 4.32%. The commodity complex is stronger today led by Energy and Base Metals; brent trades aroun $75.50. The macro data focus is on ISM Services and the Election, although we may have to wait for the results: in 2016, Trump was declared winner early Weds but in 2020, Biden was declared winner on Sat.”
The Shanghai Composite Index rose to 3385.92 today. By its action, one might say, the whole world is watching the US markets. However, The Cycles Model suggests the retracement bounce may soon be over near 3430.00-3450.00, igniting Chinese speculative fever. Following the short squeeze, the decline may resume. The Cycles Model suggests the current Master Cycle may last until early December, where it may land near the Cycle Bottom at 2705.37. The neckline of a massive Head & Shoulders structure also lies at the Cycle Bottom. Should the decline exceed that low, the H&S formation may be triggered.
VIX futures are consolidating inside yesterday’s trading range, waiting for some resolution of today’s election. Implied volatility going into the election is one of the lowest on record. Usually volatility is high prior to the election and calms down afterwards. The Cycles Model anticipates the exact opposite of market expectations. What makes this election different?
Tomorrow’s options chain shows there is no Max Pain. Short gamma resides from 15.00 to18.00. Long gamma lies between 23.00 and 25.00. There is little anticipation of a large move in either direction.
TNX is edging higher, but hasn’t yet broken out. Once it does, it may go on a rampage higher through the end of the year. The current activity may be called a “phase shift,” where the trend suddenly ramps into high gear rather than pausing for a consolidation/correction. This action will certainly change the outlook for bonds and the Fed’s ability to manage or control them. Since 1949, the Fed has carefully cultivated the image of being “in control” of the bond market. However, a close examination has shown that the Fed has never anticipated changes, only reacted to them. The September rate reduction was a major blunder that now has implications that the Fed is no longer in charge.
ZeroHedge observes, “Why so many go so wrong on public debt.
I have been involved in the study of economics for about 30 years. What spurred my interest was the discovery of a major blunder in the field of Public Finance that has caused centuries of misery, poverty and tyranny. The strange thing is that we all know of this blunder in various ways, but inexplicably refuse to incorporate the information into reasoning on this most important subject. It is beyond me why the learned and lettered people of Finance and economics allow this fundamental and dubious premise, passively accepted for millennia, to persist.”
The Japanese Yen is edging higher, toward the mid-Cycle resistance at 66.02. However, the Master Cycle may not be complete. The Cycles Model calls for another 2-3 weeks of decline before a major reversal.