7:45 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 declined to 5858.30 this morning. The likely fractal outcome is that the bounce may resume with an average target of 5925.00. Should this be so, the bounce may be over by mid-day. An alternate scenario has the SPX resuming its decline immediately. The decline that follows may take up to a week with the 3-month trendline and 50-day Moving Average at 5767.35 to be challenged next. At that time the perceived uptrend may be broken. The year-long trendline (red) at 5600.00 may be next to be probed in the following days. Warren Buffett has raised the cash in his portfolio to at least 27%. You should be, too.
Today’s options chain shows Max Pain at 5895.00. Long gamma may tentatively begin at 5900.00 while short gamma lies beneath 5870.00.
ZeroHedge reports, “tocks fell, with European equities shedding almost 1%, and global bonds and the dollar climbing on worries over the latest escalation in the Ukraine. Sentiment was spooked after Vladimir Putin signed a decree lowering Russia’s threshold for a nuclear strike in the event of a massive conventional attack on its soil. The warning came just minutes before Ukrainian forces carried out their first strike within Russian territory with a Western-supplied ATACMS missile, although the tepid Russian response indicated that Putin is in no rush to retaliate to this provocation by the deep state. As of 8:00am S&P 500 futures dipped 0.3%, but were well off their session lows; Nasdaq futures dropped 0.2% with TSLA down 1.5% and NVDA up +0.8% pre-market. The yield on 10-year Treasuries fell three basis points to 4.38% after earlier dropping to 4.33%.”
VIX futures made a nominal new high at 17.86 this morning and remains elevated. Hedges are being bought. There is no real fear yet, but caution is on the rise. VIX is on a buy signal and should be considered for hedging. The Cycles Model suggests that trending strength may rise during the week with the 50-day Moving Average at 18.22 now being considered a trigger point for a buy signal. Historically, VIX would not be a mainstream consideration as a hedge until it reaches 25.00, but it has been so low for such a long period that trigger points are being recalibrated.
Tomorrow’s options chain shows Max Pain at 18.00. Short gamma rests between 13.00 an 17.00. Long amma may begin above 20.00. This week contains the monthly options expiration for the VIX and is heavily loaded. It may be interesting to see what happens should VIX rise above Max Pain.
The Shanghai Composite has bounced to 3346.76 today in an effort to overcome it Cycle Top resistance at 3369.61. Tomorrow is a potential day of strength that may propel it to resistance. However, it may also lead to a very strong reversal. Should that occur, the Cycles Model implies a decline may follow to the end of January. A crash in Chinese stocks may set off a chain of events affecting global liquidity.
ZeroHedge comments, “I started as an emerging market analyst in 2002, and one of the biggest best stocks at the time was Petrochina. It was listed in Hong Kong in 2000, and had done nothing for years, before stating to move in 2003, and rising 1,000% by 2007, before entering a prolonged bear market.
In 2003, Warren Buffett bought 7% of Petrochina, and then slowly began exiting in 2007. The final spike happened after Berkshire Hathaway had sold out fully, and the market believed the overhang was gone. Markets were getting very bullish on emerging markets as the Federal Reserve was beginning to cut interest rates as this was seen as the catalyst for emerging markets in 2002.”
TNX has declined to a morning low at 43.57, making a 61.8% retracement of its most recent fractal this morning. This may allow resumption of the rally in the 10-year yield. The Cycles Model implies the uptrend in TNX to continue through early January as yields catch up to the reality of burgeoning renewals in 2025 due to Yellen’s propensity to refinance the Treasury market with very short-term issues prior to the election to keep rates down. Bond volatility has receded, implying a limited trading range, but that may be unrealistic, given the conditions.
USD futures made a low this morning at 106.037 and may have resumed its upward course. The Master Cycle has yet to complete its fractal at a higher level (108.00-109.00) before completion later this week. The USD may spend the remainder of the year in decline.