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 declined to 5967.40 during the overnight hours before rising back near 6000.00 this morning. After multiple attempts on Friday to punch above 5972.00, it succeeded to do so at the open on Monday , making a new ATH. It also may have completed its Master Cycle on day 262. The Fractal appears to be complete as an Ending Diagonal. The Cycle Top resistance is at 6009.70, which gave us an aggressive sell signal (lighten the longs) on Monday. Investors are euphoric, with an astounding 64% of the options bought are calls.
Today’s options chain shows Max Pain near 5975.00. Long gamma may begin above 6000.00, while short gamma may lie beneath 5950.00.
ZeroHedge reports, “n a rollercoaster session of reversals, US equity futures at first slumped only to rise to session highs, while the dollar initially spiked only to slide after Donald Trump vowed to place 10% tariffs on goods from China and 25% on all imports from Mexico and Canada, a move which at first spooked the market but was subsequently viewed as “not as bad as some had expected.” As of 8:00am, S&P 500 futures were higher by 0.2%, while Nasdaq 100 futs rose 0.3% adding to gains in early US session while remaining inside Monday’s range; European and Asian stocks fell, reflecting worries that Trump’s policies will hurt US exporters. Bond yields are unchanged and the USD – a beneficiary of isolationist policies – gave up early gains only to trade at session lows. The Mexican peso and Canadian dollar weakened. Commodities are higher led by base metals; oil is +0.9% higher. Bitcoin retreated from the $100,000 level after a failed run at the “nice round number” with Standard Chartered suggesting that the catalyst for the pullback yesterday was a post Bessent announcement (for Treasury) reduction in US Treasury term premium.The biggest headlines post Monday close was Trump’s tariff threat on Mexico, Canada and China. Today, the key macro focus will be New Home Sales and FOMC Minutes.”
VIX futures edged lower, to 14.52 this morning after a strong down day yesterday. Keep in mind this is not a complete retracement. The VIX is on a pullback from a confirmed buy signal. “Buy the dip” should be the exigent practice, as the new Master Cycle may last until February. Investors should be asking the question, “VIX calls?…or SPX puts?”
Tomorrow’s options chain shows Max pain at 17.00. Short gamma is heavily populated from 14.50 to 16.00, while long gamma begins at 20.00 and has some strength to 30.00. There is not a lot of (SPX) downside hedging yet.
TNX completed its retracement yesterday at 42.61 and has since reversed higher…in time for trending strength to reappear. The Cycles Model suggests the uptrend in yields may continue through early January. Investors, on the other hand, believe that yields may go down.
ZeroHedge reports, “Treasury yields were already significantly lower this morning (along with crude oil prices) but the strong demand for 2Y Treasuries at this morning’s auction sent them even lower…
Source: Bloomberg
Bidders were evidently happy to scoop up “cheap” paper as the offering stopped at 4.274%, nearly 2 bps through the when-issued yield…”
The Shanghai Composite is hovering at its low after giving a sell signal. The SSEC has an approximate week to make it to the Cycle Bottom at 2702.85. Will it make it? The chart appears borderline panicky.
USD futures reversed from its Master Cycle high on Friday to begin a wide-sweeping correction. The Cycles Model suggests a possible decline to the mid-Cycle support at 103.85 over the next month. Inter mediate support at 104.76 provides the first possible bounce platform. Note that the USD has broken above its previous high made in October 2023 at 107.05.
Euro futures are trading beneath the Cycle Bottom resistance at 105.41 after a strong bounce yesterday. The Cycles Model suggests a further decline toward parity at 100.00 over the next three weeks with a possible bounce afterwards.
The Japanese Yen spiked higher this morning as it embarks on a new trend. The Cycles Model suggests the Yen may strengthen to mid-March. This may give the Yen the opportunity to test (aand possibly trigger) the Head & Shoulders formation at 71.55.
Bitcoin has pulled back from its high at 99772.99 as it may yet complete to 100000.00 (or higher) over the next few days. Fractal similarity allows BTC to rise to 100900.00 to 102200.00.by the end of the week. Should it do so, it will have accomplished a much-awaited milestone. However, the downside from that milestone may be brutal. The first target for the decline may be the August 5 low at 49202.81. Unfortunately, the first sell signal lies beneath the Cycle Top at 85103.22.
Gold futures had a key reversal on Monday, first rising to 2723.20, then falling to a low of 2616.60. Today it stabilized at 2667.25. The Cycles Model suggests a possible decline to the Cycle bottom at 2125.72 by the end of December. It may go considerably lower in early 2025.
Crude oil futures tested the neckline of its Head & Shoulders formation at 68.55 this morning. Once beneath it, it may solidify the sell signal with a very deep target. Head & Shoulders formations have a reliable track record and often exceed their targets. The Cycles Model suggests the ensuing decline may continue to the end of the year.