8:30 am
The Lord’s Prayer
Our Father, who art in heaven, hallowed be thy name. Thy Kingdom come, Thy Will be done, on earth as it is in heaven. Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us. And lead us not into temptation, but deliver us from evil. Amen.
10:24 am
BKX has declined through its 50-day Moving Average at 130.66 this morning, offering a confirmed sell signal for those interested. It is currently retesting its resistance at the 50-day. Yesterday’s new high qualifies as an extended Master Cycle high on day 265.00. The Cycles Model calls for a decline to the end of January, followed by a brief bounce and a probable decline to mid-April. Today’s ISM report has taken the air out of the hopes for more rate cuts.
ZeroHedge observes, “With ‘soft’ survey data trending lower (and PMIs mixed), analysts expected this morning’s ISM Services data to print higher (catching up to S&P Global’s PMI surge in December) and they were right.
ISM Services surged to 54.1 (from 52.1 prior and better than the 53.5 expected)
Source: Bloomberg
However, below the surface things are not so awesome as Prices Paid exploded from 58.2 to 64.4 and employment slipped to 51.4…”
Good Morning!
SPX was rejected at the Ending Diagonal trendline yesterday and crossed beneath Intermediate support/resistance at 5987.41 to give a confirmed sell signal. Overnight the SPX futures rose back up to 5987.40 thus far to retest the resistance offered there. Looming on Wednesday is the FOMC report that investors will dissect to find future direction for the markets. Goldman Sachs reported a very high demand for equity financing, especially among institutions in November and early December. However, equity funding spreads imploded on December 18 when Powell took away the punchbowl. Since then, hedge funds have been active sellers of equities. The Cycles Model indicates that yesterday may have been the long-awaited Master Cycle high. Indications are for a steep decline through early February.
ZeroHedge reports, “US equity futures are up small this morning as yields continue to rise (SPX +17bps; NDX +5bps; US 10 year yield higher at 4.64%). As a reminder equities typically struggle when rates rise by 2 standard deviations in a given month, which in today’s terms is ~60bps. Stocks remain wobbly after yesterday’s performance which saw big tech \the standout, vs the Dow and S&P equal weight down on the day. Nvidia rose 1.9% in premarket trading to a new record high after CEO Jensen Huang announced a raft of new chips, software and services. Uber also gained on news about a collaboration with Nvidia for autonomous driving technology. Overnight, Europe is broadly higher with Eurozone inflation coming in line with forecasts, though ECB survey shows consumer inflation expectations picked up. Asia closed mixed (Shanghai +71bps/Hang Seng -1.22%/Nikkei +1.97%) with Japan leading the way driven by tech strength (Tokyo Electron +11%). The yen weakened to a 6-month low in the morning before verbal intervention from Finance Minister Kato. The macro focus for today will be Richmond Fed President Barkin (voter) speaks (8am est), JOLTS (10am est, GS 7,750k, consensus 7,745k, last 7,744k), ISM Services Index (10am, GS 53.5, consensus 53.5, last 52.1), & Treasury selling $39B of 10-year notes.
VIX futures hovered above yesterday’s low at 15.71, consolidating between the mid-/cycle support at 16.28 and the 50-day Moving Average at 16.56. This may be considered the calm before the storm. Long gamma has dropped off considerably, allowing the VIX more room to move. The Cycles Model suggests that VIX may receive a surge of trending strength today and that the ensuing uptrend may last through the end of March.
Bitcoin made an overnight high at 102747.54, leaving a potential Master Cycle high on day 260. Master Cycle take an average 258 days, so this high may have hit the mark. The Cycles Model suggests the ensuing decline may endure through mid-February, leaving plenty of time to do extensive damage. Once beneath the 50-day Moving Average at 97702.85, the next visible support may be the mid-Cycle value at 73640.06. Many recent investors may be underwater by that point.
TNX futures made a new high at 46.47 in the overnight session. The Cash high was 46.42 thus far. It is nearing its Master Cycle time limit, which may be reached by the end of the week. However, don’t dismiss TNX yet. There appears to be a burtst of trending strength about to come into play.