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.
12:00 pm
SPX bounced at 5773.31, just above a massive put wall at 5770.00. Should it break through, it has the capability of attaining the mid-Cycle support at 5604.27 (shown below). An attempt to save SPX from the put wall may send it to retest the trendline resistance at 5825.00. The retest may be accomplished by mid-afternoon.
Good Morning!
SPX futures declined to 5769.50 over the weekend, then bounced to retest the 100-day Moving Average and 15-month trendline near 5820.00. This was touted as the “must hold” level last week, now broken. The mid-Cycle support at 5604.27 and near the 200-day Moving Average may be tested next. Analysts are still watching the “January Barometer” with the hope of a positive turn in equities while hedge funds are selling. However, today’s move may skew the outcome of that indicator. While the January Barometer is subject to error, the Cycles Model may have offered a more realistic view of what is about to happen. The Cycles Model suggests that the SPX may hover between the 100-day and the 200-day Moving Averages the next few days, followed by a resumption of the decline.
Today’s options chain shows Max Pain at 5830.00, where the smallest payout may be made by the dealers. Long gamma may begin at 5840.00, strengthening at 5880.00. Short gamma may begin at 5800.00 while a huge put wall lurks at 5770.00.
ZeroHedge reports, “US equity futures tumbled to the lowest level since November as the global risk-off tone resumed amid a surge in oil prices pushing yields higher, with this Wednesday’s CPI print the next global catalyst. Bond yields jumped (again) as the curve bear flattens and the USD resumes its move higher in what has now become a boring daily trade where the world is once again convinced the “exception” US can decouple form a world where Japan, China and Europe are all contracting and where the US can somehow keep growing (spoiler: it can’t). As of 7:30am, S&P futures are down 0.8% to 5820, on pace for their 7th decline in the past 10 days, and approaching a level last seen in late-September; Nasdaq futures slump even more, down 1.1% with Mag7 names under pressure premarket with NVDA/TSLA the biggest losers. European shares dropped 0.9%, with technology names leading the declines. Credit ETFs are outperforming pre-mkt and may be an area of safety into CPI. Commodities are also stronger, led by Energy on news Biden hopes to blow up Trump’s presidency by sending oil prices soaring thanks to additional US sanctions on Russian oil which may impact 1mm bpd. Today’s macro data focus is the NY Fed’s 1-yr inflation expectations.”
VIX futures rose to a new January high at 22.04, soon to test the Cycle Top resistance at 23.63. VIX has been slow to react to the decline in equities because it measures investors’ outlook 30 days and beyond. Thus far, investors have chose the short-term path with zero-day options being the favored choice of investors/speculators. That may soon change.
The January 15 options chain shows Max Pain at 20.00. Short gamma lies from 15.00 to 16.00. Long gamma is practically non-existent with the exception of a cluster of brave souls anchored long at 30.00.
The NYSE Hi-Lo Index has resumed its losses on Friday, breaking beneath the Cycle Bottom at -162.00. The Hi-Lo measures new 52-week highs vs new 52-week lows. It is an early indicator, as we can see its demise below 0.00 on December 16. You can see this indicator is not oversold, suggesting further declines ahead in the SPX.
TNX futures reached 48.01 over the weekend, then began consolidating beneath it. The Cycles Model records Friday as the Master Cycle Top at 47.90 on day 260. The Cycles Model suggests continued consolidation under the Cycle Top with increased volatility later this week. The downside target for the ensuing correction may be the declining trendline with the 50-day support just beneath it, followed by the mid-Cycle support at 42.23. The correction may last 2-3 weeks.
Bitcoin has declined to a new low over the weekend, violating nearby supports. The next support level may be the 100-day Moving Average at 90181.78. The 4-month trendline is beneath it at 90000.00. Those appear to be must-hold levels to preserve the uptrend. The Cycles Model suggests a possible continued decline until mid-February. The Wave structure suggests a minimum target may be near 85000.00, with the mid-Cycle support at 74808.06.
The Shanghai Composite Index fell to 3140.98 today. It appears to be breaking a possible lip of an inverted Cup with Handle formation. A possible target for this formation lies near 2800.00, but may be deeper. The Cycles Model suggests the decline may run to the end of January, lending credence to the possible target.