11:10 am
SPX surged to the 50-day Moving Average at 5950.00 by mid-morning in a face-ripping short squeeze that retraced 71.7% of the January 6 decline. A possible objective of this short covering is to reduce the very large equity short base beneath the 50-day Moving Average, or at least make it very painful for those who shorted beneath the 50-day. With that (short) fuel gone, the retracement may be over. However, long gamma disappears beneath 5900.00, taking away the upside fuel (long gamma) as well. The current hourly Cycle may have run its course, leaving the SPX faltering beneath critical resistance.
7:00 am
Good Morning! I have an early doctor’s appointment, so I am pre-filling this report.
SPX futures may continue to consolidate until this morning. Based on the (triangle) Wave structure, it may attempt another bounce toward the 50% retracement value near 5900.00. A strong push may elevate the SPX as far as the 61.8% Fibonacci retracement value at 5926.18. However, the bounce may be over by mid-day. SPX may resume its decline thereafter.
8:50 am
Consumer prices soared in December, soaring by 21% and wiping out any thought of a rate cut. However, SPX futures rose to 5939.00, just shy of the 50-day Moving Average at 5948.00. That exceeds the normal 61.8% Fibonacci retracement in futures, but it may open at or beneath the 61.8% retracement value at 5926.18.
Today’s options chain shows Max Pain at 5855.00. Long gamma may begin at 5900.00 while short gamma resides beneath 5800.00. There’s some option maneuvering going on this morning.
ZeroHedge reports, “US equity futures are higher, led by small-caps with the rally strengthening after the cooler than expected UK CPI print. As of 8:20am, S&P and Nasdaq futures are up 0.4%, with banking shares advancing in premarket trading after markets inched out a positive close on Tues following firm underlying PPI components & yields continuing to march higher. BlackRock, Bank of New York Mellon, JPMorgan and Goldman Sachs all beat estimates for the fourth quarter, with trading revenues performing strongly. All Mag7 names are also higher. Otherwise, it’s fairly quiet from a headline perspective overnight into CPI, although US reportedly will unveil more regulations to prevent advanced chips from being sold to China, with the planned rules, targeting producers TSMC, Samsung, and Intel. Bond yields are down 1-2bps as the USD is being offered, largely a function of yen strength following comment from BoJ Governor Ueda who said the BoJ will raise rates and adjust the degree of monetary support if improvement in the economy and price conditions continues, while he added that he wants to discuss and decide whether to raise rates at next week’s policy meeting. In commodities, Energy and Metals are leading the complex higher. Today’s focus is on CPI/Bank Earnings but keep an eye on the Beige Book release.”
VIX futures may be on the last leg down, due to be complete by mid-day as well. The possible target may be between 17.50 and 18.00. Equities monthly options expiration occurs on Friday. Thereafter, the VIX may experience particular strength following that day.
9:12 am
VIX futures plummeted to 17.02 this morning, deeper than the normal retracement values. That may be attributed to tomorrow’s unusually high number of puts in today’s op-ex. Once they have matured or expired, the VIX may move more freely.
USD made a Cycle inversion after making its Master Cycle high on December 31. This is in the form of an expanded correction. Usually corrections do not exceed the Master Cycle high. An expanded correction is the exception to the rule. In this situation, USD may now decline through the Cycle Top at 108.89, completing the correction at the 50-day Moving Average currently at 106.91.
TNX is tanking this morning after the December CPI release. Yesterday’s Master Cycle high paves the way for an approximate 2-week correction in the 10-year yield. A normal correction may take the TNX down to the mid-Cycle support at 42.25.