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.
8:00 am
Good Morning!
SPX futures declined to 5633.50, then bounced. It may have embarked on a path to lower levels. It is possible that the 1987 trendline has already had its bounce 50 points above it at 5504.66. If so, this decline may go beneath the trendline at 5450.00. Should that be the case, we may see at least two limit down days in the next week-and-a-half. The target appears to be 5100.00, but may be lower. Today we see a $4.7 trillion options expiration with $2.8 trillion in the SPX that may have consequences over the next week.
Today’s options expiration shows a huge options wall of both puts and calls at 5700.00 (Max Pain). Long gamma takes over above 5725.00, while short gamma reigns beneath 5680.00. It may be a bloody battle for supremacy.
ZeroHedge reports, “US equity futures are lower, as are European and Asian markets, with sentiment after the latest batch of earnings after yesterday’s close were mostly mixed or negative (particularly Fedex and Nike, both of which guided lower again). S&P500 futs are down 0.2%, off session lows, with the index facing an additional test on Friday in the form of a huge option expiration quad-witching. Nasdaq futures dropped 0.3% with all Lag 7 names lower led by NVDA -1.2%, and TSLA -0.7%. Micron reversed an earlier gain after reporting earnings after hours and was down 3%-premarket amid margin weakness. 10Y Treasury yields are down 4bps while the dollar reversed an earlier gain. In commodities, oil markets are already feeling the effect of the first effort to target a vast private processing industry, with traders preparing for significant disruption after Washington’s move to sanction a Chinese refiner over its Iranian links. London’s Heathrow airport will be closed all day Friday and service interruptions are likely to continue for days after a nearby fire cut power to the hub and brought travel to a standstill. Today, the macro data calendar is largely quiet, with eyes on any additional headlines from the White House.”
VIX futures are consolidating at the lows. However, today’s options expiration may prove to be very active. At a minimum, VIX may rise to the August 5 high during the next week. The Cycles Model suggests a high in the first week of April.
The March 26 options expiration shows clear bifurcation between puts and calls at 20.00. Short gamma occupies the 15.00-20.00 range, while long gamma dominates the 25.00-30.00 range.
TNX declined to a morning low of 41.99 before a bounce that may propel it much higher. Thus far it has remained beneath the declining trendline at 43.67. The Cycles Model infers that a burst of trending strength may emerge this weekend that may propel TNX above that trendline, giving a buy signal. The Fed’s reduction of the run-off cap from $25 billion to $5 billion may end QT for treasuries.
The Banking index stalled just above the mid-Cycle resistance at 122.38. A decline beneath it may spark a continuation to round number support at 100.00 over the next 2-3 weeks.