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.
11:10 am
The Agricultural Index is showing signs of strength and may continue to do so during the month of April. The Cycles Model suggests the Ag Index may rally through the month of May as well. This may be one of the few assets showing long-term bullish propensities going forward.
8:00 am
Good Morning!
SPX completed a Fibonacci 38.2% retracement of its last week’s decline yesterday. This morning’s futures have made a partial pullback to 5575.60 thus far. We are neutral thus far, waiting for the pullback to be complete. Yesterday was day 258 of the Master Cycle, giving us a completed formation to the downside. However, there may be a retest of that low in the next couple of days. Once the retest is complete, there may be a three-week correction of the decline. There is an alternate view, calling for the SPX to decline beneath the 1987 trendline. Should that occur, there may be a decline to the Cycle Bottom at 5342.86. a 13% decline from the peak. As it stands, the decline thus far is a little more than 10%. Yesterday’s buying came mostly from a one-off pension quarter-end rebalancing. That leaves the commercials and hedge funds to decide whether to participate in buying as well. With earnings reports coming in the next week, a lot may depend on the results. Retail investors are a bit stand-offish yet.
Today’s options chain shows a highly contested Max Pain level at 5600.00. Long gamma may begin above 5650.00, while short gamma may proceed beneath 5550.00. The options landscape has changed to a more neutral tone.
ZeroHedge reports, “US equity futures fell abruptly just around 6am ET, reversing earlier gains and unable to benefit from the positive risk tone in European trade, hinting at another very volatile session on Wall Street, as tomorrow’s tariffs “liberation day” loomed over markets. Gold extended its winning streak, rising to another record high. As of 8:00am ET, S&P futures were down 0.5%, reversing an earlier gain of 0.2%, after the Washington Post reported a White House proposal to impose tariffs of around 20% on most imports. Nasdaq futures slid 0.6% as Tesla rose modestly but other Mag 7 stocks were in the red. European and Asian markets both rose. Bond yields slid 4bps, pushing the 10Y yield to 4.16% while the USD traded higher on the back of Euro weakness. Commodities are mostly flat this morning with base metals declining (copper -0.9%). Overnight, headlines were largely light, with geopolitical tension and trade policy remaining uncertain. Trump seems to dial back his criticism on Putin, per BBG article (here). We will get the Final March ISM-Mfg this morning: consensus expects the Index to print 49.5 survey vs. 50.3 prior; we also get the latest JOLTS report.”
VIX futures bounced to 21.63 after testing the Cycle Top resistance at 25.06 yesterday. The Cycles Model suggests a new high may be in the making this week, with the current Master Cycle ending no later than Friday. This leave a lot of uncertainty about the direction of the SPX in the next few days. Speculators are net long the VIX, leading to more volatility.
Tomorrow’s options chain shows Max Pain at 19.00. Short gamma resides from 15.00 to 18.00. Long gamma resides from 24.00 to 32.00.
TNX futures declined to 41.47 while the cash market low was 41.50. Today is day 257 in the current Master Cycle. TNX is in the reversal window and may have met its target for this decline. A bounce above the mid-Cycle resistance at 42.16 may confirm the change in direction. Most investors assume that interest rates may stay low or go even lower. That is a false assumption that may meet with dismay in the next week, as TNX may power its way above the current consolidation range.
Bitcoin may be completing its retracement to a Fibonacci high. The most likely target may be the 50% retracement at 92900.00 or the Intermediate resistance currently at 93470.00. The retracement may last another two weeks before reversing back into a decline. While bitcoin has been a favored tool for money laundering, Trump’s crackdown on the cartels and Chinese fentanyl suppliers may deal a blow to the dark side of bitcoin.
The Nikkei 225 Index may be ending its 7-month consolidation to break through the neckline of the Head & Shoulders formation, ending in a 10% loss for the first quarter. It had made its Master Cycle high on March 26 and has the green light to decline over the next three weeks. While that doesn’t seem to be a very long time, the decline may redouble through the month of June, as well. There may be two Head & Shoulders formations that would offer successively more bearish targets. Be aware that money escaping the declining Nikkei may find its way into US equities.
The Japanese Yen emerged out of its March 27 Master Cycle low to begin to challenge the USD for supremacy. The simple reason is that the Yen offers liquidity and may benefit from the declining Japanese equities. This may mean trouble for the Yen carry trade, which is dependent on a low valuation for the Yen. This may spell the end of the leveraged trades that are available today.
The EuroStoxx Index has bounced this morning after crossing beneath the 50-day Moving Average at 54.33. Anyone thinking of investing in European stocks should reconsider. The sell signal prevails and the Cycles Model suggests the decline may continue to the end of May. This may send more European investors’ money to the US, at least until capital controls are set. Should war break out in Europe, assets may be trapped by capital controls keeping European investors to flee to the US>
Gold futures have extended their gains to 3177.00 while the Merc has lagged a bit. However, both have made their respective targets on day 258 of the Master Cycle. There is an outside chance that gold may extend to the Cycle Top at 3200.00, so the current stance i remains neutral. Gold is claimed to have the highest return-to-risk ratio, but that is looking through a rear-view mirror.