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.
10:35 am
Volatility is spiking as SPX reached a low of 4835.04, then spiked up 8.5% within a half hour on rumors of a 90-day pause in the tariffs. It is now back beneath 5000.00 and sinking fast. It appears that we may see a 10% down day from here. Capitulation may rule the day.
7:45 am
Good Morning!
NDX futures traded down to 16332.50 this weekend before a bounce this morning. Friday’s close was beneath the mid-Cycle support at 17428.00, leaving it vulnerable to a further decline. An important support to point out is the 1987 trendline near 15000.00. Should today be another 10% down day, we may see a bounce at that trendline. However, a failure to hold at 15000.00 today assures the decline may extend to the next support level at 10440.00. The Cycles Model calls for a possible high velocity reversal by Wednesday. Commentators are now discussing past bear markets. There is no sign of capitulation, yet.
SPX futures plummeted to a critical support at 4802.70 this morning, then bounced to 5000.00. The selling isn’t over yet. Should SPX find today’s support at 4800.00, this crash may have the same magnitude as the 2008 decline. Failure to hold today at 4800.00 suggests a much larger magnitude decline may ensue. This may bring on capitulation, where everyone is headed for the exits. Further supports today include 4744.00, 4660.00 and 4500.00. The Cycles Model suggests a high volatility reversal no later than Wednesday.
Today’s options chain shows Max Pain at 5300.00. SPX options are deep in to short gamma. There are put walls of 5000 contracts or greater starting at 4950.00 and every 50 points down to 4500.00. The reason for the morning bounce was to enable dealers to short SPX futures as payouts may explode.
ZeroHedge reports, “US equity futures are pointing to another day of staggering losses – even as they rise from session lows – as Trump doubled down on sweeping tariffs and as the world continues its flight to safety. S&P futures had plunged as much as 5.5% around the time Europe opened but the stock selling stampede abated as traders boosted expectations for Fed rate cuts amid economic fears just days ahead of Trump’s deadline for reciprocal tariffs to take effect. The rout accelerated late on Sunday after President Trump struck a defiant tone and repeatedly defended the tariff barrage unveiled last week. His remarks underscored those of his top economic officials, who on Sunday doubled down on Trump’s plan, dampening risk sentiment further. Some comments this morning by Jamie Dimon urging a quick resolution to the trade war, helped calm sentiment. As of 8:00am S&P futures are down -2.6% with Nasdaq futures dropping around 3.0% but there is zero liquidity so it’s pretty much impossible to ascribe a snapshot to what is happening. The yield curve is bull steepening, with 5x rate cuts now fully priced in by YE25. USD is flat and commodities are being sold with Energy complex the biggest laggard, though oil is also well off session lows. The VIX is rising again, and is around 50, while oil falls below $60/barrel for the first time since April 2021 on fears that demand will collapse. Ten- and two-year Treasury yields are falling with traders pricing in five Fed cuts this year and a possible emergency move. This is a light macro data week with CPI on Thurs the highlight as earnings kick off later this week, although nobody will care about anything besides tariffs and trade war.”
The VIX index rallied to 60.13 this morning at the European open before calming down somewhat beneath 50.00. Investors are paying top price for protection that may be needed in the next couple of days. The next resistance is the August 5 high at 65.73. Further resistances may include 75.95 and 85.78. The VIX term structure is showing extreme stress.
The April 9 options chain shows Max Pain at 22.00. Short gamma remains between 16.00 and 21.00. Long gamma begins at 24.00 and peaks at 30.00. This op-ex is catching VIX traders by surprise.
TNX reversed out of its Master Cycle low on Friday and continues its climb toward the mid-Cycle resistance at 42.12. TNX only has two weeks in the new Master Cycle. However, it may prove to be a powerful rally, despite the short duration.
Bitcoin extended its decline beneath the March low. The Cycles Model suggests the decline may extend for another week. Should the strength of the decline continue, bitcoin may test the August 5 low near 48200.00.