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.
4:25 pm
SPX has completed a 30-day correction Cycle from its April 2 high to the April 7 low, then May 2 high. The panic swings, both up and down, have made this a nightmare roller-coaster ride for investors. This may be called an Expanded Flat correction where A is the shortest and B is a multiple of A with C being equal to B.
Several items make this correction unique. First, the unusual length of time. Usually corrections take only three weeks. This one has taken over four weeks due to its intermediate size. Second, Wave B is 1.305 times the size of Wave (1). Usually it would be a fraction of motive Wave (1). Third, it broke through the 1987 trendline, while forming an Ending Diagonal Wave C. A quick reversal on Monday may confirm this analysis.
7:50 am
Good Morning!
SPX futures bounced from the 50-day Moving Average at 5612.35 but did not make a new high. Futures peaked at 5651.30 then eased lower. A decline (close) beneath the 50-day offers a sell signal with further confirmation beneath the trendline near 5550.00. Equities are running on fumes as the NYSE Hi-Lo Index closed at only 1 new 52-week high yesterday, giving warning of an imminent reversal. The Cycles Model suggests the decline may be underway with trending strength appearing by mid-week. The ensuing decline may last to mid-June.
Today’s options chain shows Max Pain at 5560.00. Long gamma may begin above 5580.00 while short gamma resided beneath 56550.00.
ZeroHedge reports, “US equity futures gained ahead of the April Payolls report, but were well of their highs, after China said it is assessing the possibility of trade talks with the US, the first sign that negotiations could begin between the two sides since Donald Trump hiked tariffs last month. As of 8:10am ET, S&P futures are up 0.4% while Nasdaq 100 contracts add 0.2%, limited by weakness in the tech sector as Apple and Amazon.com shares fall in premarket after their respective updates appeared to underwhelm investors. If the S&P 500 closes in the green on Friday, it would mark a ninth day of gains, the longest winning streak for the US benchmark since November 2004. Asian markets were also broadly higher and Europe’s Estoxx 50 advances 1.5% in early London session, with risk sentiment stoked after China hinted at the possibility of trade talks. Bond yields are unchanged, reversing an earlier drop, oil and USD are both lower, while gold rebounds +0.7% from recent losses. Today, all eyes on NFP at 8.30am ET to assess market sentiment; Consensus expects a 138k print vs. 228k prior and the Unemployment Rate to hold at 4.2% (more in the full preview here).”
VIX futures are consolidating above yesterday’s low, leaving it as a possible Master Cycle low (a completed Cycle). Should the turn occur today, it may be strong and sharp with follow-0through over the weekend, as trending strength may appear quickly. VIX has not followed the SPX path to significant new lows, suggesting investor caution.
The May 7 options chain shows Max Pain at 24.00-25.00. Short gamma dwells between 20.00-24.00, while long gamma may begin at 25..00 and extends to 40.00.
TNX futures dipped beneath the mid-cycle support at 42.31, but rose above it this morning, confirming the buy signal for the 10-year yield. The next resistance is the 50-day Moving Average at 42.83. Once above it, the way may be clear for a rally to the Cycle Top at 48.00. Note the Neckline of a head & Shoulders formation just above it. The finance minister of Japan threatened to use their US Treasury holdings, the largest of any foreign government, as a negotiation card against the tariffs being proposed by Trump.
USD futures are consolidating within the uptrend established at the Master Cycle low. The month of May may show a very strong USD as war is threatened in Europe and the Middle East. The flow of money into the USD may be so strong that the EU countries may install capital controls to keep liquidity intact in Europe.
Japanese Yen futures may have made their low this morning at 68.53, completing a foreshortened Master Cycle. If so, the yen may rise to challenge the Cycle Top and Head & Shoulders neckline, gravely threatening the Yen carry trade. The carry trade has been especially influential in the rise of the Magnificent 7. Analysts don’t know exactly how large the Yen Carry really is, but point to a recent figure of $350 billion in short-term external loans in the public domain. Private loans to US banks and hedge funds may be much more substantial.
Gold futures rose to 3276.85 as it back-test of the trendline overnight. It is on a sell signal which may be confirmed by a further decline beneath the Cycle Top at 3228.47.
Bitcoin has pulled back from its Master Cycle high made yesterday at 97505.38. The Master Cycle appears exhausted. The Cycles Model anticipates a decline may ensue until mid-June. A spike in volatility is suggested this weekend.