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.
10:09 am
BKX may have made its Master Cycle high yesterday while challenging the mid-Cycle resistance at 123.92. This offers a potential aggressive sell signal that may be confirmed as BKX declines beneath the 200-day Moving Average at 122.84. There is a tremendous hidden risk in the banking sector that may reveal itself as highly leveraged investments sour.
ZeroHedge notes, “While the media fixates on interest rates and inflation, a $250 trillion shadow banking monster quietly grows, hidden from traditional regulation. Hedge funds and private equity firms operate with 100x leverage, taking massive risks backed by the very banks holding your savings.”
8:00 am
Good Morning!
SPX futures rose to 5695.80 this morning, matching the top of Wave A in this corrective rally. While individual investors remain bearish, the Commercials who buy systematically have poured in $100 billion in the past 10 days, keeping the SPX above the 50-day Moving Average. The Ending Diagonal trendline shown in the chart provides the first breakdown of support at 5635.00. Beneath it lies the 50-day Moving Average at 5571.00, giving a sell signal which is further confirmed at the 1987 trendline near 5560.00. Pick your level.
Today’s options chain shows Max Pain at 5630.00 to 56660.00. Long gamma begins above 5680.00 while short gamma resides beneath 5600.00.
Zerohedge reports, “US equity futures traded modestly higher pointing to a third day of gains, until just before 730am ET when Trump decided to play bad cop to Scott Bessent’s good cop and posted on Truth Social that “80% Tariff on China seems right!” but then added that the final tariff rate is “Up to Scott B.”
That comment promptly hit futures, erasing the market’s modest gains, but upon reflection and realization that Trump was probably just in one of his moods, futures resumed their ascent after yesterday’s trade deal with the UK and Trump’s comments to buy the market. The focus is on the start of China trade talks this weekend, but if we use the US/UK deal as a template, it is light on details with a seemingly minimal economic impact. As of 8:00am ET, S&P futures are up 0.2% and Nasdaq futures gain 0.3%. Pre-market, all Mag7 names are higher with cyclicals mixed but with a bias to Quality names. Markets also benefited from a slew of positive earnings, with Microchip Technology, Lyft, and Pinterest surging while Expedia plunged after it cut bookings growth forecasts. Bond yields are flat as the yield curve bull steepens and the USD sells off after its strongest day since Nov 6 (day after the US Pres. Election). In commodities, energy continues to see a bid with WTI now above $60/bbl, Ags are higher, and precious metals are outperforming base. There is nothing on the macro data calendar, and earnings are light today so today’s session will likely be investors trying to position for outcomes after this weekend’s US/China summit.”
VIX futures consolidated near the low at 21.88 this morning. The new Master Cycle runs to June 15. While comments are being made about the oacki of bullishness, the VIX options show little faith in either the bullish outlook or the bearish one.
The May 14 options chain shows Max Pain at 24.00. Short gamma occupies the space between 19.00 to 23.00. Long gamma kicks in above 25.00 but only runs to 35.00. The May 21 options chain shows more bullish conviction up to 75.00.
TNX rose to 43.98, just shy of the resistance at 44.00. There may be a pullback to test support at the 50-day Moving Average at 42.88 before ramping higher. Otherwise the trend is higher until the first week of June.
Bitcoin may have made its Master Cycle high at 104353.74 in the last 24 hours. With that in mind, I am neutral until either the Cycle Top at 107677.00 is challenged or the round number support at 100000.00 is defeated.
USD futures rose to 100.71, short of meeting the Intermediate resistance at 101.06. USD is on a buy signal and shows a propensity to break through that resistance as well as the 50-day Moving Average. The USD stands to gain should trade talks with China this weekend show success. Adding fuel to a potential panic rally is the large short positions on the USD.
The Japanese Yen may be consolidating above its Master Cycle low at 68.41 made yesterday on day 266 of its Master Cycle. The Cycles Model suggests today may be a day of strength for the Yen. If so, the Yen may challenge its Cycle Top at 71.16. A breakout above the Lip of the Cup with Handle formation at 71.55may cause much pain for those involved in the Carry Trade which involves borrowing against (shorting) the Yen.
Gold futures tested the Cycle Top and upper trendline today at 3275.00 and bounced. The threat of losing support is tangible, with a potential two-month decline ahead. Gold’s long-term outlook is positive. However, a liquidity event may stand in the way of higher short-term values.
West Texas Crude rose to an overnight high at 61.45, breaking through the Cycle Bottom resistance at 60.28 and offering a confirmed buy signal.