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 rose to a weekend high of 5846.80, then eased lower on day 259 of the Master Cycle. Should the SPX open above the mid-Cycle support at 5778.85, a decline beneath that level offers a sell signal. SPX is nearing the maximum retracement for a bear market rally. Retail investors have been buying the dip while certain institutions have been selling. The mechanical systems of commercial traders have been buying again. But the rally has taken the form of an ending Diagonal, suggesting the end may be near. Today’s blow-off may bring in the last retail holdout from this rally.
Today’s options chain shows Max Pain at 5650.00. Long gamma begins above 5700.00 while short gamma may start beneath 5600.00.
ZeroHedge reports, “US equity futures and the dollar soared after China and the US agreed to slash tariffs and de-escalate a trade war that had sparked turmoil in global markets. Treasuries and gold tumbled after the US cut China tariffs from 145% to 30% while China slashed US tariffs from 125% to 10% for 90 days. With the countries agreeing that they do not want to de-couple, there is optimism that a longer-term deal can be reached. As of 8:00am, S&P futures surged 3% and Nasdaq futures spiked almost 4%. JPM writes that while Trade War 1.0 tariffs remain, as do sectoral tariffs but, this is an unambiguous positive for all global risk assets and will allow markets to look through any near-term weakness in macro data but if CPI, PPI, and Retail Sales surprise to the upside, then that will provide another tailwind to risk assets. Premarket Mag7 names are higher with many up more than 3%, Semis/Cyclicals are also higher as the market will need to reset its growth expectations higher. Commodities are higher, led by Energy, despite a spike in bond yields/USD.”
VIX futures dropped to a morning low at 19.87 on day 266 of the Master Cycle. Usually the VIX turns about a week or two ahead of the SPX. However, the decline from the April 7 high was on of the longest declines in recent memory, taking 35 days. The Cycles Model suggests a strong reversal this week with growing strength in the new rally by the middle of next week.
The May 14 options chain shows Max Pain at 23.00. Short gamma dwells between 19.00 and 22.00. Long gamma may begin above 24.00 and remains strong to 35.00.
TNX rose to 44.69 this morning as it continues its rally into early June. TNX is on a buy signal with a clear path to the Cycle Top at 48.06.
The Japanese Yen extended its retracement toward the 50% level this morning on day 270 of its Master Cycle. This is a bit of a stretch which shows some institutional interference, possibly the Bank of japan.
Gold futures declined to 3211.29, beneath the trendline and Cycle Top at 3282.19 today, creating a sell signal. The Cycles Model suggests the decline may have legs, lasting to mid-July. Trending strength appears at mid-week with potentially dire consequences.
Crude oil futures rose to 63.59 this morning, before settling back. It may retest the Cycle bottom at 60.76, which it crossed on Friday. Oil futures may continue rising to the end of May. A rally above the mid-Cycle resistance at 69.55 may indicate a new trend is forming.