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.
7:30 am
Good Morning!
SPX futures consolidated beneath yesterday’s high on day 260 of the Master Cycle. Monday’s gap up into the open is reported to be the second largest net buying in 5 years, mainly due to short covering. Capitulation may have already occurred. We will be able to determine that event has happened when buyers run out of money or simply lose confidence in their ability to make money in equities. The Cycles Model anticipates that, once the buying (short covering) has stopped, the SPX may be due for a month-long decline. Ending Diagonals are often completely retraced, at a minimum.
Today’s options chain shows Max Pain at 5880.00. Long gamma may begin at 5900.00 while short gamma may start beneath 5850.00.
ZeroHedge reports, “US equity futures are modestly in the green with tech/AI stocks leading and small caps lagging as equities may see some profit-taking given the relentless strength of the rally. Stocks has now erased their YTD losses, and the recovery pace of the past 6 weeks is the fastest since the 1980s. As of 8:00am ET, S&P futures are up 0.2%, near session highs after reversing earlier losses; Nasdaq futures gain 0.4% with chips higher on new deals being made by Trump in the Middle East regarding chips/AI infra build. Pre-mkt, NVDA/TSLA are higher with the rest of Mag7 mixed but Semis are higher though other Cyclicals are slightly weaker. AI theme is higher, too. The yield curve is twisting steeper as USD strength fizzles sparked by concerns Trump may turn to dollar strength next (following overnight Bloomberg report there was discussion between US and SKorea on dollar strength). Commodities are lower as Energy sells off, and gold is flat around $3220. The macro data focus is on mortgage applications (up 1.1%) and XHB is +5% over the last two days.”
VIX futures are consolidating above yesterday’s low at 17.65 on day 267 of the Master Cycle. A further decline may be minimal, if any, as VIX has reached a “technical floor” of support. Once the reversal takes place, the Cycles Model calls for a month-long rally with rising strength being revealed next week. A buy signal may be obtained with a rise above the mid-Cycle support/resistance at 19.64.
The May 21 options chain shows Max pain at 22.00. Short gamma is back with investors crowding with puts from 16.00 to 21.00. Long gamma begins at 25.00 and is filling in longst to 75.00.
USD futures may have made a retracement to 100.11 this morning. The Cycles Model shows trending strength coming back today, suggesting the pullback may be over. Dollar shorts are licking their wounds, but more pain is yet to come, as the rally still has legs to go another month.
Japanese Yen futures rose to 68.66 this morning, potentially sending the cash market above the 50-day Moving Average at 68.26. This may result in a buy signal with the Yen subsequently rising to challenge the Cycle Top at 71.17. Those who borrowed in Yen may have to unwind. The largest players in the carry trade are commercial traders who borrow Yen and buy Treasuries, making a profit on the spread. However, the spread disappears as the Yen appreciates vis-à-vis the USD.
TNX may be consolidating after yesterday’s powerful move higher. The Cycles Model calls for three more weeks of such moves with the Cycle Top at 48.09 a likely target. Be aware that the neckline for the Head & Shoulders formation is just above the Cycle Top. Should TNX break above it, yields are sure to go higher this summer.
Bitcoin is lingering beneath its retracement high made on Monday. The Master Cycle appears to have run its course of 260 days. Note that the rally in Bitcoin mirrors the rally in equities. This suggests that Bitcoin may not offer any protection in the event of a market decline.