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 declined to 5821.00 thus far this morning, possibly on their way to the mid-Cycle support at 5793.24. We may expect a bounce near there as the first technical support is reached. The 100-day and 200-day Moving Averages are nearby, adding to the probability of a bounce lasting at least a day. The bounce may go as far as 5883.00 to 5923.00. Use the bounce to sell longs and place shorts.
Today’s options chain shows Max Pain at 5890.00. Long gamma may begin above 5900.00 while short gamma resides beneath 5850..00.
ZeroHedge reports, “US stocks and treasuries sold off after President Trump’s signature tax bill passed the House by the narrowest of margins (214-215), sparking fears that the surging deficit – already at a nosebleed 6.5% of GDP – necessary to fund the bill will spark even higher rates at a time when foreign buyers are boycotting US Treasury purchases. As of 8:00am, S&P futures slumped by 0.5%, trading near session lows and reversing an earlier gain of about 0.3%. Nasdaq futures dropped 0.4%. Treasuries also slumped, extending days of losses in which the 30-year yield hit the highest since 2023: the 10Y was trading at session highs of 4.62%. The dollar ended a three-day losing run while Bitcoin pushed further into record territory. Commodities are weaker across all 3 complexes: oil slumped again after BBG reported that OPEC+ is considering another production hike at the June 1 meeting. SCMP reports that Mexico pledges neutrality between US/China in the Trade War; this follows a similar announcement from Indonesia last month. Today’s macro data focus is on Flash PMIs, weekly claims, existing home sales, and regional Fed activity indicators.”
VIX futures are consolidating above the mid-Cycle support at 19.73 after a day of trending strength pushed it through. There is room to move higher as long as it stays above support. However, there may be a pullback in the next 24 hours to test that support before the next move higher. Trending strength may reappear early next week.
The May 28 options chain shows Max Pain at 19.00. Short gamma resides between 16+.00 and 18.00. Long gamma may begin at 20.00 and runs to 35.00.
TNX advanced to 46.29 this morning, but that may not be the last of it. Today $160 billion in Treasury bills are up for auction, In addition $18 billion in 10-year Tips are on offer. The Cycles Model suggests there may be stress in the bond market. It is stress such as this that may break the equities market.
Bitcoin is on its way to a new all-time high. However, the Cycles Model suggests that this may be the final day of strength in the current Master Cycle. Bitcoin has risen above the Cycle Top at 109898.89. A plunge beneath it may signal a change in direction that may not leave a lot of time to adjust. Due care is needed as a reversal risk is rising.
USD futures are coming off a mid-Cycle low that has given encouragement to the USD shorts. However, the trend has changed. Evidence of that change may come with the USD rising above Intermediate support/resistance at 100.22. Further confirmation may arrive at the crossing of the 50-day Moving Average at 101.44. The Cycles Model anticipates the USD rising to mid-June as it remains the only safe haven from declining stocks and bonds, both domestic and international. RealInvestmentAdvice offers some background for review.
The Japanese Yen continues its rally, caused by dramatically rising rates in the JGBs. This may cause liquidity to be drained from the markets, as it did last August. This will cause blow-back on the Yen carry trade, as well, as the Yen has appreciated more than 3% since the beginning of the month. Further appreciation is inferred by the Cycles Model, which may increase the pain in thhe carry trade and disrupt the markets.