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 rose to 6047.00 in the overnight session, approaching the 6050.00 target referred to last week. It is likely that the SPX may reach or exceed 6050.00 today before a reversal takes place. Today is day 258 of the current Master Cycle, the “bullseye” for this retracement. Even Goldman says to “Start selling this junk rally.” Equities are in the exhaustion phase, but may be quite volatile. The correction of the April decline is being traced out in a series of zig-zags, which lend an air of chaos and frustration to analysts, as they duplicate at multiple degrees of trend. Thus,, the reputation as the “most hated” rally.
Today’s options chain shows Max Pain at 6000.00. Long gamma resides above 6050.00, while short gamma becomes strong beneath 5950.00. Looks quiet thus far…
ZeroHedge reports, “US equity futures dropped into today’s CPI print after traders weren’t moved by the US-China trade talks, which saw the two two sides agree on a framework to implement last month’s Geneva deal with few actual details. There’s also nervousness ahead of inflation data: a hot reading would be a big risk factor for a market near record highs (see full preview here). As of 8:00am ET, S&P and Nasdaq 100 futures traded 0.2% lower but were off session lows; pre-market Mag7 names are mostly higher with TSLA (+2%) the standout after a contrite Elon Muskusk tweeted “I regret some of my posts about President @realDonaldTrump last week. They went too far.” Semis and Cyclicals are poised to outperform. In other trade news, US/Mexico were close to a deal on steel tariffs by using import caps, which would be higher than the previous cap, and would remove the 50% tariff on steel below said cap; this looks like a reversion to 2018 levels and may be a template for talks with Canada. The G7 summit will carry additional weight as we are a month away the expiration of the 90-day tariff delay, with only a US/UK framework on the tape. Elsewhere, the EU is said to see talks with the US going beyond a July 9 deadline. The yield curve is twisting steeper with 10Y yields higher, the USD is slightly higher and commodities rise with crude and gold higher after Trump told the NY Post that he’s getting “less confident” about nuclear talks with Iran; natgas and base metals also rallied with Ags are down. The key event today is the CPI report at 8:30am ET where economists expect a relatively tame number, with core inflation up 0.3% in May. Positioning suggests a hotter print will be punished more than a dovish one will be rewarded, according to JPMorgan.”
VIX futures remain peaceful near 17.00, above the rising “floor” defined by the Master Cycle low made last Friday. The VIX Cycle low usually precedes the SPX Cycle high by a up to a week. This may give us fair warning that the uptrend in equities is nearing its climax.
The June 18 VIX options chain promises some excitement, if nothing other than the sheer volume of puts and calls. Max Pain stands at 19.50. Short gamma remains strong between 16.00 and 19.00. Long gamma may begin above 20.00 and extends to 100.00. Remember that 75% of all options expire worthless.
Bitcoin continued to trade beneath Monday’s (swing) high at 110543.89. This may reveal the end of a trading (60-day) Cycle inversion emanating from the April 7 low. However, Trading Cycles are lesser in magnitude and may offer only secondary trending information. The Cycles Model infers an ongoing decline to the end of July.
TNX is due to complete its correction near Intermediate support at 44.03 before resuming its rally. Once the pullback is complete, the next phase may be a very strong (possibly a panic) rally to the Cycle Toop at 47.87 followed by a challenge of the neckline of the Head & Shoulders formation. Note that today’s Treasury auction features a $39 billion 10-year T-note auction early this afternoon. Tomorrow’s auction features $22 billion in 30-year bonds along with $110 billion of short-term paper. The Cycles Model anticipates rising rates into July.
ZeroHedge comments, “The Treasury just executed the largest bond buyback in history—$10 billion in U.S. debt propped up with “existing funds.” They call it “normalization,” but make no mistake—this is 100% government intervention in our monetary system.”
Japanese Yen futures bounced from the 50-day Moving Average at 69.06 this morning to 69.25, signaling the start of a new Master Cycle. A buy signal may be obtained as the Yen rises above Intermediate support/resistance at 69.30. This move, coupled with the rising 10-year Treasury note, may choke off liquidity to the markets in short order. The Yen carry trade may be under water and may become more so as the Yen continues to rise.
Crude oil continues its rally in a burst of strength as it approaches its next resistance at the mid-Cycle level. There may be a pause at the mid-point, but the Master Cycle rally may continue to mid-July in opposition to the gold Cycle, which may be declining in the same period.