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 6600.10 thus far, testing Friday’s high at 6600.21, which is round number resistance. Last week hedge funds become buyers of AI after the CPI print. Meanwhile, this week stock buybacks went into their blackout period. The current Master Cycle may be due for a downside correction that, at a minimum, may test the 50-day Moving Average currently at 6378.27. A warning that the decline may undershoot the mean (50-day) infers a possible further decline to the mid-Cycle support at 5980.28. In other words, the SPX is so far extended that a simple “reversion to the mean” may not be sufficient to relieve the overbought condition. The week of September 22nd may be particularly brutal. The 1987 trendline at 5800.00 may be another possible target for the correction. The Cycles Model suggests the correction may last to the end of September.
Today’s options chain shows Max Pain at 6575.00. Long gamma resides above 6600.00 while short gamma strengthens beneath 6550.00.
ZeroHedge reports, “Equity futures are at fresh record highs, erasing a modest dip earlier in the session when a probe found that Nvidia violated anti-monopoly laws in China in a 2020 deal. That killed the mood at the start of a big week, with the Fed expected to make the first of a series of rate cuts, however the mood was promptly lifted again just after 6am ET when Elon Musk bought $1BN in TSLA stock sending the market cap soaring by over $100BN and lifting stocks to new all time highs. As of 8:00am ET, S&P 500 futures and Nasdaq 100 futures were higher by 0.2%. In premarket trading, Nvidia shares fell as much as 2.9% after China said it violated antitrust regulations after its acquisition of Mellanox. The surprise announcement came as US and Chinese officials headed into a second day of wide-ranging negotiations in Madrid over tariffs. Mag7 names are mixed with AAPL, AMZN, and GOOG up 90bp-108bp; TSLA soared 8% after Musk purchased $1bn of stock, his first open market purchase since February 2020. European stocks advanced in a rally led by luxury shares. US / China trade talks enter a second day today. Commodities are mixed with Energy up and Ags / Metals down. Today’s macro data focus is Empire Mfg ahead of tomorrow’s Retail Sales and Weds’ Fed meeting.”
VIX futures rose to a weekend high at 15.31. The 4-month period of calm may be broken this week, leaving investors unprepared and unhedged. Note that the 50-day Moving Average is at 15.94, suggesting that hedges are still cheap.
The September 17 (monthly) options chain shows Max Pain at 18.50. Short gamma rules from 15.00 to 18.00. Long gamma dominates above 20.00 with institutional participation at every 5 points to as high as 80.00.
TNX may have been repelled at the Cycle Bottom resistance, suggesting another probe lower may be taking place. Should that be so, additional strength may be imminent, lengthening the decline. The Cycles Model suggests up to 2 weeks of additional decline before it hits bottom. Note that the FOMC announcement on Wednesday may provide the impetus for an early reversal. The market may be pricing in a .25% cut in September, rising to a .50% cut in October.