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 reached a new all-time high at 6856.00 this morning, before a slight pullback. On Friday the market opted to go higher. This move may extend the rally another two weeks, while speculators are living dangerously as margin debt is peaking and liquid cash is at its lowest point in 5 years. Today banks are launching the largest debt offering ever, to finance the expansion of AI infrastructure. Currently, there are no revenues to support such a gargantuan debt. However, a multitude of banks are taking up the offering, confident that there will be a market for this boondoggle. In the meantime, the breakout has encouraged retail investors to join the momentum rally while ‘buy the dip” speculators have moved on to yet another source of leverage to propel the market…options. This is not just the same-day options that have become popular. Wall street is seeking approval of quintuple leveraged ETFs using options that multiply the gains in a rising market, but may collapse to zero in a single reversal day. Investors may not be able to cover fast enough should a strong reversal occur. Stop losses may become meaningless in a low liquidity market with no margin for error. Cycle Top resistance lies at 6936.60, with round number resistance at 7000.00.
Today’s options chain shows Max Pain at 6775.00. Long gamma begins above 6800.00 while short gamma resides beneath 6750.00.
ZeroHedge reports, “US equity futures are higher after progress was made by US and Chinese trade negotiators, with a framework in place ahead to provide a basis for the upcoming Trump-Xi meeting on Thursday. As of 8:00am ET, S&P 500 futures rise 0.9% to a new all time high, having closed last week at a record, with Nasdaq and Russell outperforming as the framework deal is boosting Semis / Mag7 while rare earth plays are under pressure.”
VIX futures have declined to 15.62, negating the October 10 phase shift. VIX may linger in no-man’s land for the next week or so. A rise back above the 50-day Moving Average at 16.52 may give warning of an imminent reversal in the SPX.
Wednesday’s options chain shows short gamma residing beneath 17.00 while long gamma populates the options chain above 20.00.
The 10-year US treasury note yield has risen above the Cycle bottom at 39.91 on Friday and is hovering above it this morning. It would usually indicate a buy signal. However the FOMC meeting this week may obligate lowering the yield by purchasing bonds before the meeting and its announcement on Wednesday. The Cycles Model calls for volatility to rise starting on Wednesday, suggesting the dip in yields may be temporary.
ZeroHedge observes, “With U.S. debt blasting past $38 trillion, the question isn’t if the reckoning comes—it’s how to face it.”
USD futures are easing lower as it may decline to test the trendline near 98.50 and subsequently the 50-day Moving Average at 98.17 in time for the FOMC. The Cycles Model shows a jolt of trending strength may arise on Thursday to bring the USD back to trend.
Bitcoin reached a weekend high at 116500.00, having made an approximate 42% retracement and may be pulling back. Should the retracement be over, the 52-day Moving Average at 114204.00 may provide some support. Should it fail, a sell signal may be made beneath that level and a resumption of the decline may be assumed. A natural target may be the April 7 low at 74426.00 in late November.