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.
11:19 am
SPX has crashed through the neckline of the Head & Shoulders formation at 6650.00 with attendant consequences. Round number support at 6600.00 may temporarily send SPX back to the neckline to relieve the oversold condition. The next level of support may be the September 2 low at 6350.00. While there may be a bounce near there, the final target may be the April 7 low at 4835.00.
7:45 am
Good Morning!
SPX futures reached a morning low at 6616.30, well beneath the 52-day Moving Average at 6699.30 and on a confirmed sell signal. It has also crossed the neckline of the Head & Shoulders formation at 6650.00, possibly triggering that formation. The next possible bounce level is round number support at 6600.00, which may not last. The reason? Trending strength is growing and may turn the decline into a panic as monthly options expiration approaches on Friday. Liquidity is still at a premium and the repo market may be stressed as a decline may put added demands on private lending institutions (banks).
Lance Roberts of RealInvestmentAdvice offers, “Last week, we discussed the importance of “math” as it relates to valuations and noted the importance of understanding “full market cycles.” To wit:
“The math on forward return expectations, given current valuation levels, does not hold up. The assumption that valuations can fall without the price of the markets being negatively impacted is also grossly flawed. Historical data, as illustrated in the following chart, suggest that valuations do not decline without a significant impact on investment returns. Additionally, it is worth noting that “full market cycles,” which encompass both secular bull and bear periods, recur throughout history.””
Today’s options chain shows Max Pain at 6700.00. Long gamma may begin at 6735.00 while sort gamma rules beneath 6670.00.
ZeroHedge reports, “US equity futures are sharply lower again – but off session lows – after the S&P 500 and Nasdaq closed below their 50-day moving averages for the first time since April; both tech and small caps are lagging as the market tries to find a level as the bond market continues to reduce the probability of a further Fed easing.”
VIX futures reached a new high at 23.91 this morning on a buy signal as trending strength builds toward options expiration. There is little commentary on the VIX as it appears to be in a two month consolidation. However, common recognition of a VIX bull market may arise above 25.00.
The November 19 monthly options expiration shows Max Pain at 21.00 in the VIX. There are massive holdings of short gamma between 15.00 and 20.00 while long gamma may begin at 22.00. Institutional positions are noted at every 5 points starting at 25.00 with a presence to 100.00.
TNX is finishing its correction in a decline, possibly to Intermediate support at 40.70 this week as equities investors may be rotating out of stocks and into treasuries. It may not prove to be a safe haven as the rally may resume with vigor early next week.
The USD Index is hovering near mid-Cycle support/resistance at 97.48 this morning. It is also building trending strength this week with a possible target near the Cycle Top at 103.38 by the end of November. The current Master Cycle may extend to the first week of December.
Bitcoin plunged briefly beneath 90000.00 this morning as the decline may be nearing a temporary respite. It may be due for a bounce with a possible week-long snap-back to test the Cycle Bottom and the Head & Shoulders neckline at 98932.00.
Gold futures may be consolidating near the 4000.00 level. Should it remain above its October 28 low at 3886.69, it may resume its rally until mid-December, as war tensions may rise. A failure to rally may induce another stage of the decline to a minimum target at 3750.00.
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