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.
7:45 am
Good Morning!
SPX futures rose to a morning high at 6839.60 before easing down from its high. A minor correction high may be complete in the next 1-2 hours. The Cycles Model shows rising volatility for the balance of the week, suggesting the decline may resume imminently and continue over the next three weeks. Intermediate support lies at 6750.00, beneath which a sell signal may be offered. The 52-day Moving Average lies at 6725.00, which adds confirmation to the sell signal. After a 1-month delay, the Fed’s balance sheet runoff (QT) ends today with a surge of Repo to the banks. The question is, will the easing (QE) make up for the lost liquidity?
Today’s options chain shows Max Pain at 6820.00. Long gamma may prevail above 6850.00 while short gamma resides beneath 6800.00.
ZeroHedge reports, “After Monday’s dismal start to December, US equity futures are higher (if only for the time being), although lacking conviction with few major catalysts on deck today.”
VIX futures dropped to a low at 16.66 this morning as it retests Friday’s low point beneath the trendline, having completed a 6-day decline. The Cycles Model suggests increasing trending strength starting today and allows approximately 3 weeks of rally from here.
Tomorrow’s options chain shows short gamma residing from 15.00 to 18.00. Long gamma begins at 19.00 and maintains strength to 25.00.
TNX is approaching its trendline near 41.50 after rising above its 52-day Moving Average at 40.81. After having tested the 4.0% level three times in three months, it appears coiled to move much higher. The Cycles Model allows three more weeks of rally, which may challenge the Cycle Top at 45.53. TNX currently lags both Japan and Europe in rising rates. Catch-up may be imminent.
USD futures bounced from the 52-day Moving Average at 99.01 yesterday and is testing the 200-day Moving Average at 99.61 this morning. This action reiterates the buy signal for USD and the short squeeze ramps into high gear above it. Dollar shorts have been feeling increasing pain since October. The Cycles Model suggests a much greater intensity through the end of the year.
Bitcoin bounced from its low at 83828.00 yesterday. The bounce may go as high as 89250.00, or near its 61.8% Fibonacci retracement at 89568.00 before before resuming its decline later this morning. Bitcoin is trending inversely to the USD and may continue its decline to the end of December.
Gold futures rose to a high of 4269.00 before easing back to test the Cycle Top at 4223.00 this morning. The rally may continue to rally with increasing strength over the next two weeks before ending its rally near 4500.00.
Silver futures rose to 59.072 this morning before easing back in a possible consolidation. There are approximately two more weeks left in this rally with a possible target near 65.00. Following that, there may be an approximate three week retracement as speculators take profits. A retracement may decline as far as the mid-cycle support at 39.52.
The BKX persistent elevation may not last despite the resumption of repo by the Fed. In spite of turning on the liquidity spigots, a rising 10-year Treasury note yield and Japanese Yen may adversely affect profits, as banks have been reliant on declining interest rates to stay ahead. Rising rates may not only snuff out profitability but also reveal those institutions that have been on the brink.
Unlike the banks, insurance companies that sell life products and annuities have not recovered totally from the April 7 low. That very fact allows the next three weeks’ decline to be a multiple of the April 7 decline. I have not yet done a long-term Cyclical study on insurance companies, but may do so shortly. The reason they are most at risk is because they are one of the prime users of the Yen carry trade to boost yields for themselves and their customers. The next three weeks may be telling.