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.
10:56 am
“First, the stairway. Then the elevator.”
SPX has crossed beneath the 52-day Moving Average at 6764.00. There is nothing to stop the decline except except an occasional tap on the brakes at round number support down to the neckline at 6515.00. Despite the warnings, retail investors are leveraged long while commercials and systematics have pulled back a bit from their ultra-long positions. The Cycles Model suggests a week of pain may be in store for the longs. The minimum target for the Head & Shoulders is 6122.00, very near the 1987 trendline at 6000.00. But that is not all. Should this decline go beneath the 43-year long trendline (it has been functioning since August 10, 1982), a serious reckoning may take place. Confidence in a continuously rising stock market may be challenged.
7:45 am
Good Morning!
SPX futures bounced from the 52-day Moving Average at 6762.00 yesterday and followed up with a probe to 6827.00, its support level (not shown in the daily chart) that it had broken through on Friday. Support has now become resistance and may repel further advances above it. Long investors are becoming uncomfortable as they may lose the 52-day support later today. Should that be so, we may see a possible 4-5 days of decline to, or below, the Head & Shoulder neckline.
Today’s options chain shows Max Pain at 6810.00. Long gamma strengthens above 6840.00 while short gamma resides beneath 6800.00.
ZeroHedge reports, “Stock futures are higher but with less than 10 full trading days left in the year, the Santa rally seems increasingly elusive, with traders struggling to find catalysts. The S&P 500 tested a key technical level on Tuesday, coming close to breaking below its 50-DMA. As of 7:15am ET, S&P 500 futures rose 0.3%, pointing to the first increase in four days for the S&P 500 as investor appetite returned after last week’s tech retreat…”
VIX futures declined to 16.12, beneath the trendline at 16.30. A breakout above 17.51 gives the VIX a buy signal with possible confirmation above the 52-day Moving Average at 18.37. The rally over the next 4-5 days may be especially strong as there may be multiple possible panic-up days starting today.
The December 24 VIX options chain shows puts in retreat with remaining strength beneath 16.00 Long gamma may begin at 17.00 but remains clustered beneath 25.00. No one is expecting trouble this month.
TNX is rising out of what appears to be a shallow retracement, waiting for the signal to break out above 42.00. The next two days may offer that opportunity as strength appears ready to move TNX higher. An alternate view posits that the strength may offer a further retracement to the 52-day Moving Average at 40.84 before a breakout.
USD futures have reversed sharply out of the Master Cycle low at 97.87, reaching a morning high at 98.64, testing mid-Cycle resistance at 98.87 before a small pullback. USD shorts got some relief this month, but the uptrend may be restored by the weekend as it breaks above resistance. The Cycles Model posits a rising USD to early January.
The Japanese Yen may be challenging a resistance level at 64.70 this morning. It is on a confirmed buy signal after rising above Intermediate resistance at 64.40 yesterday. A rally above resistance may do serious harm to the Yen carry trade, as the loan principal appreciates, reversing a 9-month depreciation of principal, allowing borrowers to profit from a discounted repayment as well as low interest on the loans. This has kept the markets liquid during the period of QT in the US bond market, which ended this month. The Cycles Model suggests a tsunami rally may engulf the carry trade over the next three weeks. Is this why AI data centers are “falling out of bed?”
Reuters advises, “(Bank of Japan) Summary
Silver reached a possible Master Cycle high at 66.63 this morning as it completes its Master Cycle. Should that be so, silver may begin a month-long correction to mid-January. The (proposed) rising Yen may pull liquidity out of the markets. Depending on the severity of liquidity loss, silver may decline to its mid-Cycle support at 41.15 in the next Master Cycle.
Gold has failed to reach its October 20 all-time high at 4381.58. It also has begun a corrective decline to mid-January.