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.
1:29 pm
SPX continues to rise above its 61.8% Fibonacci retracement level at 6833.47. The next resistance is at 6865.00. Dealers are “locked in” to long gamma above 6800.00, causing them to buy higher until the reversal or the close, whichever comes first, when the final options expiration takes place. A reversal may take place at any time up to the close. The rally is artificial, being helped along by the dealers who must front-run the in-the-money options to the close of the day when options mature, followed closely by the 0DTE speculators who are riding the options gravy train to the close. The reversal may come suddenly and without warning. The markets may open “limit down” on Monday, so this is not a wait-and-see kind of top.
8:00 am
Good Morning!
SPX futures bounced off the 52-day Moving Average a third time overnight, rising to a third lower high at 6799.40 thus far this morning. The law of physics appears to be working as the bounces lose momentum. Simply put, liquidity may suddenly be draining from the markets. This morning’s attempts at keeping the SPX at Max Pain (6785.00) for the morning options expiry may offer another explanation for this phenomenon. The Cycles Model proposes that the SPX may decline through the 52-day Moving Average at 6764.00 by day’s end. This may lead to a panic event early next week.
Another concern is investors are still in love with AI and Tech. Risk exposure remains at high levels while margin levels have grown faster than the market growth. What could possibly go wrong?
Today’s options expiration is the largest in history at $7.1 trillion. December options expiration is usually the largest of the year, but this takes it all. Today’s options chain shows Max Pain (smallest payout) at 6785.00. Long gamma takes the majority above 6800.00 while short gamma dwells beneath 6770.00.
ZeroHedge reports, “Stocks look set toclose out a choppy week on a steady note, building on Thursday’s gains, spurred by cooler inflation that backs the case for lower borrowing costs. As of 8:00am, S&P 500 futures were 0.1% higher while Nasdaq 100 contracts were up 0.2% after the WSJ reported that OpenAI is set to raise $100BN in fresh capital (from sov wealth funds) removing near-term funding pressures across the AI sector.”
VIX futures dipped beneath the trendline overnight, but has recovered above it. Just as the 52 day Moving Average offers support for the SPX, the 52-day reveals resistance for the VIX. We may see a simultaneous breakout later today. An alternate view is that we may sse the VIX pushed down to a new low prior to breaking out next week.
TNX futures rose from its Master Cycle low at 41.39 overnight to a morning high at 41.61. Should this be correct, the new Master Cycle may rally through mid-January. Overhead resistance at the neckline, once broken may result in TNX rising to the mid-40s, with the Cycle Top at 45.45 as an outlier. The Fed’s clear bias toward easing has gone unopposed for 30 years until recently. There have been a rising number of dissents with a bias for tightening. December was the highest. This may lead to higher volatility, especially with a possible new Chairman who is beholden to the White House. The Cycles Model clearly shows rising rates going into 2026.
USD futures rose to 98.75 this morning, approaching the mid-Cycle resistance at 98.83. A breakout may trigger a buy signal with confirmation above the 52-day Moving Average at 99.21. The Cycles Model shows a burst of energy emanating from the USD over the weekend followed by a rising trend into the first week of January.
The Japanese Yen futures declined to 63.53, forming a bounce off the Cycle bottom. This is not what the Bank of Japan has envisioned. However, the decline and bounce may provide the energy to rally/break out above trendline resistance at 64.77. Trending strength may return early next week as the Yen may have sufficient energy to rally through the New Year.
ZeroHedge remarks, “In the last central bank decision of 2025, the BOJ lifted its key rate to 0.75% from 0.50% in a widely anticipated and telegraphed move, taking borrowing costs to their highest level in three decades. It wasn’t enough, however, and after an initial kneejerk move, the yen plunged while yields soared as the market concluded that what Ueda did was too little, too late, and the hike was too vague to press the hawkish case.”
Bitcoin rallied from a low at 84562.00 to a morning high at 89451.00 before reversing back down. It may embark on its final plunge with a double dose of trending strength into the next week. The decline may be spectacular for those on the sidelines. Not so much for those participants who are still long.
Silver is testing te Wednesday high, reaching 66.76 thus far. This may be the final probe at the high, as the Master Cycle may have ended on Wednesday. The new Master Cycle may decline into the first week of January.