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 declined to 6850.90, edging toward the 52-day Moving Average at 6835.98 and a trendline support level at 6825.00. SPX has been bouncing back and forth around the 6825.00 trendline since early December, essentially going nowhere. More importantly, the Ending Diagonal trendline has risen to 6815.00-6820.00. The Cycles Model recognizes the January 12 high at 6986.33 as, not only the all-time high, but the end of a Major 25.8-year Cycle, dating from the March 23, 2000 high. This information tells us that, despite the upward slant of the price movement thus far, a breakdown may be imminent. It has been a good run, but time to take profits.
Today’s options chain shows Max Pain at 6830.00. Long gamma doesn’t begin until 6950.00, while short gamma becomes strong beneath 6925.00. Little wonder the price action this morning brought the futures back to 6920.00.
ZeroHedge reports, “US equity futures are weaker but have retraced much of their overnight lows as geopolitics and USD/JPY roil markets ahead of a significant earnings week, as Mag7 earnings reports kick off this week.”
Pre-market VIX rose rom its trendline to 17.39 over the weekend, rising above the 52-day Moving Average at 17.01 and giving a buy signal. Although the VIX has since declined back beneath 17.00 this morning, we look for the rally to resume above that level. Asset managers have the highest net short position in VIX in a decade while hedge funds have their highest net short position in the past 2 years. While the Master Cycle projects being completed by the end of the week, the possibility of a 1-week extension is rising. A spike rally may bring about massive short covering. A possible target at 60.00 persists.
The Cycles Model shows Max Pain at 17.00. While there is a significant overhang of short gamma at 15.00-16.00, long gamma begins strongly above 18.00 and is well populated up to 40.00.
US 10-year Bond Yield futures dropped to 41.98 over the weekend, but the cash market shows a low of 42.13, above the Head & Shoulders neckline at 42.05. The retracement may be complete, allowing yields to regain their upward mission. The way is clear above the mid-Cycle at 42.28 with the 200-day Moving Average at 42.35. The Cycles Model suggests a burst of energy may propel the TNX higher today, with the uptrend resuming through the end of the month.
ZeroHedge observes, “I think coordination and cooperation between the Fed, Treasury, and the admin is good. It doesn’t defeat “independence” and has happened in the past – typically, in times of stress, with COVID being the most recent example. I continue to believe the announcement that the Fed would buy fixed income ETFs changed the trajectory of the corporate bond market overnight.”
USD futures made a weekend low of 96.95 while the cash market opened with a low at 97.00 this morning. Either way, the Master Cycle may have completed its downside mission this morning. The Cycles Model calls for a new Master Cycle that may last until mid-March. The dollar haters (mostly European)may not like the rising USD and the Model suggests that, once the USD crosses back above 100.00,possibly tis weekend, short covering may be akin to adding gasoline to the flames.
The Japanese Yen gapped higher over the weekend, breaking out above a critical support/resistance area at 64.75. This breakout may put a serious crimp on global liquidity, as many banks and hedge funds are leveraged through the Yen carry trade. This move has added 3.5% to the loan principal that must be repaid over the past two weeks.
Bitcoin is bouncing from a new 2026 low at 86008.00 this morning. The Cycles Model allows another two weeks or so of decline, so the Head & Shoulders target is still in play. The most likely path may be a further decline with the Cycle Bottom being the next possible target, despite the oversold condition. The first week of February shows bitcoin may be vulnerable to a panic sell-off.
Silver futures are making a new high at 113.620 thus far. The new highs are stretching the Master Cycle, heightening the risk of an impending sell-off. The main driver of this rally is China, one of the largest producers of silver, putting export controls as of January 1, 2026 on silver, along with rare earth materials. Reduced supply is coupled with increased demand, creating what seems to be a never-ending rally. In addition, perpetual deficits are heightening awareness that the endgame is imminent for multiple governments, enhancing demand for precious metals. Capital controls may put a temporary chokepoint on the rally in silver and gold. Silver, especially has industrial and defense uses, moving the US to create a strategic silver reserve. Confiscation may not be far away.