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
Please note: Due to a family obligation, I will not be available for commentary between May 20 and May 26,
Good Morning!
SPX futures declined to 7354.00 over the weekend, beneath the Ending Diagonal trendline near 7400.00. The Cycles Model allows up to three weeks for a correction to develop after a Master Cycle high, which occurred on May 14, coincidently 14 days beyond the mean Master Cycle terminus. There is an aggressive sell signal beneath 7400.00. Confirmation lies beneath the Cycle Top support at 7454.72. Many market watchers use the 52-day as the jump-off point, which may be the halfway point for the correction. The most likely target has a strong probability of reaching the Cycle Bottom at 6369.41.
Today’s options chain shows Max Pain at 7410.00. Long gamma rises significantly above 7450.00 while short gamma lurks beneath 7400.00. SPX may not succeed in staying above short gamma.
ZeroHedge reports, “Futures are lower, but off their overnight lows as markets focus on soaring global yields after US/Iran talk progress remains stalled (but at least armed hostilities did not resume contrary to some speculation). Yields also spiked on rising oil prices, concerns of an extra budget in Japan and continued political chaos in the UK.”
The premarket VIX reached a weekend high at 19.44 before easing down. It remains above the mid-Cycle support at 18.54, presenting a buy signal. Confirmation may come above the 52-day Moving average at 21.70. A possible target for this rally may be the neckline of the Head & Shoulders formation at 35.30. It may go higher. However, the decline from the high may not follow the Head & Shoulders pattern.
The May 19 options chain shows Max Pain at 20.50. Short gamma lurks beneath 16.00 – 20.00. Long gamma begins at 23.00 and strengthens above 25.00. Long gamma becomes strong above 25.00 and has call walls every 5 points up to 70.00.
The US 10-year Bond Yield futures rose to 46.32 over the weekend before easing down. There may be a short-term pullback to test the neckline of the head & Shoulders formation before moving higher. After a short lull, trending strength may pick up into the end of the month. Speculators are increasing their net short in treasuries.
QTR observes, “Bond yields are doing exactly what I warned about yesterday: forcing reality back into a market that had become increasingly detached from it.
Heading into Friday’s cash open, U.S. equity futures are under pressure, with S&P 500 futures down roughly 1% and Nasdaq futures off even more sharply as global bond markets sold off overnight.”
USD made a marginal new high before pulling back. The pause may not last as the current master Cycle a possible two more weeks of rally. The Head & Shoulders neckline may be exceeded. USD is likely to follow 10-year yields higher for the duration of this Cycle.
Bitcoin may be making a Master cycle low today, or very soon. What follows may be a month-long rally to the cycle Top at 98898.70. The trendline may have lost its potency. With stocks and bonds selling, bitcoin may be looked upon as a “safe haven” foe the time being.
Crude oil dropped precipitously (futures low at 98.68) this morning after testing the upper trendline of its Triangle formation at 108.70 over the weekend. This may unleash buying of oil under 100.00 this week.
Zerohedge remarks, “Summary
- A flurry of (the somewhat typically-timed) Monday opener headlines have pushed oil prices lower, erasing weekend gains, including Al Arabia reporting that Iran is ready to accept a long-term nuclear freeze.
- Iran has submitted its latest proposal comprising 14-points through Pakistan, amid reports that the US has offered to lift sanctions on Iranian oil during the interim negotiating period.
- Reports further add that Russia’s offer to take and hold Iran’s enriched uranium stockpile on its territory is being taken seriously.”
Gold has made a minor bounce on its way to a lower level. The nearest support is the mid-Cycle level at 4408.83. However, it may go lower over the next three weeks as proposed by the Cycles Model. No particular target has been given. The Cycle Bottom at 3428.00 is possible.
The Ag Index bounced off Intermediate support at 373.95 this morning. The Cycles Model allows another two or more weeks of decline which offer investors an opportunity to buy the dip.