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.
8:45 am
Good Morning!
SPX futures are moving higher, but choppy. The Japanese long bond (JGB) sale yesterday was met with reluctance even after the size of the auction was reduced. The major buyers of the long bands were the insurance companies, who try to meet their future liabilities with longer-term assets. However, there is an overhang of older bonds that are dragging down yields. Annuity holders may bolt for the doors as they realize that the newer bonds offer much higher yields. The Japanese bond market is second only to the US. Should there be disintermediation in the Japanese market, the consequence may be a liquidation of other assets as there may be no bid on the JGBs. The size of the liquidations may spill over into the US markets.
Retail investors have become less bearish, but still haven’t pulled the trigger to go long. Hedge funds remain bearish. The Cycles Model calls for an imminent resumption of the decline into mid-June.
ZeroHedge reports, “S&P futures are marginally higher on the day, reversing an earlier loss driven by modestly higher yields after Japan’s 40-year auction sale Wednesday was met with the weakest demand since July, even if it was far more solid than last week’s 20Y yearh JGB auction. As of 8:00am ET, S&P futures are up 0.1% after the index jumped 2% in the previous session; Nasdaq futures rise 0.2%. Premarket, with NVDA rising 1% ahead of tonight’s earnings; the balance of Mag7 names are seeing slight weakness and Defensives are outperforming Cyclicals. Europe’s Estoxx 50 trades slightly lower with losses led by health care and consumer staples sectors. European stocks dropped 0.3% with losses led by health care and consumer staples sectors, while Asian markets were steady as weakness in Chinese tech firms tempered gains in semiconductor shares. The 10Y yield is flat, erasing some modest earlier gains with a weaker JGB auction being credited for weakness in the global bond market. USD is flat helping commodities catch a bid where Energy and Precious Metals are pushing the group higher. Today’s macro data focus will be on Fed Minutes and the 5Y bond auction; but today is only about NVDA and then near-term market direction.”
VIX futures are consolidating near the mid-Cycle support/resistance line at 19.88. A rise above 20.00 puts it squarely back into the buy zone. In addition, there is a latent force of trending strength that may boost it much higher.
TNX has made a morning low of 44.38 and has turned positive since then. The current Master Cycle only has a week to go. Given that information and the lack of Model trending strength in the next week, one may expect to see the retracement go to either Intermediate support at 43.83 or the 50-day Moving Average at 43.33. However, TNX is in the turn zone and may reverse higher, given pressure from the Japanese markets.
Bitcoin has made a Master Cycle reversal on May 22 after making a high of 111998.96 on day 270.00. There simply isn’t enough room for another high in that Master Cycle. The Cycles Model also suggests a growing trending strength to the downside beginning next week. In the meantime, it has declined beneath its Cycle Top support/resistance and is on an aggressive sell signal. An aggressive sell suggests at least a lightening of exposure to this asset. A confirmed sell signal beneath the Intermediate support at 101968.60.
USD futures may be pulling back from Intermediate resistance at 99.85 this morning. The Cycles Model shows trending strength returning early next week and maintaining until mid-June. Should a panic develop, the USD may rise to its Cycle Top 110.74 in that period.
The Japanese Yen continues its decline toward the 50-day Moving Average at 68.61, or possibly lower. The Master Cycle is due to run out by the end of the week, leaving the Yen in a position to rally to mid-July.