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
2:58 pm
SPX is now nearly 6 days out of the Cycle Bottom. The rebound went to the 52-day Moving Average at 6775.00, but it may not hold. It must now find its level, and the new support may be at 6710.00. It may continue in a sideways consolidation above that support or resume its decline. There is little energy to move higher, since the retracement revisited where the short sellers began and found no desire to go long. The ceasefire may be too fragile to count on for a recovery and earnings are about to break loose. Caution is advised.
8:15 am
SPX futures rocketed higher to 6806.90 thus far, just as the bounce from the bottom was losing steam. Hedge funds were adding shorts just in time for a massive squeeze while retail investors aggressively bought puts. Of course, the catalyst was the fragile ceasefire in the Middle East. The Cycles Model suggests the bounce may have another week before complications arise. A “regular” Cyclical bounce might have risen to the mid-Cycle resistance at 6689.33 or the neckline at 6710.00. But the focus of the bounce may have been the 52-day Moving Average at 6777.12, where Wall Street could declare victory over the bears.
Today’s options chain shows Max Pain at 6575.00, as the market ripped higher into long gamma. Call Walls are in place every 50 points from 6650.00 to 6850.00, suggesting institutional expectations of the SPX reaching higher levels.
ZeroHedge reports, “US futures, global stocks and bonds are sharply higher while oil prices plunge the most in years as a wave of optimism swept through global markets after the US and Iran agreed to a two-week ceasefire in exchange for Tehran reopening the Strait of Hormuz…”
The premarket VIX plunged to 20.11 this morning, matching the March 23 low at 20.28. The Cycles Model infers a possible further decline to the mid-Cycle support at 18.22 by the weekend or early next week.
The April 8 options chain shows Max Pain at 24.50. Short gamma is concentrated between 17.00 and 24.00 while long gamma arises above 25.00 and is well populated to 100.00.
The US 10-year Bond Yield plummeted to 42.26 this morning, suggesting the cash market may follow lower, as well. The Cycles Model suggests a possible countercyclical low in the range of 41.76 to 42.12 by the end of the week. A surge in strength may appear over the weekend accompanying a reversal higher. The appearance of low volatility in bonds may just be a mirage.
ZeroHedge remarks, “After several weeks of decidedly ugly auction which saw a notable drop in foreign demand amid what we reported a week ago was rampant selling of US debt by foreign central banks, moments ago the Treasury sold 3Y notes in what may have been the best auction since the start of the war.”
USD declined to 98.52 this morning, between the 52-day Moving Average at 98.48 and the mid-Cycle support at 98.56. The Cycles Model suggests the decline may be nearly over. The USD may have another week of testing the low.