The Practical Investor

11:05 am

Theepochtimes comments on food prices, “Food prices across the world have risen to their highest levels in a decade on the back of tightening supply conditions coupled with robust demand, according to the Food and Agriculture Organization of the United Nations (FAO).

The FAO’s food price index, which measures world food commodity prices, has surged by 32.8 percent in the 12 months through September, coming in at a reading of 130 points, a level not seen since 2011. On a month-over-month basis, the index rose 1.2 percent.

Accounting for the bulk of the rise in the index were higher prices of most cereals and vegetable oils.”

10:50 am

SPX made a 61.4% retracement of Friday’s decline and appears to be stalled.  Normally a Fib rally may be attributed to short covering and not much else.  There seems to be little incentive to go higher.  VIX also tested its low at 18.20 , but did not go beneath it.

ZeroHedge remarks,  “Something’s different this time.

For the first time since the collapse in March 2020, the S&P 500 has failed to rebound back to new highs after testing its key uptrend technical levels…

Source: Bloomberg

So what happened?

SpotGamma notes that the OCC data we collect offers some insights into what happened last week. According to this data, Index call options were sold to open in pretty strong size (top chart, blue line). Along with that there was some light put options shorted (orange line), but much less aggressively that in months past.

Source: SpotGamma

For months the default reaction to any selloff in markets was to short volatility (with the recovery time of any dip in the market measured in hours).

Off of the debt ceiling punt last week there was a snap-back rally in which very short dated options (1-3 days to expiration) were sold but nothing “real” (ie larger, longer dated) moved.

It seems like traders used Thursdays rally to reposition long volatility/short markets.

The bigger takeaway is this: that reflexive short volatility trade has apparently left the building. We’ve viewed this reflexive vol shorting as a primary driver of markets in the short term. With this mechanism absent, the market seems unable to recover.”

8:20 am

Good Morning!

SPX futures slid beneath Sort-term support at 4381.18 this morning as the weekly options settled in the Max Pain zone.  A quick scan of the options expirations show that Max Pain lies at 4350.00 today, while it moves to 4375.00 on Wednesday and Friday’s monthly expiration.  That information may lead us to believe that the roller coaster in porices may continue this week.  However, the Cup with Handle formation may prove to be a “trap door” should prices fally beneath the Lip at 4306.00.

ZeroHedge reports, “While cash bonds may be closed today for Columbus Day, which may or may not be a holiday – it’s difficult to know anymore with SJW snowflakes opinions changing by the day – US equity futures are open and they are sliding as soaring oil prices add to worries over growing stagflation (Goldman and Morgan Stanley both slashed their GDP estimates over the weekend even as they both see rising inflation), fueling concern that a spreading energy crisis could hamper economic recovery (as a reminder, yesterday we had one, two, three posts on stagflation, showing just how freaked out Wall Street suddenly is).

Rising raw material costs, labor shortages and other supply chain bottlenecks have raised concerns of elevated prices hammering corporate profits while rising rates are suggesting that a tidal wave of inflation is coming. And while cash bonds may be closed, one can easily extrapolate where they would be trading based on TSY futures which are currently trading at a 1.65% equivalent.”

TNX futures are open this morning, but may close at the open of the cash market.  Today is day 257 in the Master Cycle, giving us another day or so of trading before the final high may be in.

VIX futures rose to a weekend high of 20.45, above the Ending Diagonal trendline again after Friday’s brief test of the 50-day Moving Average.  Wave [c] of 3 is projected to be at least double the size of Wave [c] of Wave 1.  The last “buy the dip” opportunity for the VIX may have assed on Friday.

On Friday ZeroHedge commented, “Time to revisit Friday VIX hedges?

The theme of VIX being the relativity more exuberant one continues. Note the gap between the VIX inverted vs Spoos widening further. VIX didn’t “buy” the late day fade yesterday, and is continuing down as the weekend effect kicks in.

VIX isn’t dirt cheap (yet), but given the various cross asset vols all showing huge moves over the past few weeks, we doubt VIX will drift much lower. Our take from yesterday is playing out according to plan:

“So far trusting VIX has been the accurate “bounce” take, but let’s see if they manage puking VIX even more into Friday.”

USD futures continue to consolidate near the Cycle Top resistance at 94.13.  The Current Master Cycle projects a potential low by mid-November.

West Texas Light Crude futures hit a weekend high of 82.17 before easing back.  I had originally put the Master Cycle high on Wednesday (day 266), but we may be seeing an extended high this morning (day 271).  If so, a corrective phase may begin, lasting through mid-November.  The Broadening wedge formation may be triggered in this decline.

ZeroHedge observes, “The surge in natural gas prices in 2021 has put even crytpocurrencies to shame: US Henry Hub spot prices have been averaging around $6/mmbtu, up about 40% from early in August and a surge of around 200% relative to prices at the start of the year; prices in German and the UK are orders of magnitude higher.

The dramatic price increase has prompted questions how it will impact inflation prints in the near-term, both headline and core, and indeed as JPM economist Daniel Silver writes today, “this recent jump is notable and should boost consumer prices.”

ZeroHedge also worries, “Commodity prices are surging around the globe, so it should come as no surprise: Marine fuel is getting a lot more expensive. That’s bad news for ship operators on the cost side, and, in the container business, yet another headache for cargo shippers.

Marine bunker prices are “soaring,” said Alphatanker on Thursday. “This has not just impacted 3.5% [high-sulfur fuel oil or HSFO] but also 0.5% VLSFO [very low sulfur fuel oil].”

“There are expectations that crude, and therefore marine fuel, could move higher in the coming weeks as oil markets tighten further,” warned Alphatanker, adding, “This will undoubtedly clip gains in tanker earnings.”

All ship categories, not just tankers, are taking a cost hit. On Thursday, the S&P Global Platts T4 index estimated that a Capesize (a dry bulk ship with capacity of around 180,000 deadweight tons) burning VLSFO was spending $24,596 per day on fuel.”

The GSCI Ag Index continues to consolidate above all supports as it relieves its overbought condition.  Thee is a possible Trading (minor) Cycle lw due at the end of the week, but the longer view is for the rally to continue through mid-December.  The following articles give us pause to consider just how far food prices may rise.

ZeroHedge notes, “Fertilizer prices have risen to a record high in North America, threatening to boost food inflation even higher. Nitrogen products are increasing due to the cost of natural gas, which is used in the manufacturing process.

The Green Markets North America Fertilizer Price Index soared to a record high last week of $996.32 per short ton.

The fertilizer market has been roiled by hurricanes, plant shutdowns, sanctions, and shortages of natural gas in Europe and China, pushing nutrient prices sky-high, which will raise the cost of production for global farmers. Here are global fertilizer prices zooming higher: ”

ZeroHedge also notes, “Americans are accustomed to a bowl of cereal as their go-to breakfast meal is about to experience a price increase because of rapid food inflation.

This year, a devastating drought in North American oat fields has resulted in the lowest harvest for the cereal grain in years, pushing prices to record highs, a warning sign that breakfast inflation is imminent.

Scorching heat waves in Candian oat fields slashed production to an 11-year low. Canada, the world’s biggest exporter, ships most of its oats to the US, its largest consumer.

The result so far has been a new record high in oats futures trading on the CME. The sudden spike in prices has yet to ripple through supply chains to affect consumers, though that will be coming.

According to Bloomberg, “the situation for North American farmers was so dire in the summer that many cut their losses and harvested damaged plants to be sold as feed for animals.”

What this means for consumers is that dwindling supplies and record-high prices will soon affect foods like cereals, oatmeal, and granola bars, all popular breakfast items.”

8:00 am

Good Morning!

SPX futures are hovering near 4400.00 this morning, no doubt due to the influence of options expiration at the close today.  At 4400.00, there is open interest of 5,833 call contracts and 4599 put contracts.  beneath that, puts outnumber calls by 1,000 at 4375.00 and at 4350.00 grow to open interest of 9,273 put contracts vs 4,176 calls.  A blow-out jobs report may increase the odds of a November taper and increase negative gamma in the options.

ZeroHedge reports, “US equity-index drifted in a tight range overnight, in a tight range before key jobs data that could provide clues on the Federal Reserve’s policy. As noted in our preview, unless the jobs report is a disaster, it will virtually assure the Fed launches tapering in one month. Markets drifted higher on Thursday after the Senate averted the risk of an immediate default, pushing global stocks on course for their best week since early September, but a late day selloff wiped away most gains and closed spoos below the critical 4400 level. At 07:30 a.m. ET, Dow e-minis were up 35 points, or 0.10%, S&P 500 e-minis were up 5.00 points, or 0.1%, and Nasdaq 100 e-minis were up 10.75 points, or 0.07%. Treasury Yields were 1 point higher after earlier tagging 1.60%, the highest since June. The dollar was flat while Brent topped $83 before paring gains. Bitcoin traded above $55,000.”

VIX futures did not make an overnight low, but are hovering near the bottom of yesterday’s trading range.  Its structure is a mirror (inverted) image of the SPX Triangle.  This may be a very powerful send-off due to its positioning as a Wave 3.  Often Wave 3 is amultiple of Wave 1.  In this case we are projective Wave 3 to be 2X the length of Wave 1…still leaving Wave 5 for the coup de grace.

TNX futures peaked at 16.01 this morning, then sold off after the Jobs Report.  Tis may very well be the end of the current Master Cycle, on day 254, as the structure appears complete.

ZeroHedge remarks, “A much worse than expected print for non-farm payrolls has prompted chaos in equity algos but a clear signal from the bond and FX markets.

The dollar dived (taper if off/delayed)…

Source: Bloomberg

Bond yields tumbled (recovery is stalling)…”

Source: Bloomberg

USD futures puled back to a low of 93.93 this morning after the jobs report.  The decline may last a few more days as the news is parsed.

ZeroHedge remarks, “Well, coming into today’s payrolls report we said that the number would be a beat and the only question was how big, as a result of millions of Americans seeing their emergency benefits expiring. Boy were we wrong: moments ago the BLS reported that with expectations of a 500K print and whisper numbers sharply higher, in September the US added just 194K jobs (in fact, the number came below the lowest of all but one of the 71 economist forecasts, with just Banque Pictet’s Thomas Costberg forecasting a 0 print). Sept payrolls were down by nearly half from the upward revised 366K in August, the first back-to-back monthly drop in payrolls this year and the lowest print of 2021 (even as then umber of Household survey showed an increase of 526K jobs in the month!), likely impairing the Fed’s tapering schedule as this number was so bad as to pass as a “major shock” from the Fed’s perspective, even if as the BLS itself admits a big reason for the drop was a seasonal adjustment in local government education, which may have pulled the number down by some 150K.”

11:30 am

SPX overshot beyond the 17.2 hour time allotted and the 50% retracement level at 4412.00.  However it did fall short of the 61.8% retracement level at 4440.00 an the 50-day Moving Average at 4438.00.  The basic analysis remains the same, however.

ZeroHedge comments, “In keeping with recent tradition, stocks blasted as soon as the cash session opened, sending the S&P above the key 4,400 level (more below)…

… while pushing the Dow Jones above its 50DMA of 34,914 for the first time in about a month.”

7:45 am

Good Morning!

SPX futures are in a Triangle overshoot after rising above 4400.00 this morning.  This verifies yesterday’s discovery of the Triangle.  SPX is in a position to make a 50%  retracement of the entire 21.5-day decline at 4412.00.  Thus far it has taken 17 hours from the low at 4278.94.  A Cyclical interval would be 17.2 hours, so this suggests that the peak retracement may be achieved within the first hour, if not the first 6-12 minutes after the open.

ZeroHedge reports, “The nausea-inducing rollercoaster in the stock market continued on Thursday, when US index futures continued their violent Wednesday reversal – the biggest since March – and surged with Nasdaq futures up more than 1%, hitting a session high, as Chinese technology stocks rebounded from a record low, investors embraced progress on the debt-ceiling impasse in Washington, a dip in oil prices eased worries of higher inflation and concerns eased about the European energy crisis fueled a risk-on mood. At 7:30am ET, S&P futures were up 44 points or 1.00% and Dow futures were up 267 points or 0.78%. Oil tumbled as much as $2, dragging breakevens and nominal yields lower, while the dollar dipped and bitcoin traded around $54,000.

Wednesday’s reversal started after Mitch McConnell on Wednesday floated a plan to support an extension of the federal debt ceiling into December, potentially heading off a historic default, a proposal which Democrats have reportedly agreed to after Senate Majority Leader Chuck Schumer suggested an agreement would be in place by this morning. While the deal is good news for markets worried about an imminent default, it only kicks the can to December when the drama and brinksmanship may run again.”

VIX futures made a low of 20.05 this morning, possibly testing the Ending Diagonal trendline and mis-Cycle support at 19.66.  VIX has been in a flat consolidation for the past 7 days, alleviating the jitters of traders that have been anticipating a spike in the VIX.  A breakout above 25.00 may change their outlook.

The NYSE Hi-Lo Index flipped to a sell signal yesterday, confirming the bearish formation in the SPX.  Late in the day the reading was -18.00 but the final tally had to be made after the market close.  You see, ETFs are included in the count during the day, but had to be netted out after hours to eliminate double counting of stocks.  Just to give you an idea of how bad the data may be, there are ETFs of ETFs (shades of 1929!).  Thus, we have a delayed count after the close.

TNX futures are slightly higher, but may yet decline to the mid-Cycle support at 14.27 before its final rally of the Master Cycle.  There is a Trading (minor) Cycle indicated for tomorrow that may go briefly lower.  The final target for this Master Cycle remains in the range of 16.50-17.93.

ZeroHedge reports, “Following negotiations that stretched late into Wednesday evening, Democrats and Republicans have reportedly forged a compromise deal on a short-term increase in the the debt ceiling which will avoid default, but as Bloomberg notes, “threatens to exacerbate year-end clashes over trillions in government spending.”

In moving forward, Democrats appear to be on the verge of accepting a proposal from GOP leader Sen. Mitch McConnell (R-KY) which would raise the debt limit by a specific amount – enough to move things into December, when Congress will have to vote again to avoid a default.

While the details aren’t totally clear, McConnell’s offer was to allow a vote on extending the debt limit at a fixed collar amount – which Goldman’s Alec Phillips expects a number on over the next day or so.”

Crude Oil futures declined to a low of 74.97 before a slight recovery.  This led me t a careful revision of the Cycles Model that accomodates a potential Master Cycle high yesterday.  You see, Cycles are organic and approximately 98% of them fall within certain parameters (within 17 days) of day 258.  Often there is more than one high or low (or both) within that 17 days, so it often becomes an issue of which is closest to its target.  The final arbiter may not arrive until the new Master Cyclepresents itself.  Should this be correct, fuel prices should moderate over the next six weeks, until the next Master Cycle ends.

While the past six weeks have evoked a panic, including our president asking the OEC to increase their production, the new trend may also catch traders flat-footed and unwinding their longs.  However, the energy crisis is not over.  We may just get a short breather before the next onslaught in December.

ZeroHedge reports, “Europe’s gas and electricity prices are setting record highs on a daily basis and rising at an accelerating rate as the market tries to destroy enough demand to protect depleted inventories ahead of the winter.  Gas storage sites in the European Union and United Kingdom are currently just under 76% full, compared with a ten-year seasonal average of almost 90%, according to data compiled by Gas Infrastructure Europe.

In the last decade, storage has emptied by an average of 57 percentage points over winter, but depletion is highly variable, ranging from a minimum of 38 points in 2013/14 to a maximum of 71 points in 2017/18.”

The knock-on effects of an energy shortage are substantial.  ZeroHedge observes, “Coal supply shortages in Asia and Europe are pushing prices for the dirtiest fossil fuel to record highs and have become a challenge for US suppliers due to a shortage of miners, according to Bloomberg.

For the last three and a half decades, the number of coal mining jobs in the US has collapsed from 180,000 to 42,500 in August. The industry remains 9,500 miners short from pre-COVID times.

With coal prices worldwide screaming to all-time highs ahead of winter as China and Europe scramble for supplies, the US coal industry is failing to find new miners willing to do the dirty work as demand soars. ”

MartinArmstrong quips, “The greatest problem I have is that those in power are evolving to the lowest possible denomination. Thirty years ago, I would have intelligent conversations with heads of state. Those days are gone. If I met with Biden, I would probably have to bring a napkin to wipe the drool from his face.

I think it is time we nominate “Dumb & Dumber” for President/Vice President. I think they have a better than 50/50 chance of doing a far better job than this crop of politicians on both sides of the fence on a global level. We have had Biden immediately cut off oil production because he is for saving the planet, but the alternative energy is not ready. Then he turns to OPEC to increase production. How many Americans lost their lives in Cheney’s war to get control of oil?

Then in Europe, the government was against being reliant on Russia and the whole gas pipeline dispute. Because of the Japanese reactor crisis, Merkel outlawed nuclear energy. Wind power has failed so the result is that now the Civil Protection Office has unveiled an ad campaign focusing on all aspects of crisis preparation! They are soon to release a targeted strategy addressing “stockpiling, extreme weather, power failure and emergency baggage.” Then these amazing officials are releasing a new book entitled “Cooking Without Electricity.”

3:20 pm

As a further evidence of a bearish structure, the NYSE Hi-Lo Index opened negative and remains so going into the close.  The adjusted reading (sans the ETFs), which will not be available until morning, may be considerably more negative.

2:55 pm

Imagine my surprise when a Triangle formation appeared on the chart of the SPX.  This is a continuation formation that may be even more bearish than most could imagine.  A Triangle occurring at the bottom of market day 21.5 has interesting implications.  First of all, it suggests that Wave (C) may be extremely impulsive and dangerous…until it reaches its target.  Second, it does not negate the Cup with Handle formation which allows multiple crossings of the Lip.  By the way, the Cup with Handle may not be the final destination.  Finally, it still does not tell us which multiple of days it will take to reach bottom.  A “best guess” suggests 12.9 days from today, taking us to October 25…

…which potentially agrees with the proposed VIX Master Cycle high which has been a puzzle to me until now.  Stand by for a possible final probe to or above the upper trendline before the reversal.

10:02 am

SPX lost Cycle Bottom support at 4307.18 and support at the Lip of the Cupw with Handle formation at 4306.00 suggesting that institutional money and possibly hedge funds are exiting the market.  Monday’s low at 4278.94 is threatened and gamma is growing more negative.

ZeroHedge observes, “The last few days have seen US equity market trading within a broad range, characterized by violent lurches from one side of the range to the other.

SpotGamma attributed this “ping pong” due to the unchanging options landscape. Despite the volatility there are little material changes to options positions, and so dealers (they’re short gamma) are simply adjusting their hedge.

They likely need to buy futures up to the 4365 zero gamma line (zero gamma implies “no more gamma hedge needed”) and selling down to the large put area <4300.

SpotGamma notes that overnight data indicates that rather slowly the options positions are beginning to fill in at prices overhead. The Volatility Trigger (aka gamma flip line) has dripped lower to 4345 (from 4370) and we note a lot of gamma now at the 4350 position. In other words: our upper bound is now 15 handles lower today than yesterday. The air pocket above 4300 is constricting.”

8:10 am

Good Morning!

SPX futures made an overnight low of 4284.10 before easing back to 4300.00.  Yesterday’s observation of the 8.6-hour rally apears to have been accurate.  Today’s options expiration still dominates trading.  There is open interest in 19,383 net call contracts at 4350.00, which were threatened but not achieved at the close.  SPX peaked just under the 50% retracement level at 4371.34 and are considerably lower, hovering near 4300.00, where the options gamma is negative.  SPX’s final spike of strength is now over and the race may be downhill from here.

ZeroHedge reports, “n our market comments on Tuesday we were stunned by the resilient surge in tech names and the broader market, even as yields soared on the biggest jump in breakevens since the presidential election, noting that something is very broken with this picture. Well, one day later normalcy is back: US stock index futures tumbled as much as 1.3% on Wednesday before paring some losses, after soaring oil and gas prices (rising as much as 40% in Europe today alone) fed into fears of higher inflation and fueled concerns of sooner-than-expected tapering, which in turn pushed 10Y yields just shy of 1.57%. At 730 a.m. ET, Dow e-minis were down 309 points, or 0.9%, S&P 500 e-minis were down 49 points, or 1.12%, and Nasdaq 100 e-minis were down 181 points, or 1.23%, to the lowest level since June 25 on a closing basis, signaling more downside for tech shares after Tuesday’s short reprieve

Up to Tuesday’s close, the S&P 500 index logged its fourth straight day of 1% moves in either direction. According to Reuters, the last time the index saw that much volatility was in November 2020, when it rose or fell 1% or more for seven straight sessions.”

VIX futures surged to 24.10 in the early morning hours before settling back somewhat.  The Cycles Model suggests a surge of strength today as it may break out of its consolidation range.

TNX futures appear to have broken above the previous high at 15.67, but it opened in the cash market a bit more subdued.  The Cycles Model suggests today may be a day of strength (a breakout?) with more to come in the following week.  A Master Cycle high is due during options week.  It is possible that the Cycle Top resistance at 17.94 may be reached by then.

ZeroHedge remarks, “US 10 year breaking out?

The US 10 year is above the big 1.55% level. Let’s await to see how this closes today, but a “proper” close above the key resistance means things will get “dynamic” again.

First big level to the upside would be around recent highs at 1.75%.”

Source: Refinitiv

USD futures reached an overnight high of 94.45, challenging the prior high.  A breakout here tels us that Wave 3 has a distance to go before completion.  The Cycles Model suggests USD may continue higher, and with strength during options week.  The Master Cycle doesn’t end until the second week in November.

Crude Oil pulled back from its Cycle Top resistance at 78.19 as it makes a brief consolidation.  Trending strength may return at the end of the week, however.  The current Master Cycle may continue through early November before reaching its next high.

ZeroHedge notes, “Europe’s power crunch is roiling energy markets Wednesday as Dutch and U.K. natural gas futures jumped 60% in just two days, hitting record highs along with soaring power prices.

Front-month Dutch natgas futures rose an astonishing 40% today to a record 162.125 euros per megawatt-hour after a 20% move higher on Tuesday. U.K. natgas futures surged 39% today, hitting 40 dollars.

For context, the EU NatGas prices are equivalent to $250 oil…

The GSCI Ag Index remains above all supports and is on a buy signal.  The Cycles Model suggests that it may remain so through mid-December.  The price of energy will have a massive effect on agriculture, as we note below.

ZeroHedge observes, “A natural gas shortage across Europe has created supply-chain shocks, as seen in the food industry, where problems continue to worsen. European natgas prices are at insane levels, triggering a domino effect of output reduction or closures of fertilizer plants on the continent.

Last month, two of the U.K.’s largest fertilizer factories producing 45% of domestic demand closed, and one shortly reopened with government aid. By late month, Austrian fertilizer producer Borealis AG slashed ammonia output after the cost natgas compressed margins in an industry facing tight supplies.

As the dominos fall, SKW Piesteritz, Germany’s largest ammonia producer, announced a 20% reduction in ammonia production due to the record-high natgas prices on Tuesday.

“The level that has now been reached no longer enables economically sensible production, so that we are forced to take this step,” the company told Bloomberg in an emailed statement. 

“Without government action, there is a risk of production being halted shortly,” the statement continued. “

2:11 pm

SPX spent precisely 8.6 hours in this retracement which fell short of the 50% Fibonacci level at 4371.34.  It is also 8.6 days from the Wave (B) high.  While it may go higher, it has relieved the oversold condition.  Now it has become short-term overbought.  In all liklihood, stocks are entering their second phase of the decline which may substantially increase in severity.

ZeroHedge remarks, “Wondering why equity markets are melting up like yesterday’s fears never happened. Nomura’s Charlie McElligott has some ideas.

This morning’s ramp has lifted The Dow, S&P, and Russell 2000 into the green for the week (erasing yesterday’s losses) and Nasdaq is also soaring…

All the majors are hovering at or near key technical levels (S&P at 100DMA, RTY at 50DMA, and NQ at 100DMA)…all of which raise the question of whether stonks can extend from here or have run out of ammo.”

10:40 am

SPX made a near-perfect 78.6% retracement of yesterday’s decline at 4350.00 while the NDX made a 55% retracement.  SPX has completed 21.5 market days of decline at yesterday’s low.    That’s three weeks of the Fed and Dealer banks wrestling with this decline.  The question is, how many more days of decline are there left?  The answer lies in several possibilities:

1.  There may only be 8.6 market days left, but that leaves us ending the decline on October 15.  Not a possibility due to options expiration on that day.
2.   The next possibility may be 12.9 days from yesterday, October 21st.  That appears to be a very strong VIX day, but not the end (peak) of its Master Cycle.
3. The final possibility is 17.2 market days, on October 27-28, which brings us to the end of the VIX Master Cycle and day 271 of the SPX master Cycle.

Which will it be?

ZeroHedge reports, “Despite the soaring rates picture this morning (which has supposedly been pressuring growthy stocks), tech is powering higher along with all major US equity indices. The ramp has so far lifted The Dow and Russell 2000 into the green from Friday’s close…

The S&P’s surge has lifted it back to its 100DMA…

7:45 am

Good Morning!

SPX futures are testing a short-term overhead resistance at 4320.00.  In the meantime, the lip of the Cup with Handle at 4305.00 is providing nominal support.  Tomorrow’s options expiration shows a net 3,322 open interest contracts in puts at 4300.00 with strikes beneath it cumulatively rising.  Thus it consolidates in the Max Pain zone between 4300.00 and 4325.00.  Tomorrow is the 17th day from the beginning of the eruptions at La Palma.  The lava flows are increasing and evidence from earthquakes show a larger supply of lava may be rising from the depths.  This could be the volcano from hell.

ZeroHedge reports, “US equity futures and European markets rebounded from a tech rout on Monday that was triggered by fears of soaring energy costs, stagflation, tech overvaluation and escalating Chinese property distress even as Asian shares tracked Monday’s broad Wall Street sell-off to weaken for a third straight session. The dollar rose and yields rebounded back ato 1.50% as the rise in oil continued, pushing Brent above $82/bbl. At of 7:15am ET, S&P futures were up 16.25 points, or 0.38%, to 4,307; Dow futs were up 116 points and Nasdaq futures rose 47.25 points as technology shares bounced in Europe. Bitcoin jumped above $50,000 for the first time since Sept 7.

The “market correction, initially sparked by tapering expectations and China’s property sector worries, is now being driven by record energy prices as well as lingering political uncertainties in the U.S. about the crucial question of the debt ceiling,” said Pierre Veyret, a technical analyst at ActivTrades. “Markets are likely to stay volatile this week and with no clear direction until there is significant progress on the existing concerns.”

VIX futures have been also consolidating with a low of 22.04 this morning.  The Cycles Model shows today being a particularly strong trending day for the VIX.  The implications are that the posssibility of a breakout above the neckline may be strong.  The Model also shows the current Master Cycle extending to the last week of October, while the SPX Master Cycle shows a possible ending on the 15th.  That being a heavy options expiration day, it suggests that the decline in the SPX may extend yet another week and could even match up (inversely) with the VIX at the end of the month.

TNX futures are consolidateing very near 15.00 after having breached it again this morning.  The Cycles Model shows a surge in trending strength tomorrow, suggesting a breakout above the 15.47 high.  It also indicates a potential Master Cycle high during options week.  The range for this Master Cycle high may be from 16.00 to the Cycle Top at 17.94.

USD futures are also consolidating under its Master Cycle peak on September 30.  There may be another week of weakness, where it corrects down to the 50-day Moving Average at 92.88 before resuming its rally.

Crude oil futures continue their inexorable march higher as it breaks above its June high.  The Cycles Model suggests the rally may continue through Thanksgiving week and possibly into early December.  The Elliot Wave Model projects a high near 100.00 by that time.

Rising oil prices and rising interest rates may deliver a double whammy to the markets by the end of the year.

1:05 pm

A momentous occasion…NDX just crossed beneath its Ending Diagonal trendline, implying a complete retracement of its rally since March 23, 2020.  For those of you who question my ‘Point 6″ of the Orthodox Broadening Top, the low at that time was 6771.91.  That was the low of “Point 4” which must be exceeded by “point 6”..   That target now has another in its vicinity.

8:45 am

ZeroHedge reports, “Stock futures ticked lower on Monday, hurt by weakening sentiment in Asia and Europe amid growing worries about economic stagflation, the global energy crisis and renewed fears about property developer China Evergrande whose stock was halted overnight in Hong Kong, while Tesla shares rose after reporting a record number of electric vehicle deliveries. At 715 a.m. ET, Dow e-minis were down 114 points, or 0.33%, S&P 500 e-minis were down 16.25 points, or 0.37%, and Nasdaq 100 e-minis were down 73.75 points, or 0.5%.

“The global chip and energy shortage is getting worse, the inflation is rising, the recovery may be slowing, and that puts central banks between a rock and a hard place,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “The best they could do is to do nothing, or to tighten their monetary policy to avoid losing control on the economy.”

7:00 am

Good Morning!

SPX futures are down this morning.  No one sees the Cup with Handle formation just above 4300.00 that can set off a firestorm.

On Friday SPX dipped its toe beneath 4300.00 and found the water too cold.  Dip buyers came in and the result was a near 50% correction (at 4377.00) of the week’s decline.  What most investors don’t see is a huge options collar taken off at the end of the quarter and a new one installed for the end of December.  The expected sell-off due to this transaction appears to have been muted.

You see, Wall Street’s biggest customer is not the retail investors nor is it the hedge funds.  It’s the insurance companies who market equity indexed life and annuity products.  They offer a floor of protection when the market goes down, but participate in market increases.  This is done through the options market.  The aforementioned collar is the tool used to provide that floor in a down market.  However, it costs money to do that, even in a bull market.

Why not make it free?  Just sell another out-of-the money put at a lower level to offset the cost of the collar.   There is no consideration that the market may decline more than 10% and go against the bank.  In the meantime, the bank(s) has put itself in the unenviable positon of having to sell more shares of SPX as the market goes up and buy more shares as the market goes down to maintain the hedge.  That is why the SPX has been “flat”  since July.  They are walking a tightrope.

ZeroHedge explains, “$500,000,000.

Half a billion dollars.

Currently, this is how much of $SPX index needs to be bought or sold for every 1% down or up move, respectively.

These flows are a result of a substantial options trade that remains unknown to most market participants.

On Friday, we highlighted some of the impact of this ‘hidden’ crash hedge.

Former Goldman Sachs quant Sergie Pefiliev (@Perfiliev) put together this excellent primer (via Twitter) on what’s really going on…”

VIX futures are consolidating within last week’s trading range.  There appears to be a considerable effort to kee the VIX from rising above 25.00, even though it has broken above its Ending Diagonal formation.  The Ending Diagonal target is a complete retracement to the March 23, 2020 high.

TNX futures testedd 15.00 this morning as it rises to complete its Master Cycle.  In fact, the Cycles Model suggests growing strength in the uptrend both this week and next.  The implied target is between 16.00 and th Cycle Top at 17.95.

6:00 am

I am on the road today to visit my mother on the occasion of her 91st birthday.  This morning’s session will be brief.

Good Morning!

SPX crossed beneath the 100-day Moving Average at 4344.43 yesterday and SPX futures continued beneath the 4300.00 level overnight.  SPX is now down more than 5% and growing.  Today’s options expiration may be a disaster, as there are over 3700 net put contracts at 4325.00, 8150 net put contracts at 4300.00, 5200 net put contracts at 4275.00, 6200 net put contracts at 4250.00, 3200 net put contracts at 4225 and 13,430 net put contracts at 4200.00!

7:45 am

SPX futures have moved aboe 4300 and may test the 100-day Moving Average and Cycle Bottom resistance at 4344.90 this morning.  This adds credence to the Cup with Handle formation.  This may minimize the damage (to the dealsers and hedge funds) on the first round of expirations.  However, the retail market (stocks and ETFs) may not hold up as well later today.

SPX futures declined to 4270.00 in the ovrnight session but have recovered somewhat this morning., still beneath 4300.00.  The $1.2 Infrastructure bill failed to pass last night as we start counting the days until Washington just closes down.

ZeroHedge reports, “In a mirror image of Thursday’s overnight action, US index futures reversed an early overnight drop, when sentiment was dented by growing concerns about the growing global energy crisis, which sent European gas prices to a record 100 euros, and a global stagflationary wave which overshadowed the positive sentiment from a short-term Congressional deal that averted a government shutdown. However as US traders arrived at their desks, what was earlier a drop of as much as 40 points reversed to a gain of 13 points with the Emini now trading up 14 points or 0.34% to 4,312, Dow eminis were up 47 at 745am, reversing an earlier loss, while Nasdaq 100 e-minis also turned higher and were last up 29.5 or 0.2%. As stocks bounced the dollar resumed its decline while oil’s rally stalled and Treasuries were steady.

ZeroHedge reports, “Update (2330ET): House Democrats called off a Thursday night vote on the $1.2 trillion infrastructure package after the Progressive Caucus was unconvinced by leadership’s proposed ‘bicameral framework’ to move forward on the legislation.

To review – House progressives have threatened to sink the Senate-passed infrastructure deal unless the moderate Democrats in the Senate agree to pass the $3.5 trillion social spending package. And with moderate Senate Democrats Joe Manchin (WV) and Kyrsten Sinema (AZ) refusing to vote on that legislation unless – according to Manchin – it’s no more than $1.5 trillion, it appears the infrastructure deal is doomed to fail unless major changes are made.”

VIX futures made a new high at 24.89 last night.  Should the slippery slope created by today’s expiring options be too much to handle, we may see a breakout above the Head & Shoulders neckline and subsequent rally toward its target in the next two weeks.

The NYSE Hi-Lo Index closed at -29.00 yesterday, confirming the decline’s continuation.

TNX futures dropped beneath 15.00 this morning, giving some relief to stocks, although transitory.  The Cycles Model indicates a surge of strength into mid-week and yet another one during options expiration.  It is possible that TNX may rise to the Cycle Top at 17.95 over the next two weeks.

The GSCI Ag Index has risen over its 50-day Moving Average at 412.80 an appears to be on a two month rally to heights not seen for the past 10 years….and higher.  Today may be the beginning of multiple periods of strength that may last through he end of October.  The current Master Cycle may remain in place through mid-December.

ZeroHedge reports, “Global food prices climbed back to near-decade highs in early September, reviving concerns about inflationary pressures. A newly emerging risk that many have missed and could catapult food prices even higher this fall/winter is China’s difficult harvest season as power curbs hurt the outlook for production, according to Bloomberg.

Autumn harvest has begun for the world’s second-largest economy amid power constraints in at least 20 Chinese provinces and regions, making up more than 66% of the country’s GDP. Some of these regions are industrial hubs that have key manufacturing plants. ”

The La Palma volcano continues to emit fluid lava that is building up on a steep ledge at the western shore of La Palma Island, increasing the potential of a collapse into the Atlantic.  Furthermore, new vents are opening at fissures on the volcano itself, destabilizing the whole mountain.  Apparently, the U.S. Tsunami Warning System is not impressed.

12:52 pm

SPX has lost its grip on its support at the 100-day Movig Average at 4345.00 and is now entering the panic phase of the market.  Gamma is seriously negative below 4400.00 and may only beget more selling.  Can a bounce happen here?  Yes, but may be limited by today’s peak at 4382.00.   Once beneath 4300.00 the cascade begins.

ZeroHedge remarks, “After another energetic session of buying in Asia, US futures began fading as Europe opened and accelerated lower as US opened…

Critically, this push lower has sent all the major US equity indices below key technical supports:

• S&P broke below its 100DMA
• Nasdaq broke below its 100DMA
• Dow broke below its 100DM
• Russell 2000 broke below its 200DMA”

ZeroHedge also notes, “Another day, another rollercoaster for stocks as futures were bid overnight until the European open and selling started…

But notably, Treasury yields have “stabilized” in a narrow range after their explosive surge higher recently. Nomura’s Charlie McElligott suggests that it does feel like the worst of the “short Gamma” dynamics clearly seen in both UST futs and ED$ futs early this week are now in a “cleaner” place…

But, the Nomura strategist suggests that today’s potential fireworks inside the Equities space will more than likely be generated from the absolutely mongo-sized qtrly SPX Put Spread Collar that is being rolled, where paper needs to buy 44,600 SPX SepQ 4430 Call (on the cover) to buy the DecQ 3490 / 4140 Put Spread while selling the DecQ 4515 Call x 44,600 – the trade will lift the Street on ~$3.1B in Gamma and SELL 14.5mm in Vega.”

6:50 am

Good Morning!

I am due for an early morninr appointment, so this session will be brief.

SPX futures are higher this morning, but could not make resistance at 4400.00.  The 38.2% Fib retracement is at 4391.05 and it appears that SPX may stay clenched at that level.  The reason?  Open interest at 4400.00 in today’s expiring put contracts is 19,663  versus open interest in today’s (expiring) calls is  11,149.  An accident here may bring a cascade of selling as open interest in puts outnumber calls quite a way down from 4400.00.

ZeroHedge reports, “US equity futures faded an overnight rally on the last day of September as lingering global-growth risks underscored by China’s official manufacturing PMI contracted for the first time since Feb 2020 as widely expected offset a debt-ceiling deal in Washington and central-bank assurances about transitory inflation. The deal to extend government funding removes one uncertainty from the minds of investors, amid China risks and concerns over Federal Reserve tapering. Comments from Fed Chair Powell and ECB head Christine Lagarde about inflation being transitory rather than permanent also helped sentiment, even if nobody actually believes them any more.In China, authorities told bankers to help local governments support the property market and homebuyers, signaling concern at the economic fallout from the debt crisis at China Evergrande

As of 7:15am ET, S&P futures were up 18 points ot 0.44%, trimming an earlier gain of 0.9%. Dow eminis were up 135 or 0.4% and Nasdaq futs rose 0.43%. 10Y TSY yields were higher, rising as high as 1.54% and last seen at 1.5289%; the US Dollar erased earlier losses and was unchanged.”

VIX futures have pulled back to the trendline at 20.50 but have recovered back nearer the close.

The NYSE Hi-Lo Index closed at -11.00, giving no support for a further rally.

NDX futures remain range-bound within yesterday’s trading range as a battle rages over which options get paid.  QQQs (closing price: 359.28) are especially sensitive, since opoen interest in today’s expiring put contracts is 15,980 versus open interest of 7,325 call contracts.  The Max Pain zone is 361.00, which is still slightly tilted toward puts.  Calls dominate at 362.00 and above.  Today’s options expiration is a minefield where the dealers dare not trod either to the right or the left.

CharlesHughSmith opines, “The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.

The ideal setup for a crash is a consensus that a crash is impossible–in other words, just like the present: sure, there are carefully measured murmurings about a “correction” but nobody with anything to lose in the way of public credibility is calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip that will immediately be bought.

What I’m calling for is a rip your face off, weeping bitter tears over the grave of the speculative wealth that you thought was forever crash. All those buying the dip because the Fed will never let the market go down will be crushed like scurrying cockroaches and all those trying to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Everything Bubble pops, well, everything pops. There is no shelter in a risk-off cascade.

The crash is coming as a result of multiple mutually reinforcing dynamics, the first being that no “serious person” believes a crash is possible, much less imminent. In no particular order, here are a raft of other causally consequential triggers of a cascading market crash:”

TNX is on the rise again with a high at 15.57.  With only two weeks to go to its next Master Cycle (high), a breakout may be underway.   The Cycles Model suggests a possible rally of the current Master Cycle to the October 18 drop dead date.  The decline in stocks may extend beyond that date, as the damage of higher rates may be realized.

ZeroHedge observes, “Now that Sen. Joe Manchin has denounced his own party’s multi-trillion plan to expand the social safety net as “the definition of fiscal insanity,” we can be virtually assured that the entire Democratic domestic agenda has essentially been left dead in the water, since the progressive Left won’t agree to back the Dems’ “bipartisan” infrastructure plan via reconciliation without first passing the larger spending package through both chambers.

Whatever the outcome, Manchin’s statement suggests it will likely take weeks and months – not days – for President Biden and the leadership to negotiate the votes – if indeed they can ever resolve the intractable divide within their own party, which has largely taken the form of aggressive leftists in the House (exemplified by the AOC-led “squad”) vs. a pair of moderates (Manchin and Arizona’s Kyrsten Sinema) in the Senate.”

That’s fortunate, in a sense, since it means Chuck Schumer and Nancy Pelosi will have no choice but to focus on the arguably more pressing priorities: keeping the government funded while raising the debt ceiling, ideally before Treasury Secretary Janet Yellen’s “drop-dead” date of Oct. 18.

USD futures are consolidating this morning after yesterday’s breakout rally on day 266 of the Master Cycle.    Normally we would anticipate a two-to-three week correction after the Master Cycle, but due to the extended older Master Cycle, we may only see an abbreviated correction before moving higher.  The new Master Cycle may not end until mid-November.

11:40 am

While SPX hugs its Max Pain zone at 4375.00 to 4400.00, NDX is also walking a tightrope in the options arena.  QQQ (359.95) is the best example where a slip may plunge it into the abyss.  At the 360.00 strike, open interest in put contracs is 13,020 vs calls at 6580.  Above that level is positive, while beneath 360.00 becomes deeply negative.  Don’t be surprised to see these Max Pain levels maintained through the end of the day.  However, accidents do happen.  Meanwhile the NYSE Hi-Lo Index is at -4.00 and the NDX Hi-Lo Index is at -40.00.

The dealers are hoping that pensions will ante up at the table for quarter-end rebalancing.

ZeroHedge observes, “With month- and quarter-end on deck, Goldman’s theoretical, “model-based” estimates are for a net $14 billion of US equities to buy from US pensions given the moves in equities and bonds over the month and quarter.

How does this stack up vs history? According to Goldman’s Gillian Hood, this ranks in the 36th percentile amongst all buy and sell estimates in absolute dollar value over the past three years. In absolute terms, this falls below the three year average absolute dollar value of $26bn worth of equities to be rebalanced.”

7:55 am

Good Morning!

SPX futures appear to have completed Wave [c] of 2 this morning just shy of the 38.2% retracement level at 4391.05.   It is unclear whether another attempt at retracement may be made at the open.  While futures are still positive, negative gamma prevails for today’s options expiration.  While open interest in today’s options remains neutral at 4400.00, it becomes progressively more negative the further south that prices go.  Open interest in puts outnumber calls by 1750 at 4350.00 and outnumber calls by over 2000 at 4325.00.  Puts have the upper hand by 5000 contracts at 4300.00.

In an event that largely goes unnoticed, the La Palma Volcano is having increasing tremors and quakes along with stronger eruptions that may further destabilize the volcano.  The implication is a possible collapse into the Atlantic with knock-on results for the East Coast of the United States.

ZeroHedge reports, “U.S. index futures rebounded on Tuesday from Monday’s stagflation-fear driven rout as an increase in Treasury yields abated and the greenback dropped from a 10 month high while Brent crude dropped from a 3 year high of $80/barrel after API showed a surprise stockpile build across all products.

One day after one of Wall Street’s worst selloff of this year which saw the S&P’s biggest one-day drop since May, dip buyers made yet another another triumphal return to global markets, with Nasdaq 100 futures climbing 130 points or 0.9% after the tech-heavy index tumbled the most since March on Tuesday as U.S. Treasury yields rose on tapering and stagflationconcerns. S&P 500 futures rose 28 points or 0.6% after the underlying gauge also slumped amid mounting concern over the debt-ceiling impasse in Washington.”

The NYSE Hi-Lo Index closed at 0.00 yesterday, confirming the sell signal.  Internals are extremely weak.  Unfortunately, the live quotes during market hours include ETFs that double and triple count individual stocks.  They are removed in the after hours to obtain the correct count, which we see this morning.

VIX futures pulled back to 21.45 this morning but has recovered somewhat as I write.  The Cycles Model indicates an increase in trending strength going into the weekend and lasting through mid week.  This implies a breakout above the neckline and the follow-through rally that may match the June 2020 high at 44.44 over the next week.

TNX futures pulled back to 14.94 in the overnight session.  The Cycles Model suggest a bit more of a pullback by the weekend, then a period of strength during the first half of next week.  This may lead to a Master Cycle high by mid-October.

ZeroHedge observes, “Maybe the market has been too hypnotized by the promise of cheap free money flowing forever, or maybe it remembers how the Fed stepped in last March to ensure that nobody lost any money and thus nobody wants to sell this time, or maybe it is just too used to buying every single dip so that news of the Fed’s taper actually sent stocks higher. But all that may soon change, because as Deutsche Bank’s Jim Reid calculates in terms of global central bank hikes exceeding cuts, we are now at the highest differential for a decade on a rolling 12-month basis.

In other words, we are now entering the most aggressively global hiking cycle in a decade.”

USD futures not only broke out above its previous high at 93.75 but also broke above its Cycle Top resistance at 93.83 this morning.  This is lending credence to the notion that the Master Cycle may be extending until the end of the week, in a period of strength.  A probable target for this rally may be 94.79, the equivalent of the June 2020 high and the 38.2% retracement level for the decline which extended from January 2020 to February 12, 2021 (12.9 months).

The Sanghai Composite Index fell to to a low of 3518.04 during today’s session before it bounced back toward the 50-day Moving Average at 3542.11.  It is on a confirmed sell signal with a projected decline that may last until the second week of October.  The high in September missed the February high by 8 points, attesting to the great lengths the Bank of China went through to keep stocks elevated, to no avail.

ZeroHedge reports, “China’s cash-strapped property giant Evergrande was on the verge of defaulting on a second bond on Wednesday despite agreeing to settle debt with a Chinese bank in a $1.5 billion stake divestment deal, a move which sent Evergrande’s worthless stock squeezing higher, now up 50% from a week ago.

Early on Wednesday, Evergrande said in an exchange filing that it would sell a 9.99 billion yuan ($1.5 billion) stake it owns in Shengjing Bank – its most valuable financial unit – to a state-owned asset management company. The bank, one of Evergrande’s main lenders, demanded all net proceeds from the sale go towards settling the developer’s debts with Shengjing.

“The company’s liquidity issue has adversely affected Shengjing Bank in a material way,” Evergrande said in the statement, adding that the introduction of the purchaser — state-owned Shenyang Shengjing Finance Investment Group Co. — will help to stabilize the bank’s operations.”

2:55 pm

SPX bounced from the 100-day MovingAverage at 4341.00 at 1:00 pm.  It appears that the bounce may be ending shortly.  The 38.2% retracement level is at 4391.05, if it can make it.  This is no time for taking short profits.  There may yet be another two weeks to go on the dowside.

7:40 am

Good Morning!

The projected final probe to 4475.00 did not materialize.  In fact, there appears to be a truncated Wave [v] of C in the final hour which remained within the Triangle boundaries.

This morning the SPX futures tumbled to 4398.40, giving up the 50-day Moving Average support at 4438.03.  Welcome to phase 2 of the decline.  Should this event mark the halfway point of the decline, we may now see a panic phase lasting until October 20.

The La Palma Volcano has opened new vents and the lava flow is more liquid than before, suggesting a deeper source than what was earlier witnessed.  Vents are now cutting across the cone that may destabilize it.  The U.S. Tsunami Warning System does not see this as a threat.

ZeroHedge reports, “For much of 2021, a vocal contingent of market bulls had claimed that there is no way the broader market could sell off as long as the gigacap tech “general” refused to drop. Well, it looks like that day is finally upon us because this morning US equity futures are sliding again, continuing their Monday drop as yields from the US to Germany again, the 10Y TSY rising as high as 1.55%, driven to an extent by Fed tapering fears but mostly by the surge in oil which has pushed Brent above $80, the highest price since late 2018. The dollar gained amid the deteriorating global supply crunch from oil to semiconductors.

The surge in oil sparked a new round of stagflation fears, sending Nasdaq futures down 240 points or 1.3% as the yield on the benchmark 10-year U.S. Treasury climbed sharply. S&P 500 and Dow Jones futures also retreated, with spoos sliding below 4,400 as to a session low of 4,390.”

VIX futures soared to 21.45 this morning, above the mid-Cycle resistance at 19.73 and the trendline just above 20.00.  This may be the beginning of a period of strength that may intensify through next week.  Another period of strength may develop during the week of October 18.

The NYSE Hi-Lo Index made a new high yesterday, as expected, but closed beneath the 50-da Moving Average at 77.46.  That appears to be the end of the retracement with new lows developing through October 15.

USD futures rose to 93.68, breaking out above the existing high in what may be a running correction.  This may lead to a recalibration of the Wave structure.

TNX resumed its climb as it continues toward its next Master cycle high due in mid-October.  This is starting to look ugly and may be the cause of a couple of Federal Reserve presidents resignations.

More resignations may come as the realization that the Fed does not control rates becomes apparent.  In addition, when will the dealer banks start to rebel as the Fed loosens the reverse repo spigots to accomodate the banks having to guarantee the purchase of unsold treasury paper?

ZeroHedge reports, “In the aftermath of the ugly 2Y auction at 1130am, moments ago the Treasury followed up with its second coupon auction of the day when it sold $61 billion in 5Y notes. And unlike the “gruesome” tailing 2Y sale, this time demand was far more solid.

Printing at a high yield of 0.990%, the auction stopped through the When Issued 0.994% by 0.4bps, even if it too was the highest yield since February 2020 and decidedly above last month’s 0.831% now that the Fed’s tapering is officially in play.

The Bid to Cover came in at 2.37, which unlike the near record plunge in the 2Y BTC was actually a modest improvement to last month’s 2.35, and also printed right on top of the six-auction average.

The Internals were soggier, with Indirects taking down just 54.3%, below the recent average of 59.8%, and the lowest since March 2020 when foreign buyers took down just 52.1%. And with Directs taking down 20.2% higher than the 17.1% recent average, Dealers were left holding 25.5%, or the most since February.”

NDX futures made a morning low of 14939.40 as it lost the 50-day Moving Average support at 15191.70.  While the NDX all-time high was made on September 7, five days later than the SPX, it may be playing catch-up in the decline.

ZeroHedge remarks, “Below is what ZH premium clients received yesterday as one of our TME thematic emails. On rates, tech and volatility. Don’t miss the next one, sign up here.

Was this the bounce?

Here we are with major index futs reversing from overnight highs. Both SPX and NASDAQ futs reversed right on short term resistance levels.

We would love to see how this behaves should we dip once more from here.

While Spoos is above the 50 day, NASDAQ is right on it…watch those yields moving higher again.

Rates matter…especially for tech. Then you have the power crunch in China to consider as well. Hard to produce all those iPhones if Beijing is tightening the energy consumption policy…”

The GSCI Ag Index has broken out above Intermediate-term (the higher) resistance at 413.39 and is clearly on a buy signal.   For those who want to be long in a short world, this is the place to be.  The Cycles Model indicates that this rally may last through mid-December.  Not only do we have drought in the Western States, but also snow in Argentina and frost in Brazil and flooding in Europe and China.  Can it get any worse?

ZeroHedge answers that question, “Millions of Britons could face a “national shortage” of turkeys, toys, and trees this Christmas due to a lack of skilled European employees following Brexit, according to the chair of a farming association.

The Road Haulage Association (RHA) last month said the UK is facing a shortage of around 100,000 HGV drivers, which along with Brexit, has been further exacerbated by people leaving the industry as well as the pandemic, which halted driver training and testing for nearly a year.

As a result, food supply chains have been drastically disrupted, leading to shortages across some UK supermarket shelves.

Kate Martin of the Traditional Farm Fresh Turkey Association (TFTA) told the PA news agency that Christmas could see a “national shortage” of turkeys on the UK’s supermarket shelves, driven by the declining supply of skilled European workers.”