June 9, 2021

2:59 pm

TNX swept past the 100-day Moving Average at 14.87, then bounced back for a retest.  There may be another probe lower before the retracement is over.   Today’s 10-year Treasury auction benefitted from this move.  How will those buyers feel when the yield goes to 2.00%?

ZeroHedge reports, “Having seen yields in the secondary market plunge to 3-month lows during the morning, Treasuries were sold ahead of the $38 billion reopening 10-year sale (backup to a When Issued yield of 1.507% – from 1.4705% intraday lows).  The Fed may have had a direct hand in lowering prices because they do not need pressure to raise rates in their repo facility…an accident waiting to happen?

Demand was stellar with the bid-to-cover (2.58x) surging to its highest since July 2020…

Source: Bloomberg

Today’s high yield was 1.497% (almost 20bps below the 1.684% at the last auction), trading through the WI yield by a very significant 1bps”

Zerohede further reports, “With usage of the Fed’s overnight reverse repo facility again hitting a new record high on Tuesday, rising to an all-time high of $497.4 billion…

… rates traders are trying to decide if the Fed will tweak the rate on either the IOER (Interest on Excess Reserves) or the Reverse Repo Facility, collectively the Fed’s “administered rates” in order to ease the liquidity congestion that has parked half a trillion dollars at the Fed where it is sitting inert, doing nothing.

One strategist who believes there is a “small chance” the Fed will adjust its IOER/RRP rate is Deutsche Bank’s Steven Zeng, who also cited concern about the quarter-end balance sheet squeeze, which is less than the futures market is currently pricing.”

 

10:15 am

This is very interesting.  The Cycle from the March 7 high to this morning’s high is exactly 21.5 market days , top-to-top, completing the daily Cycle.  Should this be the last of the retracement, this morning’s high also pinpoints the potential Master Cycle low (Wave 3 or (3) of Wave [1]) on June 25 in what may be a 12.9-market-day scorching decline.

Another surprise is that the NDX failed to make a new retracement high this morning after a 30-market-day Cycle completed.  Something is brewing…

 

7:20 am

Good Morning!

NDX futures are consolidating beneath yesterday’s high, within a range of 13804.38 to 13860.38.  It appears to be in an irregular correction that may require yet another probe higher.  A decline beneath the 50-day Moving Average at 13568.88 would negate that move higher.  However, NDX has yet another potential period of strength on Friday that may not be shared with the SPX.  That strikingly corresponds with a potential period of weakness in the TNX, which ends over the weekend.

ZeroHedge observes, “Several assets are working on the range break out, although in slow motion. US 10 year at 1.51% is a new “thing”. We have not seen yields close here or lower since early March. Note the 100 day slightly lower at the big 1.5% level.

Source; Refinitiv

With yields down, the obvious question is whether or not NASDAQ will start to catch more solid bids. Note the most recent short term divergence between yields and NASDAQ.”

 

The Shanghai Composite appears to be due for a Master Cycle high early next week as well,  which also corresponds closely with a possible high in the NDX and a potential low in the TNX.  Should it go higher, the target appears to be the Cycle Top resistance at 3655.15.

ZeroHedge reports, “Update 10:00pm ET: moments after reporting a red hot PPI which was the highest since Lehman, China effectively launched price controls, with China’s economic planning agency vowing to increase supply of key consumer goods to stabilize prices, according to a statement on NDRC website on a national video meeting Tuesday.

  • *CHINA VOWS TO CONTROL CORN, WHEAT, PORK PRICES AFTER PPI SURGE
  • *CHINA TO KEEP PRICES OF GOODS LINKED TO LIVELIHOOD STABLE: NDRC”

 

SPX futures are consolidating in a narrow range between 4222.62 and 4232.12.  The correction of the May 12 decline appears to be complete.  This Friday’s open interest in the options market shows net puts outpace calls at 4200.00 by 2800 contracts, while calls outpace puts at 4225.00 (by 2700 net calls) to 4250.00 with over 10,000 net call contracts.  Max pain lies in the 4200.00 to 4225.00 range.  All of this is in a period of strength that ends on the weekend.

ZeroHedge reports, “S&P futures traded in a narrow 8 point range near all-time highs as a lack of clear catalysts kept trading slow, with investors awaiting fresh cues from inflation data this week and an upcoming Federal Reserve meeting. 10Y TSY yields dropped below 1.50% for the first time since May 7 amid a plunge in odds that Biden’s reflationary infrastructure program will pass, and easing fears that tomorrow’s CPI print will smook markets. At 07:15 a.m. ET, S&P 500 E-minis were up 3.25 points, or 0.08%, Dow E-minis were down 37 points, or 0.1%, while Nasdaq 100 E-minis were up 40 points, or 0.29%. The dollar dropped against all of its G10 peers.

 

On Tuesday, U.S. stocks closed within a hair’s breadth of a record high and Treasuries rose as investors debated the impact of resurgent inflation on monetary policy. “Investors are likely to be in a wait-and-see mode,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management. “People will want to check how market expectations over the Fed’s policies change and how yields, whose upside has been capped recently, move following the U.S. CPI data.”

 

VIX futures appear to be consolidating in a range from 16.04 to 17.37.  VIX options expiring today have a Max Pain range from 16.00 (puts prevail) to 20.00 (calls prevail),  It is likely that the VIX may remain range-bound today.  Next Wednesday’s VIX options show the puts have it over the calls by over a million contracts spread between 15.00 and 22.00.  This is begging for an accident to happen.  At the very least, it suggests that at next week’s expiration on the VIX is likely to be near 22.00 or possibly higher, since the number of net calls is miniscule.

 

TNX made a morning low testing the 100-day Moving Average at 14.87 on day 253 of the Master Cycle.  Monday is day 258, which is likely to end the decline.  The only obvious target is the mid-Cycle support at 11.99.  However, treasury shorts are all in, so the risk of a short squeeze grows exponentially.

ZeroHedge comments, “With the recent JPMorgan Treasury Client Survey showing that self-reported Treasury net longs were at record lows (and by extension, shorts were all time high) understandably perhaps ahead of an inflation print that is expected to be among the highest on record, there were virtually no traders left to short Treasurys, with all bears already on board.

This meant that as a result of a massive position imbalance, the risk was for a raging short squeeze on even a whiff of deflationary news, and that’s precisely what we have seen in recent days, starting with last Friday’s disappointing payrolls report which sent 10Y yields lower by 8 bps, and continued with the collapsing odds that a Biden infrastructure plan will pass, amid a breakdown in GOP talks and opposition by centrists such as Manchin.

 

USD futures tested yesterday’s low at 89.84 in the morning session.  This is near the 61.8% Fib retracement level.  That may be the extent of the correction, since the Cycles Model shows a double dose of strength by Friday.

 

 

 

 

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June 8, 2021

11:10 am

BKX has broken its 8.6-month trendline near 135.00 and may be considered on a sell signal.  Intermediate-term support is at 130.40 and the 50-day Moving Average is at 127.66 for those seeking more confirmation.  BKX is the proxy for liquidity in the markets.  Declining liquidity suggest available money is moving into cash.

 

7:50 am

Good Morning!

NDX futures have made a morning high of 13874.38, exceeding the estimated target of 13841.00.  FOMO (fear of missing out) appears to be the driver of this rally as the NDX approaches 14000.00.  The Cycles Model suggests not.  The period of strength that was discussed yesterday may run out very quickly, as it appears to be a one day affair.  On the other hand, the Cycles Model shows increasing weakness leading into a Master Cycle low following options expiration.

ZeroHedge comments, “While stocks remain rangebound ahead of Thursday’s CPI print which according to Deutsche is “the most closely watched data release so far this year“, the real action remains below the surface where the continuation of last week’s big story in Equities is the acute underperformance of Longs relative to the Squeeze in Short Books led by the Retail “Meme,” SPAC and Bankruptcy plays. As Nomura’s Charlie McElligott shows, this appeared in risk-premium HF Crowding Factor which dropped -1.3% on the week, along with Size Factor (Large over Small) -1.3%, Growth Factor -1.6% and 1m Reversal -2.2%

Yet while the return of the short-squeeze is a closely watched if transitory phase, the big picture “renormalization reflation” narrative remains alive and well, with the 3 month Value inflow now surging to $44.5 billion (99.9%-ile since 2003) compared to a 3-month outflow from Growth stocks of -$20.8BN (2.7%-ile).”

 

SPX futures made an overnight high of 4234.62, potentially making a new retracement high, but not a new all-time high.  This topping process has been going on for two months with no resolution neither up nor down.  Interestingly, the gamma bear puts are building up at 4200.00 and 4150.00, where the  Broadening Wedge trendline may be triggered.  Most analysts view the shallow decline thus far as an indicator of a mild decline to follow.  There is no relationship that justifies that conclusion.

ZeroHedge reports,”US equity futures suffered a violent airpocket shortly after 6am, sliding 20 points in minutes after news that a Fastly outage had sent many media and government websites offline in a repeat of last year’s Cloudflare fiasco, pushing traders to buy safe assets, but then rebounded just as quickly rising to session highs even as the dollar and Treasuries also rose. Nasdaq 100 contracts rebounded. The 10-year yield fell back to 1.55% area with focus turning toward Thursday’s blistering CPI report that may offer clues on how far the Fed can postpone a tapering of stimulus.”

 

VIX futures spiked to 17.52 at 6:00 am on the news of the internet outage.  It has since settled back to a flat line from yesterday’s close.

 

TNX continues its decline, indicating a potential second (lower) Master Cycle low in Minor Wave 4.   The Cycles Model calls for a further decline through this week and early next, culminating in a potential Master Cycle low before a rally in strength emerges.  This may give some solace to the equity bulls, but it may turn out to be a trap for the unaware.

ZeroHedge comments, “A week ago, none other than Larry Fink poured an illiberal amount of cold water on the current inflationary narrative being spewed by Powell, Yellen, and their lackeys in academia.

The Blackrock CEO – who happens to manage more than The Fed at last check – countered soothing talk that soaring prices are here and gone tomorrow, and said that investors may be underestimating the potential for a spike in inflation.

“Most people haven’t had a forty-plus year career, and they’ve only seen declining inflation over the last 30-plus years. So this is going to be a pretty big shock”, Fink said, his warning falling on deaf ears.

Alas, unlike the Fed, Fink actually know what he is talking about: he began his career at First Boston Corp. in 1976, in during runaway US inflation, with the Consumer Price Index hitting a high of 14.8% in March 1980, and forcing Volcker to hike rates as high as 20%.

Treasury Secretary Yellen was quick to dismiss this fearmongering malarkey by claiming that while she may, possibly, kinda, sorta see higher prices, it will be transitory (because The Fed is awesome) and besides, America… it’s all good!

“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen said in an interview with Bloomberg. And yes, she really said that.”

 

 

USD futures appear to be consolidation beneath Intermediate-term resistance at 90.44.   This consolidation may end soon, as USD is in line for a double dose of strength by the weekend.  The short USD trade is crowded, so a liftoff may result in massive short covering.

 

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June 7, 2021

3:40 pm

The GSCI Ag Index appears to be in a correction that may take it down to the 50-day Moving Average at 423.70.  This may be a fake-out, as speculators are accumulating these shares.  The Master Cycle may have been on June 1 at day 256.  However, today is day 260 and a brief decline would fill the bullish pattern more appropriately.

ZeroHedge reports, “Reuters reports money managers boosted their net long position in Chicago Board of Trade (CBOT) corn futures and options last week after slumping to a five-month low. New weather models forecast hot and dry conditions in the Corn Belt to persist through mid-month.

The western half of the US is facing a megadrought while a heat wave last week swept across the West Coast to East Coast by the weekend.

ZeroHedge further comments, “California and Nevada are 100% in drought.

Direct from Drought.gov:

After two water years of dry conditions, both California and Nevada are now 100% in drought. And with dire drought conditions, rapidly decreasing snowpack, and low reservoir levels, concern for wildfire season is growing.

This is a dry spell not seen since the Great Depression and the Dust Bowl days. Because of the drought, Americans very likely will experience a shocking food shortage very soon.”

 

3:32 pm

NDX did make a new retracement high, but nowhere near its target limit of 13841.  The pattern appears complete, or nearly so.   Prepare for a 2-3 week decline.

 

7:15 am

Good Morning!

While NDX futures remained beneath Friday’s close for most of the weekend, it has not ventured down far enough to be considered bearish.  More recently this morning it has been recovering its losses and poses a probability of a new retracement high approaching 13841.00, should Wave [c] need completion.  The Cycles Model poses today as a day of potential strength before the equities fall into the abyss.

 

SPX futures likewise spent most of the weekend in negative territory but now is approaching breakeven.  Today’s proposed period of strength is a concern, as another probe higher may meet the Cycle Top resistance at 4247.20.

ZeroHedge reports, “US equity futures rebounded from a mild dip in the overnight session, rising back to just shy of all time high at 4,228 as of 7:45 am on Monday, shaking off Yellen’s Sunday comments that the US Tsy Secretary welcomes higher rates (i.e., inflation) which would be “good for the Fed and US society.”  World shares were range bound on Monday as markets digested Friday’s disappointing yet “Goldilock” jobs report and a global tax deal between the G7 group of countries, while also looking ahead to critical CPI data due Thursday. The dollar was steady while the 10-year rate added two basis points after Janet Yellen said on Sunday a slightly higher interest-rate environment would be “a plus” for society. WTI slipped after rising to $70 per barrel as short-term demand worries continued.”

 

VIX futures spiked to a weekend high of 17.32 before easing back, but remaining above the trendline.  Having made its Master Cycle low last Tuesday, it may be poised for a strong move higher in the immediate future.

 

USD futures are making new highs, topping at 90.63 over the weekend.  It appears to be on a buy signal and the Cycles Model suggests a gain in strength as the week progresses.

 

TNX may have a faulty data feed this morning.  While the chart shows it has risen to 15.81, the price indicator shows a decline to 16.23!  Today is day 251 of the Master Cycle.  While it is possible to make and new low, it is more likely that a new high may be made in the next week or so.

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June 4, 2021

7:45 am

A globally Synchronized Crash is looming

Wave 3 of Intermediate Wave (1) has just begun in the Shanghai Composite Index.  The minimum decline in Wave (1) appears to be point 6.  It may go lower.  China and the US have the two strongest markets, as you will see.  While it peaked on February 18th, it was able to hold off the decline until now.

ZeroHedge reports, “Good economic news is bad news for markets now.

A better-than-expected ADP jobs report sent the dollar and bond yields higher and stocks lower Thursday. A strong payroll report Friday would give more ammunition for folks calling for earlier QE tapering. In a sense, policy normalization has already started after the Fed announced plans to wind down its emergency corporate-credit facility. From that perspective, the peak of liquidity is near.

In China, the authorities are already mopping up the dollar liquidity awash in its domestic market. On Thursday, two Chinese policy banks, China Development Bank and the Export-Import Bank of China, announced selling of dollar notes in the onshore market, the first such sales in years. It followed a move Monday when the PBOC required lenders to hold more foreign currencies in reserve.

Both aim to reduce the dollar supply and ease pressure for yuan appreciation. As a result, one-year yuan swap points dropped to the lowest since January, reflecting higher dollar funding costs. The yuan rally has also stalled.”

 

The Nikkei 225 Index peaked on February 16, but try as it might, it could not recover.  An attempted Wave (5) on May 10 truncated in a failed rally that normally have made a new high.

 

SPX futures are dead in the water, waiting for the May employment survey.    The EW structure calls for another probe to 4215.00 to 4220.00 in a possible flat correction.  A Minute Wave [ii] may go as high as 4234.00, but no higher.  I will update this commentary as things develop.

ZeroHedge reports, “US stock index futures fluctuated listlessly in a narrow range on Friday as investors braced for a crucial report that is likely to show jobs growth accelerated last month, possibly fanning fears over inflation and easing of the Federal Reserve’s support. At 7:30am emini were down 11 points, or 0.03%, S&P 500 e-minis were up 3 points, or 0.08%, and Nasdaq 100 e-minis were up 22 points, or 0.16%. The meme mania was dormant this morning with reddit stocks all lower after peaking two days ago.  Treasuries were steady and the dollar rose modestly to fresh 3-week highs. Gold dropped and bitcoin slumped after a Elon Musk tweet trolled cryptos.”

8:40 am – A big miss…futures rally.

ZeroHedge reports, “With so much of the recent labor market discourse focusing on widespread shortages resulting from Uncle Sam’s generous unemployment benefits (15 million people still collecting some form of weekly unemployment benefit), today’s jobs report which is expected to show a substantial rebound from April’s big miss, was set to be defining: another big miss and the shortage narrative would dominate for a long time, a big beat would meanwhile spark renewed reflation worries.

Well, it appears that “shortages” won out in the end because moments ago the BLS reported that in April just 559K jobs were added, which while a big improvement to April’s upward revised 278K, was another big miss compared to the 674K expectations.”

 

TNX moved above the 50-day Moving Average at 16.24 on the jobs report.  The Cycles Model suggests a strong rally over the next two weeks or more.  It is now on a buy signal.

 

USD futures rose to 90.63, challenging Intermediate-term resistance at 90.51.  This triggers a buy signal.  The Cycles Model suggests a rally through the July 4 holiday.

 

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June 3, 2021

8:00 am

Good Morning!

SPX futures have tumbled o a low of 4171.88, challenging both Short-term support and mid-Cycle support at 4173.28.  This is the next level from which an aggressive sell signal is given.  The signal is finally confirmed beneath 4150.00, where the lower Broadening Wedge trendline lies.  Gamma may be turning negative this morning, forcing the dealers and hedge funds to sell/short the SPX.

ZeroHedge reports, “Futures were already looking a shaky when they took a hit lower after news that Russia would cut the dollar from its sovereign wealth fund, shifting to euros, yuan and gold instead in an attempt to reduce exposure to U.S. assets amid threats of sanctions.  . They then slumped even more on the perfectly predictable news that AMC would offer 11.55mm shares in an At The Market offering, with the Emini sliding 0.6% to 4,175 after trading around 4,210 for much of the overnight session. Nasdaq futures were hit even harder, dropping 1% even though the broader risk-off mood did not help TSY yields which rose modestly, while the dollar barely dipped from its upward trajectory even as Bitcoin rose again, approaching $40,000.

Despite the hit to AMC following news of the equity offering, the stock still remains green on the day after soaring 95% the previous day, and although we saw a tremendous meme stock rally, it is now fading fast.”

 

NDX futures are down a whopping 142 points to 13517.50, testing the 50-day Moving Average at 13514.86 as I write.  It has given an aggressive sell signal by declining beneath its mid-Cycle support at 13645.70.  The signal is confirmed beneath the 50-day.

 

VIX futures rose to a high of 19.27, surpassing the 50-day Moving Average at 18.77 this morning.  There may be a retest of the 50-day before moving higher.  However, the urge to “buy protection” in the VIX may make a retest short-lived.

 

TNX is testing Intermediate-term resistance at 16.07 this morning with the 50-day Moving Average at 16.25.  Once above those levels, TNX may rise to 19.71, the next level of resistance.

 

USD futures rose to a n overnight high of 90.25 as it is poised for a potential breakout above Intermediate-term resistance at 90.55.  An aggressive buy signal is confirmed above that level.

ZeroHedge reports, “he number of Americans filing for first time jobless benefits fell to 385k last week – the lowest since the start of the government-policy-driven lockdowns last year (below 400k for the first time since March 2020)…

Source: Bloomberg

Pennsylvania, Illinois, and California saw the biggest jumps in initial claims while Texas, Florida, and Oregon saw the biggest drops…

 

 

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June 2, 2021

7:10 am

Good Morning!

The S&P GSCI Ag Index is climbing higher after touching its Head & Shoulders neckline at the 61.8% retracement level last week.  The Cycles Model suggests that this uptrend may last until mid-July and that the Head & Shoulders target may be an understatement.  This Cycle is based on real supply and demand, not liquidity-induced mania.  However, the mania will come in spades to anything related to food.

ZeroHedge reports, “We’ve documented (read here & here) this spring of a “megadrought” sweeping through the western half of the country and could be one of the worst in decades. This is troubling news because major water reservoirs have already dropped to dangerously low levels, cutting off access to farmers.

The latest US Drought Monitor map shows nearly the entire western half of the nation is experiencing some level of drought at this moment. Parts of the Southwest could be undergoing their second Dust Bowl as conditions continue to deteriorate. ”

You can see that the entire upper Midwest, including Michigan, is being affected.  Farmers and ranchers are culling their herds for lack of feedstock.  That is why (at least in the Midwest) meat prices have been low.  Not any more.  A highly suspicious cyber attack on the largest meat processor in the world may cut off supply and raise prices dramatically.

ZeroHedge informs us, “Update (2002 ET): The USDA has released an important update about the Biden administration’s steps to mitigate potential supply constraints and price surges following JBS’ ransomware attack.

As noted earlier today by the White House, USDA is aware of the ransomware attack against JBS, which is affecting the company’s operations, including its facilities in the United States. USDA continues to work closely with the White House, Department of Homeland Security, JBS USA and others to monitor this situation closely and offer help and assistance to mitigate any potential supply or price issues. As part of that effort, USDA has reached out to several major meat processors in the United States to ensure they are aware of the situation, encouraging them to accommodate additional capacity where possible, and to stress the importance of keeping supply moving.

USDA has also been in contact with several food, agriculture and retail organizations to underscore the importance of maintaining close communication and working together to ensure a stable, plentiful food supply. USDA will continue to encourage food and agriculture companies with operations in the United States to take necessary steps to protect their IT and supply chain infrastructure so that it is more durable, distributed and better able to withstand modern challenges, including cybersecurity threats and disruptions.”

 

SPX futures are hugging round number support this morning as dealers are loath to see it decline any further due to a large negative gamma strike due on Friday at 4200.00.  Weekly options expirations are now being utilized due to crowding at the monthly expirations on the third Friday of every month.

ZeroHedge reports, “One day after a concurrent ramp (then reversal) in stocks and the VIX prompted some confusion on trading desks, on Wednesday e-mini futs were stuck at the 4200 gamma pin…

… while European stocks rose and Asian markets fell as the tussle between economic optimism and inflation concern continues to play out in markets. Bitcoin and the dollar ticked up, oil and treasuries were mostly flat.”

 

NDX futures are likewise hugging the mid-Cycle support/resistance at 13652.00, another level where options sentiment change from positive to negative.

ZeroHedge notes, “Major indexes have continued to trade inside their respective ranges for the past months. We have seen a few “shake outs”, but markets have reverted back to the range, frustrating momentum chasers.

Interesting to note is that several of more risky assets have decided to move sharply higher over past sessions. We have seen notable squeezes in EEM, EWZ, CQQQ. These are all “exotic” risks and show a lot of the risk willingness among investors, especially as SPX remains rather dull here (our most recent logic on EEM here, Brazil here and Asian tech here).”

 

VIX futures are also consolidating beneath the 50-day Moving Average at 18.85.  Yesterday may have been the Master Cycle low at 15.68 precisely on day 258.  To see a trendline break such as this after the end of a trend is highly unusual.  The short vol trade is obviously involved, but this also reeks of Fed and big bank meddling.  The question of the day is, will the VIX stay beneath the 50-day until weekly expiration?

 

USD futures consolidated near their Master Cycle low overnight.  The shorts have had a field day, so the trade has become very crowded.  The Cycles Model suggests a rally into early July with strength beginning to build next week.

 

TNX appears to be consolidating between 15.99 and 16.22 this morning.  The 50-day Moving Average is at 16.26, at which point TNX offers a buy signal.  The current Master Cycle extends through mid-June and possibly through options expiration on June 16.  The current target is 19.71 for Primary Wave [3].  However, Primary Wave [5] may extend to 32.48, the high last seen in October 2018.

ZeroHedge observes, “As we approach the second half of 2021, many countries around the world are beginning to relax their COVID-19 restrictions.

And while this signals a return to normalcy for much of the global economy, Visual Capitalist’s Marcus Lu notes that there’s one subject that’s likely to remain controversial: government debt.

To see how each country is faring in the aftermath of an unprecedented global borrowing spree, this graphic from HowMuch.net visualizes debt-to-GDP ratios using April 2021 data from the International Monetary Fund (IMF).

 

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June 1, 2021

10:55 am

After rising within 4 points of its all-time high, SPX had a mini-flash crash, erasing all its gains.  This was expected and may be used as an aggressive sell signal.  The first confirmation of the sell signal comes beneath mid-Cycle support at 4171.56.

VIX rallied to 18.40 but has not crossed the 50-day Moving Average at 18.86, as yet.  NDX has the largest losses and is leading the decline, as anticipated.

ZeroHedge reports, “…the most liquid stock market in the world?

Just prior to the open, VIX did another of its now infamous mini-flash-crashes (no that’s not a fat finger)…

And while stocks were higher from Friday’s close, they puked shortly after the better than expected Manufacturing survey data signaled stagflation. Nasdaq is leading the drop but all the majors are tumbling…

Bear in mind that SpotGamma warns that gamma may flip around the 4200.. exacerbating any drop from there…

Get back to work Mr.Powell (even if you are cornered).”

 

 

7:55 am

Good Morning!

NDX futures rose to 13755.88 this morning, suggesting a possible extension of Wave [c] of 2.   The Cycles Model showed strength over the weekend which should wind down after the open.  The Elliott Wave structure shows it to be minimally complete, so the NDX may go either way.  Wave [c] will have completed 8.6 days by mid-morning.

 

SPX futures made a new retracement high this morning at 4228.12 this morning, extending Wave [c] of 2.  The May 7 high remains as the all-time high.

ZeroHedge reports, “It turns out that Monday’s dip in futures was a low-volume headfake, and on Tuesday global markets hit a new record high as U.S. equity futures jumped, with spoos also approaching all time highs after markets shrugged off concerns about rising inflation and looked ahead to U.S. employment data later in the week. Brent rose above $70 to the highest since October 2018 as OPEC+ forecast a tightening global market before members meet to discuss production output today. At 715am, Emini futs were 4,226 up 24 points ot 0.58%; Dow futs were up 212 to 0.61% while Nasdaq futs rose 52 pts, up 0.38%.”

 

 

VIX futures rose above the trendlines yesterday to a weekend high of 17.24 and appear to maintain their elevation a I write this commentary.  This may be the first sign that something may be afoot.

 

TNX is challenging the 50-day Moving Average at 16.30 this morning.  Today is day 257 of the current Master Cycle.  The correction appears to be complete at 61.8%.  This leave the possibility of an extension higher, especially since the Model shows strength this coming week.

 

USD futures made a weekend low of 89.86, suggesting that the rally out of the Master Cycle low is correcting.  Futures may linger near the lows this week, as trending strength does not appear until next week.

ZeroHedge reports, ”

The Market Ear Picture

Source: Haver Analytics

Over the week ending May 25, non-commercial traders net sold $1.4bn USD, increasing their net short Dollar positions for the sixth consecutive week.”
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May 28, 2021

3:10 pm

SPX may have made its final probe to 4218.36, slightly higher than the EW minimum target.  The SPX can go down now.  A certain fly in the ointment suggests that the final probe may only be partially complete, with a final target of 4222.00…which would give the perfect fake-out going into the close before the holiday.  In addition, the VIX is trading near its bottom at 15.90, suggesting the powers that be are milking indicator this for all it’s worth.  At the very minimum, this is no time to be long.  In fact, an aggressive short position may be warranted!

ZeroHedge observes, “The recent surge in retail trading, which has seen the WallStreetBets army flood back into meme stocks for the second time since the epic February short squeeze sending names like AMC and GME soaring even as other high risk-reward corners of the market have remained stagnant…

… may prove to be – in the Fed’s favorite parlance – “transitory.”

The reason fort his is that unlike the first quarter when we saw a record flood of new capital entering equity funds and validating the retail buying

… this time the flow of funds is in the opposite direction.

According to BofA’s latest Flows Show, this week’s EPFR data revealed a broad defensive retrenchment, culminating with the largest inflow to cash since Apr’20 & largest inflow to gold in 16 weeks ($2.6bn); and while broad inflows to equities continue ($512bn YTD) & largest inflow to Europe since Feb’18 ($2.8bn); we just experienced the largest 3-week outflow from tech since Mar’19 ($1.5bn) as well as the largest outflow from banks since Jun’20 ($0.6bn).”

 

7:00 am

Good Morning!

SPX futures made a new high at 4217.50 after 10:00 pm last night.  Since then the futures have been hovering near that level.  Wave (v) of [c] of 2 is still incomplete and a  move to 4220.00 would satisfy the shortage.  The Cycles Model infers that the May 7 high may be the top, while the Elliott Wave (looser) guidelines allow a move from 4217.00 to 4244.00.  Today may be the last day of a positive seasonal rebound from an early May low, according to the Stock Trader’s Almanac.  It is also day 431 from the March 23, 2020 low.  The Master Cycle low bottomed on May 12.  The only way the Master cycle gets extended is with a new all-time high, which is not favored here.

ZeroHedge reports, “S&P futures rose on Friday after solid economic data and Joe Biden’s leaked $6 trillion federal budget plans spurred a Wall Street rally in cyclical shares ahead of a closely watched inflation report offsetting recent worries about a spike in prices put the S&P 500 on course for its smallest monthly gain since February. At 7:15 a.m. ET, Dow e-minis were up 177 points, or 0.5%, S&P 500 e-minis were up 16 points, or 0.38%, and Nasdaq 100 e-minis were up 48 points, or 0.35%. Treasuries were steady and the dollar strengthened. Markets will be shut on Monday for Memorial Day holiday”

 

NDX futures made an overnight high of 13725.75 and may also be missing a final probe higher.  This could be complete in the first hour of the day, which is generally positive.

ZeroHedge observes, “By now everyone has seen some iteration of this chart (most recently discussed here), which shows that whereas stocks are generally flat over longer periods of time during the regular “cash”, or day session, they tend to melt up during the overnight hours when liquidity is far lower and when the “pajama trades” come out and play.

And while there is no single, widely accepted reason for this “overnight drift”, the post-closed meltup phenomenon has been one of the most popular and recurring strategies in equity markets, with many traders selling spoos when the day session begins and then re-buying at the market close in pursuit of scarce alpha.”

 

VIX futures have been running flat all night and appear poised for a takeoff.

 

 

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May 27, 2021

1:53 pm

TNX has risen above Intermediate-term support at 16.05 and has challenged the 50-day Moving Average at 16.24.  A rally above the 50-day gives TNX its buy signal.  The 7-year Note auction did well today.  The 10-ear Note auction is held on June 9.  There is  about 1 week left in the current Master Cycle, unless extended.

ZeroHedge reports, “What a difference three months makes: on this day in February, a catastrophic 7Y auction was this close to failing, and sparked a violent market selloff first in bonds, and then in stocks, leading to a flood of fears that the Fed had lost control over inflation. Fast forward to today, when moments ago we get the final of the week’s coupon auction results when the Treasury sold $62BN in 7 year paper in what can be best described as a stellar auction.

The high yield of 1.285% was below last month’s 1.306 and the lowest since February; it also stopped through the When Issued 1.291% by 0.6bps, the first stop through since January.

The bid-to-cover of 2.412 was impressive, rising from 2.314 last month, and not only well above the 6-auction average of 2.264 but also the highest since September.

The internals were also solid, with Indirects taking down 59.6%, the highest since January. And with Directs taking down 20.7%, or just above April’s 20.6%, Dealers were left holding 19.7%, the lowest since January.

Overall, this was easily the strongest 7Y auction of 2021, and a far, far cry from the dismal February 7Y auction which sparked so much turmoil in the market.”

 

10:15 am

The GSCI Ag Index has started higher this morning after completing a 61.8% retracement of its most recent rally.  It has also retested the neckline of the Head & Shoulders formation which may activate the pattern.

 

9:55 am

The VIX ix pressing on the merging trendlines of the Ending Diagonal formation and the open gap left on February 19, 2020 at 17.08.  Should the Master Cycle extend to a new low, today would be day 253.  The Cycles Model also suggests that VIX may go higher today, as well.

10:20 am 

Addendum:  VIX has made a lower low, extending the Master Cycle to today in all probability.

ZeroHedge observes, “We have seen extreme moves in VIX over past weeks. On April 14, in our note, Time to hedge – VIX guy is back, we outlined our long VIX logic. We wrote;

“The recent move higher in SPX has resulted in an epic vol reset with VIX trading at post corona levels, currently around 16.5.

Vol is not dirt cheap given the low realized vol environment, but there are risks to consider going forward.”

Our biggest VIX contra indicator, the VIX guy, timed that call perfectly again and we saw VIX go from 16.5 to recent highs at 29. We are now back to hoovering around 17.5 as people once again realize they bought way too expensive protection in panic, confusing direction with pace once again.”

 

8:00 am

Good Morning!

I am expecting may 9 year-old grandson to arrive any minute for a short stay, so I may be distracted.  I’ll do my best for the blog.

NDX futures declined through mid-Cycle support at 13665.00 and bounced, but resistance seems to be holding.  Should this decline continue, the loss of mid-Cycle support may be considered an aggressive sell signal.  The 50-day Moving Average is not far below, at 13466.54 gives us a confirmed sell signal.  Today is a critical day, Cycles-wise, the 430th day from the March 23, 2020 low.

ZeroHedge observes, “While tomorrow’s data calendar is chock full of closely-watched data, including the latest Initial and Continuing Claims, the second revision to the Q1 GDP print, and most importantly the Fed’s favorite inflation indicator, the core PCE, it’s debatable that any of these will have much of a market impact especially now that the market appears confident that the peak inflation impulse is behind us and the Fed is unlikely to unveil tapering at Jackson Hole.

However, one thing which could have a dramatic impact on tomorrow’s market is the massive rebalancing of BlackRock’s Momentum Factor (ticker MTUM) ETF, in which the $16 billion exchange-traded fund is set to see an “astounding” 68% of its portfolio holdings change in favor of value shares over tech as it chases the hottest trends on Wall Street.”

 

SPX futures have made a shallow decline and are still hovering above the mid-Cycle support at 4166.65.  Short-term support is just beneath at 4157.01.  A decline beneath those supports gives us an aggressive sell signal with confirmation beneath the trendline at 4150.00.  These points also correspond with the change in gamma from positive to negative.

ZeroHedge reports, “U.S. stock index futures ticked lower ahead of an economic data dump that will reveal the latest durable goods, cap goods orders, jobless claims, GDP, PCE, and Personal Consumption data, amid fears that signs of an improving economy would lead the Federal Reserve to start tapering following comments on Wednesday that the Fed’s Quarles is open to talk about adjusting the Fed’s bond purchases. At 7:15 a.m. ET, Dow e-minis were up 3points, or 0.01%, and S&P 500 e-minis were down 6.50 points, or 0.16%. Nasdaq 100 e-minis were down 45.5 points, or 0.33%, as tech giants Apple, Amazon.and Tesla slipped between 0.2% and 0.7%.”

 

VIX futures are actually positive this morning after making an overnight low at 17.27.  The key move today is breaking the 50-day Moving Average at 19.00 for a buy signal.  The Master Cycle low may have been made on Tuesday (day 251), but we will need confirmation such as mentioned above.

 

TNX futures gapped higher out of its retracement low yesterday.  As mentioned yesterday, TNX is getting a triple dose of strength through the next week.

 

USD futures made an overnight low at 89.86.  Tuesday’s low (day 266) was not broken, giving us some evidence that the low may be finally in.  The USD appears to have six weeks of rally ahead.  The Broadening Wedge trendline appears to be the target for this rally which may be fueled by short-sellers covering.

 

 

 

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May 26, 2021

3:15 pm

Just another day left of this nonsense?  I am constantly analyzing the Cycles to see what compels the market to do what it does.  The Monthly Cycle strongly suggests that May 7 was the high for this trend.  Here’s another bit of information.  Tomorrow is day 430 from the March 23, 2020 low in the Daily Cycles.

NorthmanTrader may agree with my analysis from another direction.  He maintains that the uptrend (trendline) from March 23 was broken last week (see the chart).  The SPX is now trading beneath the trendline while still appearing positive because the decline was so shallow.  Very subtle but dangerous.

This supports the notion that the bounce may not reach a new (all-time) high…

The VIX Cycles Model also supports this as strength comes roaring back starting tomorrow.

 

7:50 am

Good Morning!

SPX futures rallied to 4204.12 in the overnight session, leaving the probability of yet another probe higher.  Should it go higher, the two possibilities are that it may rise to the 2-hour Cycle top at 4231.25, leaving the May 7 high, or it may go marginally higher, possibly to 4244.00.  The squeezing trading bands foretell a very powerful move down once that is accomplished.

ZeroHedge reports, “US equity futures rose on Wednesday, rebounding from a modest dip  the day before as more central-bank officials joined the chorus predicting that inflationary pressures are transitory, while a recent dip in bond yields supported Nasdaq futures climb for a third straight session. At 7:15 a.m. ET, Dow e-minis were up 82 points, or 0.24%, S&P 500 e-minis were up 14 points, or 0.33%, and Nasdaq 100 e-minis were up 51.25 points, or 0.38%. Treasuries and the dollar were roughly flat, recovering from an earlier drop. BItcoin soared back over $40,000, rising as much as 8.6%, before paring gains.”

 

VIX futures stayed within a narrow range just beneath the 50-day Moving Average at 19.06.    Yesterday may have been a Master Cycle low on day 251 of the current Cycle.  I originally anticipated that the Master Cycle would be a high (and it still may be) because of a potential triple dose of strength due by this weekend.  If correct, we may see the VIX break above its Head & Shoulders formation by the weekend.

There have been a lot of cross-currents that have been giving possibly fake signals.  In addition, the Memorial Day weekend is usually considered to be positive season, according to the Stock Trader’s Almanac.

 

NDX futures rose to 13727.62ion the overnight session, leaving the door open to a new high.  Should Wave C not be complete, there is a limit to Wave [v] may be 13944.00, since Wave [iii] cannot be the smallest.  The recent action is potentially misleading analysts about the future outcome of the market.

ZeroHedge observes, “Ask around on Wall Street (or any street) what the biggest bogeyman to capital markets is and 11 times out of 10 the answer will be “the taper“, even though the fact that everyone is fully aware of the risks from the Fed’s looming announcement, also means that it is more than fully priced in.

Which is why, in light of the fact that the market’s true biggest risk is runaway, out-of-control, inflation, we previously suggested that far from being a crash catalyst, the taper may well end up being a trigger for further market gains especially since it would mean that the unprecedented flood of liquidity in the market which has sent the Fed’s reverse repo facility to near record levels

… as banks simply no longer have a place where to store all the Fed’s reserves, will finally ease.

 

TNX has made a 50% retracement thus far.  It may decline to 15.27 and a 62% retracement as it appears the pattern is still incomplete.  Today is day 251 o the Master Cycle and it appears that it may have another two weeks to its new high with strength beginning next week.

 

 

 

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