April 5, 2021

8:20 am

Good Morning!

SPX futures rose to an all-time high of 4033.88 this morning, just ticks shy of the long-term target of 4034.00 (see the Friday report).  Today is day 280 of the Master Cycle and the fruit is rotting on the tree.

ZeroHedge reports, “S&P futures surged and most Asian stocks climbed (Europe remains closed for Easter holiday) as investors digested Friday’s unexpectedly strong jobs report which showed the strongest jobs growth in seven months and could mark the beginning of the best annual economic growth in nearly four decades. Bond yields rose modestly after Friday’s spike, while the dollar and gold were both unchanged.

At 730am, Dow E-minis were up 226 points, or 0.68%, S&P 500 E-minis were up 23 points, or 0.57% and Nasdaq 100 E-minis were up 59.75 points, or 0.45%.”

 

The Industrials made their (all-time) high at 33259.00 on March 19 thus far.  This morning the DJIA futures high was 33292.50, so it is possible that the all-time high may be this morning.  Wave [5] equals Wave [1] times Pi at 33255.82.  Perhaps this morning both time and target will be confirmed.

RealInvestmentAdvice comments, “n retail investing, do the “blind lead the blind?” Such was a question I asked recently about young investors who are “Long Confidence And Short Experience.” However, a recent survey by MagnifyMoney dug much deeper into the subject.

Our previous article’s gist is that throughout history, markets have a way of separating investors from their money. Such is the reason every great investor in history has one rule in common: “Don’t lose money.” The reason, of course, is that if you lose your capital, you are “out of the game.”

As I noted, the market’s current speculative behavior is not uncommon throughout history.

“Bubbles are characterized by extreme predictions, tend to dominate conversations and induce people to leave their jobs. The warnings of bubble skeptics get invariably met with scorn and derision.” – William Bernstein

Today, more individuals are searching “google” for how to “trade stocks” than at any point in history. (If data was available back to 1999, I am sure it would be similar.)”

 

VIX made its Master cycle low on April 1 at 17.29.  This morning VIX futures rose as high at 18.14 before pulling back.  In other words, VIX is not confirming the new highs in the SPX and DJIA.

 

TNX rose this morning, threatening a new breakout.  There is much debate regarding which level the TNX will affect the equities market.  The Cycles Model suggests that TNX may keep rising through options expiration.  The target appears to be 19.71, which may appear to be a threat to equities.

 

 

 

 

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April 2, 2021

9:55 am

The futures data feed was turned off at 9:14:48 am.  The cash market data feed has not been turned on due to Good Friday.  The 10-Year Treasury yield futures continues to rise to 17.23 at this time.

I would not be surprised to see the market open lower on Monday.

8:20 am

SPX futures reached an all-time high of 4037.62 (at 8:50 am) this morning as we wait for the March payroll report.

ZeroHedge reports, “While US cash markets are closed for Good Friday today, S&P futures continued their Thursday ramp higher, and after rising above 4,000 for the first time yesterday were last trading at 4,022, up 0.3%, ahead of the March payrolls data (preview here) expected to show the biggest increase in jobs in five months (and potentially much more). While cash bonds are open, most other markets were also closed for Good Friday.

As previewed yesterday, if it is a big outlier, the jobs report will likely roil the bond market as trading volumes will be extreme thin during today’s holiday-shortened session and all trades will be focused in rates as Treasuries will be the only asset open (until noon) while the New York Stock Exchange is closed today.”

 

VIX futures data feed has not been activated this morning.  The gap from   February 21, 2020 closes  completely at 17.08.  The daily Cycle Bottom is at 16.94.  The EW structure allows that both targets may be hit.  At the same time, the Master Cycle is stretched beyond the normal range of 241-258-275 days at 293 days!

 

TNX futures have risen to 16.98 after the jobs report.  The data feed to StockCharts apparently has not been turned on.

ZeroHedge reports, “It wasn’t quite the whisper number of 1 million jobs, but it was close: moments ago the BLS reported ago that in March the US added a total of 916K jobs, smashing expectations of 660K, nearly triple the original February print of 379K and was the strongest payrolls report since last August.

Developing”

 

Talk about being stretched!  SPX is in a throw-over position above the 1987 trendline and met the 2.618 Fibonacci Wave Relationship this morning.  Mission accomplished.

 

Here’s another Wave relationship that explains why the DJIA has not reached a new high this morning.  It already accomplished this feat on March 29.

 

 

 

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April 1, 2021

8:00 am

Good Morning!

SPX futures advanced to a high of 3984.12 this morning, equivalent to 3996.00 cash.   On a sub-minute scale, Wave (v) needed one more probe higher to complete the pattern.   4000.00, anyone?  Today is day 276 in the current Master Cycle and it is ripe for a turn.

ZeroHedge reports, “Now that the quarter-end rebalance malarkey is behind us, it’s full steam ahead into the new quarter and S&P futures hit a new all time high overnight rising as high as 3,984 before stabilizing up 0.3%, breaching Wednesday’s best levels as signs of faster job creation in the US fueled optimism about the global recovery (although all that will change tomorrow if the NFP whisper of 1.8MM jobs is remotely accurate). Oil climbed above $60 per barrel before a meeting of OPEC+ on extending production cuts.

At 7:30 a.m. ET, Dow E-minis were up 12 points, or 0.04%, S&P 500 E-minis were up 12 points, or 0.30%. Nasdaq futures rose as much as 1.1%, as “high flying” FAAMG stocks added between 0.6% and 1.1% after underperforming last month on concerns over elevated valuations.”

 

VIX futures made a new low at 17.97 this morning.  It appears to be filling the gap left on February 21, 2020when the VIX rocketed higher at the open.  Depending on how it is measured, the gap closes between 17.08 and 18.21.  The Cycle Bottom support is at 17.06, so it is feasible that it may touch bottom before a reversal.  However, the uncommonly long Master Cycle is building pressure for a reversal.

 

NDX futures probed to 13242.00 in what appears to be the final completion of the EW pattern.  This completes nearly a month long sideways consolidation.  Apparently the NDX has become a bargain again as investors sell value and rotate back into tech stocks.

ZeroHedge proclaims, “Despite some of its questionable holdings, which we outlined days ago, the ARK Invest Space Exploration ETF saw more than $294 million of shares change hands during its debut on Tuesday. Bloomberg’s Eric Balchunas reported:”

 

TNX has pulled back under 17.00 in a Trading Cycle low that may last until early next week.  UST shows Cyclical strength through Tuesday, so the underlying supports may be tested.  However, TNX appears to have another four weeks to its Master Cycle high.

 

USD futures appear to be consolidating inside yesterday’s trading range.  Two weeks remain in the current Master Cycle and its target appears to be either the Cycle Top resistance at 95.59 or the Broadening wedge trendline at 96.00.

 

 

 

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March 31, 2021

2:32 pm

SPX tested the upper trendline of its trading Channel shortly after 1:30 pm.  While it may retest it by the end of the day, the Cycles Model infers that this may be the top at 275 days.  Investors may be noticing the mere 1.1% gain in the last 45 days with rising volatility and lower liquidity.  There are likely to be some skeletons still hidden in the Archegos failure.  In addition, massive tax hikes are being proposed by the Biden administration that are taking some of the excitement out of investing.

Look for a cross beneath Short-term support at 3936.89 for an aggressive short signal.  Oddly enough, the DJIA did not make a new high today.

 

12:28 pm

TNX has pulled back since this morning.  However, it appears poised for a surge higher by the end of the week.

ZeroHedge remarks, “On the last day of Q1, the quarter seems to be ending very much how it began, with Treasury yields rising to fresh highs as investors await the announcement of further spending proposals in President Biden’s infrastructure package while buying stocks first (the S&P just hit a new all time high) and asking questions later.

Indeed, as DB’s Henry Allen writes, the rise in 10yr Treasury yields in Q1 so far had reached a massive +82.7bps (0.797bps at the time of writing), which puts them just shy of the 21st century’s other quarterly records back in Q4 2016 (+85bps) when President Trump won the presidential election, and Q2 2009 (+87bps) as the global economy was climbing out of the financial crisis. Of note: even the 2013 taper tantrum was a far more modest, and slow move compared to what we have seen now.

And while everyone is waiting for Biden to reveal further details from his infrastructure package on Wednesday, should today’s Biden speech spark a further climb in yields, that could then leave this as the biggest quarterly rise going all the way back to the Great Bond Massacre of Q1 1994, when yields blew out +94.4bps.”

 

10:05 am

NDX shot up to test its mid-Cycle resistance at 13081.33, while stomping the VIX down to 18.90.  This is the strongest surge of all the stock indices.  None have made new highs.  Note the bearish cross of the mid-Cycle with the 50-day Moving Average.  Big money is ramping the indices (especially the NDX) to:  1.  See if new highs may be made.  And 2.   Raise FOMO sentiment among the retail investors.

10:15 am  The Dow has gone negative…

12:15 pm  NDX is now at the 50-day Moving Average and appears to be overbought with Slow Stochastics at 99.7.  The DJIA remains at breakeven.

ZeroHedge proclaims, “Well that just happened… Buy Mortimer, buy!

The Dow, S&P, Russell 2000 all spiked dramatically at the US cash open (Nasdaq did not initially then decided to join the momo party because, well, someone must know something right?)

So much for the massive JPM-predicted forced month-end selling!?

No move in bonds or the dollar at all, but gold did pop a little…”

 

8:00 am

Good Morning!

SPX futures are flat this morning It appears that the effort to preserve the market gains until the end of the quarter may be successful.  However, the inability to make new highs tells us that there may be no more fuel in the tank.  today may be the last day for an all-out effort to make a new high.  However, should this Wave structure be correct, a decline, the magnitude of which hasn’t been seen before, may commence.  The first major low, according to the Cycles Model may be at options expiration, or shortly thereafter.

The DJIA also failed to make new highs, suggesting that the indices may now be in sync.

ZeroHedge observes, “US index futures were little changed and global stocks treaded water on Wednesday as Treasury yields resumed their upward march ahead of Joe Biden’s Pittsburgh event where he will announce a $2.25 trillion dollar plan – one which the administration says will be the most sweeping since investments in the 1960s space program and 1950s interstate-highway system – to rebuild America’s infrastructure, with traders weighing the inflation and tax impact of the stimulus.

At 07:30 a.m. ET, Dow E-minis were down 27 points, or 0.06%, and S&P 500 E-minis were up 3.5 points, or 0.09%.

Nasdaq 100 E-minis were up 75 points, or 0.56%, as Apple Inc rose 1.6% after UBS upgraded the stock to Buy on stable long-term demand for iPhones with better authorized service providers.”

 

NDX futures rose to a high of 12975.75, short of Monday’s retracement high at 13013.50.  The Cup with Handle formation is still operative and may be triggered with a decline beneath the Lip just beneath 12700.00.   There is some indication that the bloodletting may not be over.

ZeroHedge reported yesterday, “Unlike the devastating London Whale debacle in 2012, which was all JPMorgan eventually drawn and quartered quite theatrically before Congress (and was a clear explanation of how banks used Fed reserves to manipulate markets, something most market participants had no idea was possible), this time JPMorgan was nowhere to be found in the aftermath of the historic margin call that destroyed hedge fund Archegos. Which is may explain why JPMorgan bank analyst Kian Abouhossein admits he is quite “puzzled” by the recent fallout from the Archegos implosion (or maybe JPM simply was not a Prime Broker of the notorious Tiger cub), which however does not prevent him from trying to calculate the capital at risk from the Archegos collapse.

In a note published this morning, Kian writes after Nomura yesterday confirmed (at least) a $2Nn potential claim and fellow Japanese bank Mitsubishi UFJ Securities Holdings announcing today of another potential $300MM loss – which as the JPM strategist admits “for a likely non-material PB player is surprising to us” – JPMorgan now expects losses well beyond normal unwinding scenario for the industry: and explains that it now sees “the losses as very material in relation to lending exposure for a business that is mark-to-market and holds liquid collateral” and makes Nomura’s indication of potentially losing $2bn and press speculation of CSG $3-4bn losses “as not an unlikely outcome” according to the JPM strategist.

So why is JPM surprised?

Because as Abouhossein writes, in normal circumstances… we would have suspected industry losses of $2.5-5bn. We now suspect losses in the range of $5-10bn.” In other words, JPM has doubled its max loss estimate to as much as $10BN, a number which could yet rise.”

 

VIX futures took another dip to an overnight low of 19.12.   This may be due to the effort by the powers-that-be to maintain the SPX at or near its quarterly high.  The new Master Cycle may be due to end at the end of April at a high.

 

TNX appears to be pulling back from its new high.   However, it may be brief, due to the oncoming Master cycle high in the latter part of April.  The target appears to be the November 2019 high at 19.71.  The Treasury Department announced that it will ramp up offerings/auctions in April to $170 billion.

 

USD futures pulled back after their breakout above the 200-day Moving Average.  The pause in the rally may be brief, as USD is due for a Cycle high at the end of April.

Investing reports, “Stronger than expected economic reports drove the U.S. dollar higher against all of the major currencies. There’s no question that of the G3 currencies (USD, EUR and JPY), the U.S. is leading the recovery, and data is beginning to show the benefits of a smooth coronavirus vaccine rollout. Seventy percent of Americans 65 or older have received at least one COVID-19 vaccine dose, with more than a third of the overall adult population receiving their first jab. Businesses are reopening and economic activity is accelerating. As a result, jobless claims fell to 684,000, its lowest level in more than a year. Fourth quarter GDP growth was also revised up to 4.3% from 4.1%. The U.S. economy is still a long way from normal, but the numbers show that it is moving in the right direction. With more Americans getting vaccinated every day, further improvements are likely. Personal income and spending numbers are due for release tomorrow.”

 

Gold futures bounced off the Broadening Wedge trendline this morning.  The bounce may go as high as the Cycle Bottom resistance at 1707.93 and last until Friday, a day of strength.  However, it is due to resume its decline through April options expiration.  There appears to be two bearish formations that indicate a very deep decline which may proceed from this juncture.

Investing comments, “Gold spot we wrote: outlook negative and holding first resistance at 1715/17 re-targets 1707/05 then 1700/1698. A good chance of further losses eventually to very important strong support at 1685/75.

What a call! gold collapsed straight to very important strong support at 1685/75 and bottomed exactly here.

This was perfect! The break below hit 1705 and even the bounce topped exactly at 1715/17. Outlook now negative.”

 

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March 30, 2021

7:40 am Tuesday of Holy Week

Good Morning!

DJIA futures are lower this morning after making a new all-time high at 33259.00.  This morning the INDU futures slid back beneath 33000.00.  Today is day 274 of the current Master Cycle, a very stretched Cycle.  However, it may stretch another day to preserved the gains made in the past quarter.  Usually, 275 days (258 + 17.2 days) is the upper limit of the normal range of the Master Cycle.  There appears to be a final probe left before the reversal.

 

NDX futures slid to a morning low of 12839.62.  It is hovering above the Lip of the Cup with Handle formation at 12700.00.  A decline beneath that formation denotes the final breakdown that ushers in the bear market.  This is the opposite of the DJIA, as money rotates out of the NDX and into the DJIA.  Confidence is being lost as the NDX is very close to having a negative quarter for the first time since a year ago.

ZeroHedge remarks, ”

See the source image

When analyzing the markets, it is important to differentiate between one’s longer-term and shorter-term outlook. Our longer-term outlook, spelled out in detail in our newest Wellington Letter issue, is focused primarily on the government’s record-breaking efforts to stimulate the economy, flooding the financial system with easy money and credit.

While this may be enough to stave off a major crash for some time, it may not be enough to sustain the market’s vastly overextended bull run of the past several months. Increasingly, in the short-term, we see important signs of exhaustion that could lead to a painful correction.”

 

SPX is caught in between, with the SPX futures hanging on, but showing signs of exhaustion.  Another probe higher and it may have made yet another all-time high and completed its Elliott Wave pattern.  The question is, can it last another day and make that new high?  Critical support lies at the mid-Cycle/Intermediate-term support at 3902.96.  A double trendline and gamma neutrality lies at 3850.  Beneath that the trap door opens.

ZeroHedge reports, “US index future slumped on Tuesday as traders continued to fret over fallout from the implosion of Archegos (especially after Morgan Stanley said it was not done selling residual blocks) and as Treasury yields soared to the highest since Jan 2020.

Emini S&P futures were down 13 points or -0.3% to 3,946, with ViacomCBS shares rising 2.6% premarket; Discovery Inc. and the American Depositary Receipts of Chinese companies linked to the Archegos block trades also posted gains. Tesla fell after a report Xiaomi Corp. plans to invest $15 billion to make electric cars. Industrial stocks and banks such as JPMorgan, Morgan Stanley and Boeing added between 0.9% and 1.4%. American Airlines rose 1.2% after an upgrade from Jefferies. The carrier expects to put most of its fleet back in service in the second quarter on signs of a travel rebound.”

 

VIX futures are consolidating at the high end of yesterday’s trading range.

YahooFinance brings us, “(Bloomberg) — The Cboe Volatility Index may have just wiped out the pandemic-induced doom and gloom, but Munich money managers Daniel Danon and Tobias Knecht are fretting over the warning signs still flashing across the stock market’s underbelly.

The recent decline in the Wall Street fear gauge to pre-virus levels belies the “tension beneath the calm” within the volatility landscape, according to the traders at Assenagon GmbH with 27 billion euros ($32 billion) under management.

“The price for protection against sharp downside moves, sharp correlated moves or for just outright volatility exposure is high,” Danon and Knecht, who specialize in such derivatives strategies, wrote in an email.”

 

TNX has broken out while TNX futures have made an overnight high at 17.76.  The Cycles Model implies that there may be another three weeks of rally, ending at April options expiration.  TNX may have completed a” running correction” Wave 4.  While TNX may still pull back to its Cycle Top or one of the lower supports, the target for this move may very well be near 20.00.  The next chart resistance level is the November 4. 2019 high at 19.71.

ZeroHedge reports, “Gold and bonds are getting dumped amid the ongoing fallout from the Archegos debacle, and the dollar is bid, as it appears a broad-based demand for liquidity is trumping any quarter-end rebalancing flows that may have been expected. At the same time, bitcoin has been stable and acted as a source of stability.

Rather unexpectedly, Treasuries are being sold into quarter-end, with 10Y yields back above 1.75%…

Source: Bloomberg

Gold futures are back below $1700 as the sell first, think second plan for liquidity appears to be in play..”

 

 

Gold futures made a morning low of 1678.80 as it also has three weeks to its Master Cycle low, which may be devastating for the gold bugs.  The reason is that it is now testing the combination Broadening Wedge and Head & Shoulders formations.  These two formations foretell the probable depth of Wave (3) of [3].

There are two possible “ultimate bottoms” to this decline.  The first is the 61.8% Fibonacci retracement of the entire rally from August 1999 to August 2020 at 954.55.  The second is the Cycle Wave IV low at 681.00.

 

 

 

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March 29, 2021

7:30 am

Good Morning!

NDX futures  plunged to 12807.62 in the early morning hours, then was ramped back to 12972.75 at 7:00 am.  There is blood in the water and the sharks are circling.  Prime brokers are badly wounded and would not venture in these waters.  That tells us the normal sources of market liquidity may disappear.   Despite the intervention of the Fed (could it have been anyone else?), the overnight structure is very bearish.

ZeroHedge reports, “Update (615am ET): Just around the time Nomura closed down 16.3%, its biggest drop on record after warning it faces around $2 billion in prime brokerage losses (see below) tied to a single US client – the now infamous Archegos tiger cub hedge fund – Swiss banking giant, Credit Suisse, was also swept up in the Archegos vortex after the Swiss bank said it faces a potentially “highly significant” loss from a U.S. hedge fund client defaulting on margin calls, sending the Swiss bank’s share plunging as much as 16%, the most since March last year and wiping out all 2021 gains.

While the actual loss number was not defined, estimates pegged it in the $2-3 billion ballpark, and one commentator said that “Credit Suisse $CS lost its entire year profit because it is out-smart by Goldman aka the Sharks on the street and by a One Day.”

 

SPX futures plunged to 3929.12 in the early morning hours before being ramped back up to 3963.12 at 6:30 am.  However, it does not appear to be holding.  While there is still a possibility of making a new all-time high, the Cycles Model and Elliott Wave structures do not support it.  Last Friday’s end-of-day ramp may have been an effort to mitigate the blow that would come over the weekend.

ZeroHedge observes, “After initially dipping as much as -0.7% during the early Asian session on fears that the Archegos margin call crisis which has already cost billions in losses at Nomura and Credit Suisse’s prime brokerage units could spread, futures have stabilized and at last check the Emini was down -0.3% to 3,952 after its remarkable late Friday surge which pushed the S&P just shy of an all time high, while quarter-end is expected to be in focus this week, favoring buying of Treasuries although it is debatable how stocks will trade today.

At the same time, Nasdaq 100 futures erased losses of as much as 1.2% to trade little changed as of 7:30am in New York following revelations that Archegos Capital Management LLC – Bill Hwang’s family office – was behind a $20 billion spree of block trades on Friday, selling Chinese tech giants and U.S. media firms. And with a number of banks exposed to Archegos and losing billions, investors are on edge lookout for signs of contagion.”

 

VIX futures rose to an overnight high of 20.90 from their Master Cycle low on Friday at 284 days.  This Cycle was stretched to an extreme and did not correspond with a new high in the SPX.  This oddity may be the result of the short-vol trade which has not entirely left the scene.  A ramp above the 50-day Moving Average may result in a short squeeze that would add fuel to the subsequent rally.

 

TNX appears to be pulling back from its surge on Friday.  There are some cross-currents in the Cycles.  Today may be a Trading Cycle low, followed by yet another surge in rates.  There may be a Master Cycle high in the week after options expiration in April.

 

USD futures appear to be consolidating above the 200-day Moving Average.  The Cycles Model calls for a probable Master Cycle high at options expiration in April.

 

 

 

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March 26, 2021

2:34 pm

VIX appears to be on the rebound after making a new low  at 18.68 on its Trading Cycle.  This was unexpected and caused me to rethink the Cycles structure.  While today’s low may be the basis for a new Master Cycle pattern, the Cycles Model is not so clear.  The high on March 4 was on day 262 of the Master Cycle.  It appears that I will have to stick with it until further evidence tells me otherwise.  In the meantime, the Cycles Model shows strength beginning in early April and continuing through mid-May.

 

 

2:18 pm

NDX remains on its sell signal after being repulsed at Short-term resistance at 12866.05.  It appears to be read to cross the Lip of its Cup with Handle, setting a course for its long-term trendline just above 7500.00.  Should this take place, the rest of the market will follow.

ZeroHedge observes, “Something odd is going on.

During today’s US session we noticed an unusual number of large block trade headlines.

  • Shopify – SHOP 762k @ $1,000
  • FarFetch – FTCH 26mm @ $45

  • Discovery – DISCA 16mm @ $45-50, DISCK 32mm @ $40-44″

 

8:15 am

Good Morning!

SPX futures were as high as 3921.38 this morning before fading lower.  The Elliott Wave Model suggests a brief surge at the open to 3935.00, if it can achieve it.    The Cycles Model suggests a breakdown may be in order.  The question is how fast the SPX may tumble beneath all the supports that have held it thus far.

ZeroHedge reports, “US equity futures and global markets rose this morning, continuing yesterday’s torrid late day surge, as investors looked past supply chain disruptions and focused on the optimistic targets for vaccinations and economic re-openings, after Joe Biden doubled the goal for his vaccination drive even though Covid-19 cases keep rising, and the Federal Reserve freed banks from pandemic restrictions on dividends. Oil rebounded and pushed Treasury yields higher, prompting investors to buy undervalued energy and bank stocks ahead of what is expected to be the fastest economic growth since 1984. Investors awaited key income, spending and inflation data later in the day.”

 

NDX futures rose to 12880.00 in the overnight session before plunging into the red as the morning wore on.  It is currently challenging the Lip of the Cup with Handle formation at 12700.00.

The following may explain why the stimulus checks may not end up in the market. ZeroHedge reports, “After the extreme surge in income and spending in January (as government handouts gushed across the nation), analysts expected February to see some give back (more on the income side than on the spending side) – they were right.

Americans’ income fell 7.1% MoM in February (-7.2% exp) vs the 10.1% (revised up) rise in January.

Americans’ spending fell 1.2% MoM in February (-1.0% exp) vs the 3.0% (big upward revision) jump in January.

Source: Bloomberg

That is the largest MoM decline in Americans’ income on record.”

 

TNX jumped higher this morning, sending yields as high as 16.81 and jitters up the spines of traders.  Yesterday’s 7-year Treasury auction was a bust.  The next 10-year auction is scheduled for April 8.  In the meantime, the Cycles Model suggests a painful month ahead for bond investors.

ZeroHedge reports, “It wasn’t nearly last month’s catastrophic 7Y auction but it wasn’t all that much better either.

Moments ago the Treasury sold $62BN in a closely watched 7Y auction (previewed here), which matched the record size for the tenor.

And while sentiment was far more positive heading into the 1pm deadline, traders were surprised to learn that the high yield on the auction was a rather dismal 1.30%, which tailed the When Issued 1.275% by a sizable 2.5bps and was the highest yield since Jan 2020.”

 

VIX futures drifted lower in the overnight session, hitting a low of 19.24.  Yesterday’s breakout above the 50-day suggests the pullback won’t last.  There appears to be an attempt at a Trading Cycle low, which may match, but not trump the Master Cycle low of Tuesday.

 

The NYSE Hi-Lo Index closed at a deeper low yesterday after venturing to a high of 71.00 intraday.  This is an unequivocal sell signal, showing the internal deterioration inside the markets.  This is telling us that the decline will not be normal, but an avalanche, taking everything with it.

 

USD futures appear to be consolidating after rising above the 200-day Moving Average at 92.76.  The Cycles Model calls for another three weeks of rally which appear to be targeting the Cycle Top and Broadening wedge trendline at 95.94.  A USD short squeeze may have begun.

Investing observes, “Investors have a voracious appetite for U.S. dollars this month as the Dollar Index climbed to its strongest level in four months. Over the weekend, the Senate passed a $1.9-trillion stimulus bill that is expected to pass the House tomorrow and signed by President Joe Biden before the end of the week. The passage of this bill has been eagerly awaited and now that it is pretty much a done deal, investors are starting to think about how stimulus cheques will be spent. “

 

 

 

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March 25, 2021

11:21 am

NDX has now declined beneath the Lip of its Cup with Handle formation.  The Cup with Handle formations may target the bottom of Wave [3].  This may happen as early as the end of April, which also corresponds with the end of the current Master Cycle in the VIX!

This first Bearish Cycle from the high on February 16 to the high (Wave [2]) on March 16 lasted 21.5 market days.  The next Cycle (Wave [3]) of 21.5 market days may be a high-to-low Cycle similar to the 2020 decline.

 

11:12 am

VIX has challenged its 50-day Moving Average at 23.44.  After a brief pullback, it may advance to the next level, the mid-Cycle resistance at 25.03.  The most common buy signal (SPX sell signal) is at 25.00.  The Hi-Lo Index opened at 7.00 and rose to 25.00, well within the sell signal parameters.  What this means is that the SPX now may have a triple confirmed sell signal by the end of the day.

  • SPX beneath the 50-day.
  • VIX above the 50-day.
  • Hi-Lo beneath 50.00.

 

11:03 am

SPX bounced at the 50-day Moving Average at 3866.58, as expected, and has fallen through that level.  It may now test the two trendlines at 3840.00 and 3850.00.  This level also corresponds with the next tranche of call options.  As these options are wiped out, Dealer gamma becomes more negative and the selling intensifies.  We may see a larger bounce back to the Lip of the Cup with Handle formation at that point.

ZeroHedge remarks, “We warned this morning that ‘if’ we start to sell that selling could be quite material as implied by the trio of vanna charts below (SPX, IWM, QQQ) wherein dealer exposure gets more long as markets drop (and so they need to sell futures), with and we would anticipate a quick visit of the 3800 level in SPX.

And, after a brief attempt to ignite some momentum at the cash open, things have escalated rather quickly…

But this move has sparked breaks of some serious technical levels across the indices.

The S&P is back below its 50DMA…”

 

8:15 am

Good Morning!

SPX futures are testing the 50-day Moving Average this morning at 3865.71.  The erosion of prices is speeding up as even retail sentiment has changed.  There may be a half-hearted bounce at the 50-day but, once beneath it, selling may intensify.  Call options at 3900.00 and higher are losing value fast, which may change the outlook for those that have been riding the wave higher through options.

ZeroHedge reports, “US equity futures faded a modest overnight rebound on Thursday, ahead of data that is expected to show a small drop in weekly jobless claims after last week’s surprise spike, while the tech-heavy Nasdaq looked set to stabilize after its latest 2% rollercoaster drop in the previous session. The dollar and 10Y yields were unchanged from Thursday’s close, while oil turned lower after a rally spurred by the blockage of the Suez Canal fizzled. It wasn’t clear what was the reason for the persistent late – and as of today, early – selloff, but increasingly many are speculating that the month-end rebalance by pensions is winning the battle, if not the war, against the quant buying we noted in “Month-End Set For Epic Clash Between Forced Pension Selling And Quant Buying.”

At 730 a.m. ET, Dow e-minis were up 27 points, or 0.09%, S&P 500 e-minis were flat, and Nasdaq 100 e-minis were up 24 points, or 0.18%.

 

VIX futures are surging higher, hitting 22.01 in the morning session.  The technical breakout is at the 50-day Moving Average at 23.41, which should be anticipated very soon.  There appears to be no anticipation of a higher VIX in the media.

 

The NYSE Hi-Lo Index closed at its lowest point since October 28 and is firmly on a sell signal.  It was positive until 3:00 pm when the usual end-of-day ramp turned into a rout. This is a new phenomenon which has only started in the last two weeks.  Since the Hi-Lo is a lagging indicator, it was not discovered to be this bad until this morning, when final calculations were recorded.

ZeroHedge observes, “Back in 2013, long before anyone had heard of it or plagiarized it, we first defined the term 3:30 pm Ramp Capital to describe the clockwork meltup of stocks in the last half hour of trading.

In the nearly decade that has passed since then, both the term Ramp Capital and the phenomenon which it describes have become household items, so much so that JPMorgan’s clients get upset when the requisite last hour lift is missing.”

 

NDX futures declined to 12706.00, just short of a technical breakdown at 12704.10.  The NASDAQ Hi-Lo Index closed at -230.00, the lowest since March 24, 2020.

ZeroHedge advises, “With ‘Ramp Capital’ dead, investors are growing anxious that the huge and hotly-anticipated quarter-end rebalancing flows will overwhelm any BTFD enthusiasm (as ‘weaponized gamma’ retail players appear to have jumped ship).

As Nomura’s Charlie McElligott notes this morning, it does indeed look like the much-hyped “pension quarter-end rebalancing” flows are evidencing themselves in the market, effectively VWAP buying TY vs VWAP selling ES over the course of the day the past two sessions, as evidenced by our futures bid-ask “imbalances” monitor across all lot sizes.

Particularly looking at ES (S&P E-Mini) imbalance, we see the last two days (Pink yesterday 3/24, Light Blue 3/23) being two of the four most “sold” of the entire past month window”

 

TNX is still easing lower, but may be preparing for a double burst of strength early next week.  The current Master Cycle is due to expire after options expiration in April with new highs anticipated.  A decline to the Cycle Top at 15.30 may be in the cards before its next big move higher.

ZeroHedge reports, “After yesterday’s massive 2Y auction went swimmingly, nerves were soothed ahead of tomorrow’s closely watched 7Y “bellybuster” auction because, as a reminder, it was the catastrophic 7Y auction that sparked turmoil in the bond market.

But maybe that was a bit premature because moments ago the US Treasury sold a record $61BN in five year paper…

… in what could best be described as a subpar auction.

The auction stopped at what was once seen as a red-line for 5Y paper, 0.850%, tailing the When Issued 0.847% by a somewhat concerning 0.3bps. Putting the lousy 1pm performance in context, this was the 4th auction in the last 5 when the 5Y has tailed.”

 

USD futures are now testing the 200-day Moving Average at 92.77.  The current Master Cycle is not due to mature until options expiration in April.  This gives a green light to advance to the combination Broadening Wedge trendline and Cycle Top at 96.04.  The advance, which has been orderly thus far, may become chaotic, as long-time short sellers are forced to cover.

The velocity of money is near its all-time low as fearful investors hoard cash.  Much of the money coming out of stocks and bonds will simply be hoarded in cash.

ArmstrongEconomics observes, “While central banks are hard at work trying to come up with the magic bullet to kill cash and avoid having to bail out bankers again, they are faced with what has been termed the “Paradox of Cash,” whereby the demand rises in the face of declining use of cash in normal transactions. In Europe, studies show that about one-third of all households are hoarding cash. Interestingly, they seem to be just hoarding it rather than spending it. The supply of physical money has doubled over the last 10 years, yet its actual use has been declining. This is no doubt the result of negative interest rates. Why keep money in a bank and be charged a negative interest rate for not spending? If you do not earn interest anymore, then why keep savings in a bank to begin with? This is creating the Paradox of Cash.”

 

 

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March 24, 2021

3:16 pm

NDX continued its decline after an 82% retracement.  It has fallen back beneath its Short-term support at 12 891.92, which has made a bearish cross of the mid-Cycle and 50-day lines.  If this is a short squeeze, it appears that there are no shorts who covered above the 50-day moving average.  In addition, there may be a preference for put options instead of calls.

 

11:30 am

Are call buyers exhausted?  3950 appears to be the upper limit to this retracement in SPX.

ZeroHedge writes, “A volatile overnight session in the S&P 500 has left in the middle of a range between 3900 and 3950.

If you look at SpotGamma‘s total S&P500 profile you can see the “box” the market is in, and whats curious is that this picture has remained the same for the past several sessions. In other words, its not “filling in”.

 

10:00 am

The GSCI Ag Index appears to have completed a late Master Cycle low yesterday.  This has been a very shallow correction, but may give a new sell signal above the 50-day Moving Average at 391.11.  The next major resistance may reside at the 2010 high at 570.50.  After a bumper wheat crop in Australia, an infestation of mice may not only damage the new crop, but limit grain exports to stop the infestation from spreading to other countries.

ZeroHedge reports, “New South Wales and Queensland are being overwhelmed by a biblical wave of mice, which have taken over homes, stores, farms, hospitals, and automobiles. These nasty little rodents are eating everything in sight, leaving a path of destruction.

Reuters said, “the Australian state of New South Wales is suffering their worst plague of mice in decades after a bumper grain harvest.”

“At night… the ground is just moving with thousands and thousands of mice just running around,” farmer Ron Mckay told the Australian Broadcasting Corporation.”

 

8:00 am

Good Morning!

NDX futures nudged up to the 50-day Moving Average at 13163.23, but pulled back.  NDX is on a sell signal, but hasn’t made much progress in the past month.  NDX often leads the other stock indices at major turns, but, in this case, appears to be waiting for the rest of the market to catch up.

 

SPX futures appear to be testing the combination Short-term support an mid-Cycle support at 3899.51.  However, it has not yet made a clean breakthrough.  There is known to be a significant call option position at 3900.00, which may be giving it support.  One noteworthy item I should mention, the high at 3983.87 on March 17 is exactly 12.9 months from the February 19, 2020 high.  Yesterday happens to be the one-year anniversary from the 2020 low.

ZeroHedge reports, “US stock futures rebounded after Tuesday’s rout as Intel’s shares surged on plans to expand advanced chip making capacity, while investors looked to business surveys for March and another day of testimonies from Yellen and Powell. Futures on the S&P 500 and Dow Jones also pointed to a rebound in the underlying indexes which dropped Tuesday amid a setback for reopening favorites. Stable bond yields and assurances by Powell on inflation risks has helped allay fears that a growth breakout will force tighter central-bank policy.

At 715 a.m. ET, Dow E-minis were up 135 points, or 0.4%, S&P 500 E-minis were up 18 points, or 0.5% and Nasdaq 100 E-minis were up 108.5 points, or 0.83%.”

 

Despite the positive news this morning, the NYSE Hi-Lo Index closed on an unmistakable sell signal at -46.00.  The internals are crumbling while the surface appears calm.  It appears that today was a good day to return from my brief vacation.  This may be a good sign that quarter-end rebalancing may have started.

 

Yesterday’s low may be the culmination of this very stretched Master cycle at 281 days.  VIX futures are hovering just beneath 20.00.  This morning’s low at 19.87 happens to be the Fibonacci 61.8% retracement value of the bounce to 21.58.  That suggests a high probability of a breakout above the 50-day Moving Average at 23.43, possibly today.  This would give us a confirmation of the already low NYSE Hi-Lo Index.

 

TNX may already be recovering from a brief retracement.  The Cycles Model calls for trending strength that may continue through the week after (April) options expiration.

ZeroHedge remarks, “After stocks just saw their best 12-month performance since 1936, it should not be a total surprise that Treasuries have suffered… but the extent of the bond bloodbath is almost unprecedented.

After $17 trillion of liquidity was gushed across the global markets (raising all equity boats), the recent prospect of resurgent inflation has pushed government and corporate bonds around the world to their worst start to a year this century.

Source: Bloomberg

Bloomberg reports that the notes have lost over 3.7% so far in 2021, according a Bloomberg Barclays index of investment-grade securities across currencies going back to 1999. That’s worse than for similar periods in previous years, even after dip-buying in recent days.”

ZeroHedge also reveals, “In recent weeks we have been pointing out the stark divergence between markets in various geographic time zones, most notably the variance in equity “moods” between the Europe and US, where it often appears that there are two regimes: one ending when Europe closes and another starting, with both usually mirror images.

But while we mostly focused on how geography impacts stock markets, a far more interesting observation was made this week by Morgan Stanley’s chief rates strategist Matthew Hornbach, who over the weekend identified the origin, if not quite the identity, of the persistent seller of Treasurys over the past few months, who has sparked such a violent rout across not just the US rates space but also stocks and other core assets.

As the following remarkable chart from Hornbach makes very clear, the cumulative downward price movement in Treasury futures has been concentrated in the Tokyo session. Furthermore, after a brief respite in the first week of March, selling in the Tokyo session accelerated dramatically ahead of the FOMC meeting and it continued afterward.”

 

USD futures broke through mid-Cycle resistance at 92.45 this morning, reaching a high of 92.61.  The 200-day Moving Average at 92.79 may be next, causing grief among USD short-sellers.  The short squeeze has begun and may run through options expiration on April 16th.  The target appears to be the combination Broadening Wedge trendline and Cycle Top at 96.14.

ZeroHedge remarks, “We’re dedicating today’s entire Data section to the value of the dollar and how this translates to US corporate earnings fundamentals. We use the Federal Reserve’s Trade Weighted Dollar Index rather than the DXY because it includes a broader and more representative basket of currencies. DXY doesn’t even have the Chinese yuan or the Mexican peso.

Three points on this topic:

#1: A long run look at the Trade Weighted Dollar Index (chart below, 2004 – present) shows how global currency markets trade through a cycle.

Global recessions/crises create safe-haven demand for the dollar. This is plainly visible in the 2008 – 2009 recession (dollar peak in March 2009, right as global equity markets troughed) and again in March 2020 (again at a low for global equities).

Now, looking across cycles (2006 – 2021); the dollar has clearly traded like a secular growth vehicle. It has, for example, appreciated 28 percent over the last decade. That is an annual compounded growth rate of 2.5 percent. Across the entire timeframe pictured here, the dollar is up 11.6 percent, for a 0.7 percent CAGR. Over the same timeframes, the euro is exactly flat to the dollar since 2006 and down 15 percent over the last decade, just to call out one major non-dollar global currency.

Takeaway: whenever you hear that the dollar is about to lose its reserve currency status or otherwise implode, remember this chart. No one would call the last 16 years the most stable or predictable in America’s history. But the dollar has done just fine. In short, if there’s a crack forming in the dollar’s secular, long run appeal we just don’t see it in this chart.”

 

WTI futures bounced this morning back above the 50-day Moving Average at 58.40, reaching an overnight high at 59.76.  WTI has given a sell signal, so the time to go short or sell longs is on the bounce.  It is difficult to determine whether it will be involved in the quarter-end rebalancing, since there appear to be anomalies in the Current Cycle through the first week of April.

ZeroHedge reports, “Crude prices crashed today, extending recent losses with WTI back below $58 at six-week lows amid dimming prospects of a steady recovery in demand from Europe to India.

“The weakness in crude prices isn’t likely to go away in the coming weeks, even as U.S. refinery utilization recovers to pre-storm levels,” said Fernando Valle, a Bloomberg Intelligence analyst.

“There is still the resurgence of Covid-19 in Europe and Asia, and refinery maintenance in China and these are likely to keep international demand weak for U.S. crude.”

Tonight’s API-reported inventory data will give us the next trend direction

API

  • Crude +2.927mm (-900k exp)
  • Cushing -2.282mm
  • Gasoline -3.728mm
  • Distillates +246k

After four straight weeks of builds, analysts expected crude stocks to draw this week, but once again (if API is right) we saw a crude build. Gasoline stocks drew down once again.”

 

 

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March 18, 2021

8:45 am

I will be away for the next 5 days to visit my eldest son and his family.  I’ll be back for commentary on March 24.

NDX futures declined to a low of 12951.50, on a sell signal beneath the 50-day Moving Average.

ZeroHedge reports, “It started off well enough, with futures initially continuing their post-FOMC ascent and lifting global markets.

However, It all reversed sharply during the Asian session driven by a sharp spike in the 10Y TSY, which initially jumped following a Nikkei report that the BOJ readied to adjust monetary policy and will look at measures that will allow long-term interest rates to move in “a slightly larger range of about 0.25%, versus 0.2% now” in order to make life easier for financial institutions. The news, which came during the Japanese trading break forced local traders to sell US paper instead.

The selloff then accelerated sharply when Europe opened, and pushed the 10Y as high as 1.75%, a level which BofA two weeks ago said was the “tipping point” for bonds

… the highest level since Jan 2020, while the 30-year topped 2.5% a level that hasn’t been seen since August 2019

The algos took one look at the fresh surge in yields and dumped risk assets with a focus on high duration “bathwater” tech names, slamming Nasdaq 100 futures 1.7% lower….

… while Emini S&P futs were set to fade the entire post-FOMC move.”

 

TNX rallied to a high of 17.47 (17.45 in the futures) this morning.  The Cycles Model suggest a continuation of this rally with growing strength through the end of the month.  A possible trigger for the spike in the 10-year yield may be the Philly Fed Index, which reported a massive increase.

ZeroHedge reports, “The Philly Fed Business Sentiment Indicator exploded higher in March. Against expectations of a rise from 23.1 to 23.3, it jumped by the most ever to 51.8…

Source: Bloomberg

That is the highest level since the Arabian Oil Crisis in 1973.

Under the hood, everything jumped except inventories…

  • New orders rose to 50.9 vs 23.4
  • Employment rose to 30.1 vs 25.3
  • Shipments rose to 30.2 vs 21.5
  • Delivery time rose to 29.5 vs 15.1
  • Inventories fell to 12.1 vs 20.0
  • Prices received rose to 31.8 vs 16.7
  • Unfilled orders rose to 21.8 vs 12.6
  • Average workweek rose to 39.7 vs 30.6
  • Six-month outlook rose to 61.6 vs 39.5

But, the surge is driven by a massive spike in the prices-paid index (which rose to 75.9 vs 54.4).”

Yet another indicator of trouble ahead.  ZeroHedge reports, “While much of the financial commentariat spent Wednesday afternoon focusing on the Fed’s useless dot plot (which focuses on a period that takes place about a year after Powell’s tenure at the Fed is over and he will be replaced by uber-dove Brainard), we pointed out a “huge surprise” (as Curvature’s repo expert Scott Skyrm put it) contained deep inside the statement – the Fed’s decision to hike the Reverse Repo counterparty limit from $30 billion to $80 billion.

Why was this significant? Because as Skyrm explained, “if the Fed wanted overnight rates higher, they would have raised the IOER and/or RRP. Instead, they raised the RRP counterparty limit” which also “implies the Fed is very comfortable with zero percent rates and maybe even negative rates.

In other words, having seen the recent drops of overnight GC repo into the red…

… and 1 month bills trading as low as -0.01% this morning, the Fed decided to do nothing.

However, as that “other” repo guru, Zoltan Pozsar (formerly of the NY Fed and currently at Credit Suisse) pointed out later on Wednesday, there is another possible interpretation, a much more ominous one for those who believe that banks need an SLR exemption now, or else they will be forced to raise capital/delever/dump treasurys – in other words, lead to even more pain for Treasurys.

 

SPX futures declined to a low of 3932.62, testing its support at yesterday’s low.  As mentioned yesterday, the EW structure is complete, and a decline beneath 3935.00 may eliminate the possibility of a new high.  A decline beneath 3900.00 may turn options gamma negative, as well.  The fly in the ointment is that the DJIA may have made a new (all-time) overnight high.  However the DJ30 futures turned red this morning.

The social mood is shifting.  People have quit wearing masks in droves.  Anthony Fauci is ignored or, even worse, mocked.  We are already tiring of Biden’s ineptitude.  This may be showing up in the markets.  Be prepared for a sudden shift in sentiment that will take many by surprise.  The stimulus checks are coming, but will they be enough?

ZeroHedge observes, “The highly anticipated Fed meeting is now in the rearview mirror, but for weary traders sitting at a fresh all time high in the S&P, the week is not yet over as another major market event is on deck: we are talking about Friday’s quad-witch (quadruple expiration) when once a quarter on the third Friday, we get the simultaneous expiration of stock index options, market index options, individual stock company options and and single-stock futures.

At the 30,000 foot level, two things make Friday’s quad-witch especially notable: the relatively small size of Friday’s event, and the dismal liquidity going into it.

As Goldman writes in its latest Vol Vitals report, when measured in contracts (or percent of SPX market cap), the SPX open interest expiring this Friday is the smallest for at least a decade. The 4.0 million March contracts outstanding are just 60% of the open interest at this point in the volatile week approaching March-2020 expiration. According to Goldman, the reduced SPX open interest reflects volume continuing to spread around the calendar instead of being concentrated in just the quarterly expirations. Meanwhile, the rising SPX index level has left the bulk of March open interest (87% has strikes of 3900 or lower) below the current index level, so expect marketwide gamma to have limited impact on trading dynamics this week.

 

VIX futures rose to an overnight high of 20.43.  While nowhere near the 50-day, VIX may have become unshackled from the short-vol trade, since futures and options expired yesterday.  The rest of the market is in a fragile state, with liquidity extremely low.  Quad witching may light a spark under the VIX that sends it rocketing higher.

 

USD futures are moving higher.  Both the Cycles and Elliott Wave structure imply that USD may rally back to the Broadening Wedge trendline at 96.00.  That is entirely possible due to a potential sell-off in stocks, raising the demand for USD and the massive short USD trade that may be forced to cover.  The current Master Cycle ends on options expiation day in April.

 

Gold futures are sliding again.  Despite all of the calls to buy gold, it appears that it may descend to the bottom trendline at 1500.00 before too long.  The next Master Cycle is due at the end of the month.  Should liquidity remain thin and the USD rally to 96.00, gold may have no other choice than to plummet.

ZeroHedge comments, “Worried about gold sentiment? Don’t be.

The mainstream view of gold right now is an open yawn, and sentiment indicators for this precious metal are now at 3-year lows despite the gold highs of last August.

Is this cause for genuine concern?

Not at all.

In fact, quite the opposite.

Most investors are totally wrong about gold, and below we show rather than argue why they are missing the forest for the trees.

Unlike trend chasers, speculating gamblers and gold bears, sophisticated precious metal professionals and historically (as well as mathematically) conscious investors are not only calm right now, they are biding their time for what is about to become gold’s perfect backdrop and, pardon the pun, golden era.”

 

 

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