January 12, 2023

9:10 am

SPX spiked higher on the “in line” CPI print.  It challenged the 200-day Moving Average at 3987.35, then reversed.  This may trap “lazy long” investors who may not be ready for a Key Reversal ( when the share price accelerates in an ascending trend, exceeds the current peak and after a high opening on the next day, the price falls and closes below the previous day’s trading range), as we did in December.

ZeroHedge remarks, “Once again, US equity markets have squeezed dramatically higher in the last few days (post-payrolls) ahead of this morning’s all-important CPI print…

All of which, as Nomura’s Charlie McElligott notes, shows strong evidence of “fear of the right tail” yet again in Equities, due to “trending” expectation of a “dovish CPI” print today (set-up for disappointment on “just in-line”?)”

 

8:15 am

Good Morning!

SPX futures rose to 3984.10 this morning, above the 61.8% Fibonacci retracement value of 3971.40.  The CPI print may dictate the direction of the markets.  A lower CPI may give the SPX a burst of energy taking it to a possible high near 4150.00 over the next two weeks.  A higher CPI print may push the SPX o a new low.

Today’s op-ex shows Maximum pain for options investors at 3935.00.  Long gamma begins at 3950.00, while short gamma starts at 3900.00.  Friday’s Max Pain is near 3900.00 with long gamma starting at 3950.00 and short gamma beginning at 3850.00.

ZeroHedge speculates. “We previously showed a CPI-dependent market matrix from both JPMorgan and Goldman, as well as an analysis by Morgan Stanley why tomorrow’s CPI print is likely to miss big.  Now, we take a look at what consensus expects.

According to Wall Street economists, tomorrow at 830am, the BLS will report the following data for the month of December:

  • CPI MoM: exp. -0.1%, down from 0.1% in November
  • CPI Core MoM: exp. 0.3%, up from 0.2%
  • CPI YoY: exp. 6.5%, down from 7.1%
  • CPI Core MoM: exp. 5.7%, down from 6.1%

Broader picture, market is already pricing in a lower inflation path than Fed’s SEP shows for 2023. Specifically, CPI fixings imply headline PCE inflation below the Fed’s 2% goal by July and around 2% goal by year-end.”

ZeroHedge reports, “US futures are trading near session highs after earlier fluctuating between gains and losses ahead of make-or-break inflation data which many expect will show price pressures continuing to ease. S&P 500 futures traded 0.1% higher as of 7:30am ET, just shy of 4,000, one day after the S&P 500 clocked this year’s first back-to-back gains on Tuesday and Wednesday. The gains stem from bets that cooling inflation ill give the Federal Reserve room to slow its pace of rate hikes, a take substantiated by Boston Fed chief Susan Collins, who said she was leaning toward a quarter-point move at the bank’s Feb. 1 meeting. Treasuries steadied after gains in Wednesday’s session, with the 10Y trading at 3.52%, while a gauge of dollar strength edged lower as investors looked beyond the drumbeat of hawkish comments from Federal Reserve officials. The yen rallied on a report that the Bank of Japan will look into the side effects of its ultra-loose monetary policy. Commodities are mostly higher with the dollar weaker.”

 

 

VIX futures consolidated in a narrow range ahead of the CPI print.  The corrective pattern appears complete as of Tuesday, day 253 of the Master Cycle.  A reversal may be imminent.

ZeroHedge asks, did you know,”In the final days of 2022, Goldman’s economists predicted that “the biggest political risk” of 2023 will be the Congressional showdown over America’s favorite periodic drama: the debt limit.

This is what the bank’s chief economist Jan Hatzius said then: “The debt limit likely poses the greatest political risk next year, and we expect it to rival the 2011 episode in its disruption to financial markets and the economy. That said, we do not expect Congress to enact major fiscal changes. Republicans might press for spending cuts in a debt limit deal, but we do not expect substantial cuts next year. The White House might press for increased fiscal support, but this also looks unlikely as we believe a soft landing is more likely and a divided Congress would have difficulty responding to a recession even if one occurs.”

 

TNX extended its (declining) Master Cycle this morning, on day 266 of the current Master Cycle.  A reversal may be imminent, with a possible four weeks of rally ahead.

ZeroHedge reports, “Headline and Core CPI printed ‘as expected’ (which is likely disappointing for the whisper numbers and remember the last CPI printed ‘cooler than expected’). Goods inflation continues to slow but Services inflation continues to soar (highest in over 40 years). Shelter costs continue to soar.

*  *  *

Expectations for this morning’s headline CPI ranges from +6.3% to +6.8% YoY, with consensus seeing a 0.1% decline MoM – something the world and his pet rabbit has bid stocks up into anticipating this as the signal for an about face by The Fed on their higher for longer narrative as it ‘proves’ inflation has peaked.

The headline print came in right as expected with a 0.1% decline MoM (leaving the YoY print at +6.5% as expected)…”

 

USD futures made a new Master Cycle low at 104.06 on day 259.  This sets up a potential reversal into an USD rally through the end of February.

 

 

 

 

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January 11, 2023

3:09 pm

TNX faded after 10-year auction, then stabilized.  The Cycles Model remains neutral at this point, but the uptrend may resume.

ZeroHedge comments, “One day after what may have been the strongest 3Y auction in history (and if not, then certainly one of the top 3), moments ago the Treasury sold $32BN in 10Y paper (in the form of 9Y-10M reopening of Cusip FV8), in what was another stellar auction.

The high yield of 3.575%, was the second consecutive drop since the 10Y auction peaked at 4.14% in November, and was also down from 3.625% in December. More importantly perhaps, compared to the When Issued 3.580%, today’s auction stopped through by 0.5bps. This was the first 10Y auction that did not tail since August, and it certainly was better than last month’s auction when the tail was a record 3.7bps:”

 

 

2:50 pm

SPX is approaching its 61.8% retracement value at 3971.40 and has completed 19 market days since its inception on December 13.  It still has 17.2 probable days of decline ahead, starting this afternoon.  Most investors are looking up.  A reversal here may surprise many, followed by the CPI print tomorrow morning.

ZeroHedge remarks, “Nomura’s Charlie McElligott began this morning’s note by warning investors that tomorrow’s CPI print “is a bigger deal than the market is already giving it credit for.”

Specifically, he notes that while straddle pricing is for around a ~2.0% SPX move, we’ve continued to “over-realize vs implieds” consistently on CPI prints, which is why owning Gamma for this day has been the right trade for most of the past 9 months…”

 

10:14 am

The Ag index may have put in its Master Cycle low yesterday, on day 266.  Should that be correct, the new Master Cycle may only last to the end of the Month, but may be buoyed with unexpected strength.

ZeroHedge remarks, “Most Americans have watched their food expenses at grocery stores ballon in recent years. The one item that likely shocked consumers the most is the skyrocketing price of a dozen eggs.

Avian flu has decimated the US egg-laying hen population at commercial farms. Tens of millions of hens have been culled to prevent one of the worst bird flu outbreaks on record from spreading, though efforts have failed as the virus continues to decimate US egg production, sending retail prices sky-high.

Readers have known about the dire egg situation for many quarters, but the evolving story is that people are now posting images of supermarkets across the country running out of eggs.”

 

8:10 am

Good Morning!

SPX futures are hovering in a narrow range near the close.  The high at 3950.57 remains intact, but there seems to be a hesitancy to decline.  There are three weeks left in the current Master Cycle.  Whichever way the market goes may set the tone for the rest of the year.

ZeroHedge reports, “US equity futures were set to rise for a second day as upbeat sentiment ahead of tomorrow’s key CPI print – which JPM gives 85% odds of pushing stocks at least 1.5% higher – lifted global markets despite a freak outage of key FAA advisory system this morning led to a nationwide ground halt for all domestic flights (until at least 9am) pre. Contracts on the S&P 500 and Nasdaq 100 ticked up 0.1% as of 7:15am ET while Europe’s Stoxx 600 Index rose 0.8%. The FTSE 100 climbed within striking distance of a record high; Asian equities were supported by China lifting Covid restrictions. Among the top corporate news, Credit Suisse weighs cutting by half the bonus pool for 2022 after a turbulent year and Apple plans to start using its own custom displays in mobile devices as early as next year. Treasury yields dropped and the dollar gained for the second day in a row.”

 

 

VIX futures appear stuck at the lower end of yesterday’s trading range.  This may be due to the weekly op-ex this morning. At the last count, there were 40,229 put contracts with a strike at 21.00 expiring this morning.  This may be a good example of short gamma suppressing the VIX.  At the same time, VIX may spring out of its box as the expiry is settled.  Today is day 254 of the Master Cycle, suggesting a low may be put in by the end of the week.

Today’s op-ex shows why the VIX remains near the low, as there are 40,330 put contracts at the 21.00 strike price.  While investors are loading up on puts for next week’s op-ex, there are some very large investors buying calls for next week’s expiry.  Someone invested over over a half million dollars for nearly 225,000 contracts at a strike of $70.00!

 

TNX is making a corrective pullback from yesterday’s test of the trendline.  Having made its Master Cycle low on January 9, it may be gathering energy for the  next leg up.  The new Master Cycle is about 4 weeks long and the Cycles Model suggests trending strength may be about to appear.

ZeroHedge observes, “And we’re off: the first coupon auction of 2023 is in the history books and what a blowout it was.

Today’s sale of $40 billion in 3Y paper can only be described as an absolute whopper, starting at the top: the 3.997% high yield was the 2nd consecutive drop in the yield, and the first sub-4.00% since September; more importantly it stopped through the 4.000% When Issued by 2.3bps, the biggest stop through since at least 2016 (which is how far back our series goes.)

The Bid to Cover was also stellar: at 2.839, it was not only above last month’s 2.551 but also above the six-auction average of 2.518; in fact it was the highest since April 2018.

The internals were also stellar, with Indirects taking down a record 69.5%, and with Directs awarded 13.8%, that meant that Dealers were left with just 17.3%, the lowest on record.”

 

 

USD futures may be challenging the trendline near 103.00.  Today is day 258 in the current Master Cycle.  I have marked Monday’s low as the possible terminus of the Cycle, but await further developments, including a clear rally above the trendline for confirmation.

 

WTI futures hit a new high at 77.14 this morning as it emerges out of a probable Master Cycle low on January 5.  Crossing above Intermediate-term resistance at 76.63 may have created a buy signal, to be confirmed above the 50-day Moving Average at 80.35.  If so, the new Master Cycle may be nearly two months long and bullish for crude oil.

ZeroHedge remarks, “Oil prices eked out gains today (4th straight day higher) with WTI back above $75 as fears of a hawkish Powell speech passed painlessly (despite some hawkish FedSpeak from his underlings) and a flat dollar didn’t impact direction.

“Technically, the energy complex remains stuck in neutral, with a wide range for prices to swing inside of without creating a new trend,” analysts at wholesale-fuel distributor TACenergy wrote in a note to clients.

“Fundamentally, the case for prices bottoming is getting stronger as lingering supply issues coincide with demand picking up both domestically and abroad.”

 

 

 

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January 10, 2023

10:10 am

BKX, our liquidity proxy, made its Master Cycle high yesterday, on day 266.  Today may be the beginning of the decline from the mid-Cycle resistance at 105.81.  Confirmation of the decline and sell signal may be had beneath the 50-day Moving Average at 103.37.  It appears that a decline may be in order that may last through the end of January.  The Head & Shoulders formation may be our guide for a potential target.  While several US banks are showing weakness, the real problem may be in Europe, where several major banks are on the rocks.

ZeroHedge observes, “The last time we looked at the massive money-printing (literally) hedge fund that also moonlights as the Swiss National Bank, we were stunned to learn that its US equity holdings had exploded to a record $177 billion at the end of Q1 2022, orders of magnitude more than the mere $27 billion it held as recently as 2014.

Since then things haven’t gone exactly as planned for the massive asset gatherer, and the value of its US equity longs has tumbled by almost $50 billion from the record high in Q1 to $139.8 billion as of Q3, a two year low… and a huge loss despite the fact that all the SNB has to do is print some more Swiss Francs, sell them for dollars and then simply buy some more stonks to plug whatever P&L holes it has.”

 

8:10 am

Good Morning!

SPX futures declined to 3870.20 this morning after closing just above the 100-day Moving Average at 3882.38.  It had declined beneath the 50-day Moving Average at 3903.26, confirming a sell signal.  The Cycles Model suggests the decline may intensify over the next week with a likely target near 3400.00.  But the decline may not be over until the end of January.

A look at today’s options chain shows Maximum Pain for options investors at 3905.00.   The noose is tightening with long gamma starting at 3910.00 and short gamma at 3985.00.  Day traders are chasing the close trying get maximum gain instead of maximum pain.

ZeroHedge reports, “US futures dropped as investors waited to see whether Fed Chair Jerome Powell will differentiate himself from hawkish comments made by two policy makers on Monday when he speaks later at an event in Sweden at 9am ET. S&P 500 and Nasdaq 100 futures dropped to session lows around 7:15am ET after trading little changed for much of the overnight session. Traders are also reluctant to take strong directional bets before US inflation data is published on Thursday and visibility clears up on the trajectory of interest rates. The Bloomberg Dollar Spot Index was near session after trading earlier in a tight range, while the rest of the currencies in the Group of 10 were mixed. Treasuries also broke out above a range, hitting session highs around 3.57% around the time stocks stumbled. Oil rose with gold and Bitcoin rallying for a seventh-straight day.”

 

 

VIX futures rose to 22.45 in the morning session, approaching the 50-day Moving Average at 22.78.  A period of strength may have begun yesterday and may last another week.  Four of six indicators have turned positive for the next week, a rare event which suggests a probable breakout.

Tomorrow’s op-ex shows Max Pain at 22.00.  There is a massive short position at 21.00, possibly an attempt to sink the VIX.  Long gamma begins at 25.00.  Long positions are not very well populated.  However, day traders may be quick to move in on a breakout.

 

TNX has risen to 36.00 this morning and may rise above the trendline and Intermediate-term resistance at 36.50.  It made its Master Cycle low on Monday at 35.08, on day 263 of the Master Cycle.  The corrected Elliott Wave structure explains the extension of the prior Master Cycle from November 16 to December 7 to accommodate the completion of Primary Wave [4].  TNX is back on a buy signal above 36.50.

ZeroHedge reports, “At 9am ET, Powell will be speaking at a Riksbank panel on “central bank independence and the mandate – evolving views”, and accordingly, some believe that there is a risk that he disappoints those who are looking for fresh insight on the current monetary policy outlook.

Stocks slumped ahead of Powell’s speech yesterday on fears that Fed chair will talk stocks down as financial conditions have once again eased notably since the FOMC even though Powell explicitly warned that “unwarranted easing is a problem.”

 

 

USD futures are on the rise after a possible Master Cycle low yesterday on day 256.  A potential buy signal may have been made above 103.00.  If so, the new Master Cycle may see a rise in the USD through the end of February.

 

 

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January 9, 2023

1:18 pm

SPX may have reversed from the mid-Cycle resistance at 3950.82.    The reversal may be confirmed with a decline beneath Intermediate-term support at 3925.00 or the 50-day Moving Average at 3904.29.

 

9:50 am

The Ag Index has stopped its decline last Thursday on day 261, very likely ending a retracement.  I had previous thought that the Ag Index may decline alongside other assets as liquidity declines.  However, the Cycles Model may indicate otherwise.  In essence, food may become more valuable than any other asset as liquidity diminishes.

 

9:40 am

BKX, our liquidity proxy, has extended its Master Cycle to test mid-Cycle resistance at 105.88 on day 266 of the Master Cycle.  A reversal may be imminent.  If so, the new Master Cycle may take BKX beneath the neckline of the Head & Shoulders formation in a short-but-sharp decline lasting through the end of January.  Abundant liquidity may be a thing of the past.

ZeroHedge observes, “It would be best to consider the idea that if you have good credit you will always be able to get a loan a myth. This is not about you, it is about markets and reality. People learn in a credit crunch that liquidity is far more important than interest rates. We are currently in a credit tightening cycle and it seems that greed has temporally overshadowed the potential this has to impact the economy.

Many years of an easy credit environment have numbed people to the reality that credit is not a guaranteed right. This is a reality that can hit us like a slap in the face. The notion you stand a snowball’s chance in hell of getting a loan in such an environment has yet to dawn on many people.  ”

 

8:25 am

SPX futures reached a morning high of 3914.80, between the 50-day Moving Average at 3901.44 and Intermediate-term resistance at 3925.32.   The 50% retracement value is 3931.39.  Today SPX will have completed 17.2 market days from the December 13 high and has another 17.2 days to complete this Master Cycle.  Investors are being worn down since this is the 10th day of nominally positive returns after a 7-day decline.  The market just doesn’t feel bearish.

In today’s op-ex, Maximum pain for options investors is at 3875.00.  Long gamma starts at 3900.00, while short gamma begins at 3850.00.

ZeroHedge reports, “Futures extended their Friday post payrolls gain on the back of Chine reopening optimism coupled with speculation that China’s tech crackdown is finally ending – just as we speculated this weekend when reporting on Jack Ma’s ceding control of Ant Financial. S&P futures rose 0.4% as of 7:30 am ET while Nasdaq contracts 100 added 0.5%. And while European stocks were mostly in the green, the bulk of overnight action was in Asia where the Hang Seng Tech Index jumped 3.2% Monday, led by Alibaba Group after a top central bank official said the clampdown on the Internet sector was drawing to a close. The broader market also advanced, with a gauge of Chinese equities listed in Hong Kong rising 2%, helping push the MSCI Asia Index up 20% from its October low, setting it up for a bull market. The dollar weakened to a seven month low and oil rallied.”

 

 

VIX futures are higher this morning and may have crossed above the lower Triangle trendline at 21.50.  Overhead resistance is the 50-day Moving Average at 22.89, offering a potential buy signal.  Traders may recognize a breakout above 23.76 to 24.30.

 

TNX is consolidating above Friday’s low.  Friday is day 260 of the Master Cycle and may actually mark the low, should TNX rise above the trendline at 36.50.  This is a very close call and should be watched carefully.

ZeroHedge comments, “Is the Fed trying to wean the markets off monetary policy? Such was an interesting premise from former British diplomat Alastair Crooke via the Strategic Culture Foundation, to wit:

“The Fed however, may be attempting to implement a contrarian, controlled demolition of the U.S. bubble-economy through interest rate increases. The rate rises will not slay the inflation ‘dragon’ (they would need to be much higher to do that). The purpose is to break a generalised ‘dependency habit’ on free money.”

That is a powerful assessment that, if true, has an overarching impact on the economic and financial markets over the next decade. Such is especially important when considering the effect these repeated monetary and fiscal interventions have had on financial market returns of the previous decade.”

 

USD futures are challenging the trading channel trendline at 102.91 and may be putting in a Master Cycle low on day 256.  Stand by for a reversal that may confirm the low.

 

 

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January 6, 2023

1:15 pm

SPX made a new retracement high, but fell short of the 50-day Moving Average at this time.  It has the potential of a reversal here.  A Key Reversal may take SPX to or beneath 3800.00, so be prepared.  I have not given a buy signal since the retracement has been too choppy, although long.  The Triangle formation fits this description quite well and I have labeled it as such.

 

10:05 am

SPX gapped up to Short-term resistance at 3852.90, but failed to overcome it.  It has since declined to 3809.66 and is hovering between support and resistance.  Should Short-term resistance be overcome, the 50-day Moving Average and the Fibonacci 38.2% retracement lie at 3898.00.  The market is now focusing on weaker wage growth.

 

8:55 am

ZeroHedge analyzes, “There was a general sense of foreboding ahead of today’s jobs report, because as we wrote in our payrolls preview, several strategists noted that there was virtually no number that would be good for risk assets. As Goldman trader John Flood said, “whispers into December’s jobs print are creeping higher as we have already gotten 4 strong labor data points this week… We are still in a good data is bad for stocks set up but the new spin is that really bad data is also bad for stocks. AKA risk is skewed to the downside.” Meanwhile Bloomberg’s Heather Burke writes that the “median estimate for the change in non-farm payrolls is 202k versus a prior 263k and for the unemployment rate to stay steady at 3.7%. But the Fed’s own estimate is for the unemployment rate to shoot up to 4.6% this year. Until we get there, there is not going to be an alignment of demand with supply, which will compel the Fed to stay hawkish with no chance of a pivot.

So with that in mind, here is what the BLS reported moments ago:

In December, payrolls rose 223K, which was down from last month’s downward revised 256K and also the lowest since the negative December 2020 print, but was above the consensus estimate of 202K.”

 

8:40 am

BLS reports, “Total nonfarm payroll employment increased by 223,000 in December, and the unemployment rate edged down to 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, health care, construction, and social assistance.”

 

7:45 am

Good Morning!

SPX futures bounced in the overnight session, only to fall back to the flat line by morning.  The markets await the BLS Employment Situation Survey. due at 8:30 am.  A better-than-expected report may cause a breakdown beneath 3800.00 confirming the decline that may continue through the end of January.  A report that comes in at or beneath expectations may cause a challenge of the 50-day Moving Average at 3898.70.

Today’s op-ex shows Maximum Pain for options investors at 3810.00.  Long gamma begins at 3850.00 while short gamma starts at 3800.00.  A report exceeding expectations may break through the 3800.00 barrier and possibly break the hold that the options players have on the market.

ZeroHedge reports, “US equity futures struggled to maintain gains on Friday as traders awaited the December jobs report that will help chart the path forward for Fed monetary tightening. Contracts on the Nasdaq 100 and the S&P 500 were unchanged at 7:15am ET, erasing earlier gains sparked by a report that China was planning to relax restrictions on developer borrowing, and dial its stringent “three red lines” policy that exacerbated one of the biggest real estate meltdowns in the country’s history. US equities dropped on Thursday as separate data showed the labor market remained strong. European markets were steady as data showed euro-area inflation returned to single digits for the first time since August. Treasury 10-year yields steadied after climbing for the first time this week on Thursday following comments from Fed officials, while a  measure of dollar strength climbed for a second day, as the yen fell to levels not seen in a week, after the Bank of Japan unveiled further unscheduled bond buying to control its yield curve.”

ZeroHedge further states, “As discussed earlier, the rate of payrolls growth is expected to cool (modestly in December, much more in Q1), with the street looking for the addition of 202k nonfarm jobs in December, which would be beneath the prior 263k rise as well as recent averages.

A couple quick points here: as Jim Bianco pointed out economists have consistently underestimated payrolls in 2022 and as shown below, the (first release) of the payrolls report has consistently beaten the median estimate for the past 8 months and 11 of the past 12.”

 

 

VIX futures are nudging against the 50-day Moving Average at 23.04 this morning.  There is pressure for a breakout above the 50-day as trending strength starts to build today for the first time since mid-December.  The Cycles Model calls for a peak during the week of the monthly options expiration on January 18.

Next Wednesday’s options expiration shows Max Pain at 22.00  Short gamma begins at 21.00, while long gamma starts at 25.00.  At the moment, there is more conviction on the short side, but that may chaange with the Monthly Employment Report.

 

TNX rose after the BLS report, but remained beneath the 50-day Moving Average at 37.83.  The trendline is near the Intermediate-term support at 36.67.  Waiting for the breakout or breakdown.

 

 

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January 5, 2023

8:00 am

Good Morning!  I have an abbreviated session due to outside appointments.  I may comment in more detain later in the day.

SPX futures consolidated in a narrow range during the overnight session.   Resistance is now at 3860.00 from the Short-term support/resistance line (not shown).   A breakthrough may allow the SPX to retest the 50-day Moving Average at 3895.00.  The Christmas low at 3764.69 may offer support i a decline.  Otherwise the next support may be at the Cycle Bottom at 3569.57.  The Cycles Model suggests the decline may gather strength through the end of the week.

In today’s op-ex Maximum Pain for options investors is at 3845.00.  Long gamma appears at 3850.00, while short gamma may begin at 3825.00.  Little wonder that the SPX is caught in such a narrow range.

ZeroHedge reports, “US stock-index futures were steady on Thursday, recovering from earlier losses as investors brushed off mostly hawkish commentary from the latest Fed minutes amid further signs of reopening and stimulus in China. Contracts on the S&P 500 and the Nasdaq 100 were both up 0.2% as of 7:15 a.m. ET following a positive session in Asia, driven by a rally in Chinese mainland and Hong Kong equity gauges on news the border with China will gradually reopen. Cautious Fed minutes on Wednesday evening failed to stem optimism, while investors await a private US jobs report later today. Europe’s Stoxx Index was also positive, erasing earlier losses, with retailers leading gains after Next Plc raised its profit forecast. Oil snapped a two-day drop, while the dollar was flat and 10Y TSY yields erased earlier gains.”

 

 

VIX futures continue to consolidate between the lower Triangle trendline and the 50-day Moving Average.  It has challenged the 50-day and may be on a buy signal, to be confirmed with a close above it.   The Cycles Model indicates a period of strength starting tomorrow and lasting through mid-January.  It appears to be significant.

Investing.com comments, “2023 started the same way 2022 ended, volatile and directionless. The S&P 500 opened Tuesday’s session with nice gains, but minutes later the index retreated into the red and quickly retested 3,800 support.

As dramatic as that 80-point collapse felt, rather than trigger a bigger wave of follow-on selling, supply dried up and prices bounced, which wasn’t a surprise because that’s exactly what we’ve seen every time the market tested 3,800 support over the last couple of weeks.

Big money is still on vacation, and that means retail investors are still in control. And in typical retail fashion, these impulsive traders overreact to every little bump in the road. Lucky for us, their accounts are so small they run out of money long before they can do any real damage.”

 

TNX bounced off Intermediate-term support at 36.66, just above the tendline.  The Cycles Model suggests another month of Cyclical decline before the rally resumes.  A breakdown at the trendline suggests a further decline to the Cycle Bottom at 24.10.

 

USD futures rose to a new high at 104.56 in the overnight session.  It is eligible for an aggressive buy signal as it has bounced off the trendline after a possible Master Cycle low (day 250).   Caution may be warranted for a few more days, due to the early low.  The new Master Cycle may last through the end of February.

 

 

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January 4, 2023

7:00 am – I am posting early as I am taking two grandsons to the airport this morning.

Good Morning!

SPX futures made a 61% retracement at 3844.40 in the overnight session and may already be declining again, suggesting the cash retracement may be lower.  The Cycles Model suggests the decline may continue through the end of January.  The weakness of the retracement to the 50-day may be telling us that the intensity of the decline may increase by the end of the week.  A decline in January does not bode well for 2023, as the “January effect” is a known phenomenon that recurs on a Cyclical basis.

ZeroHedge reports, “US futures reversed after Tuesday’s slump and gained on Wednesday, although easing off higher levels reached earlier, amid optimism around a boost from a potential recovery in China’s economy (which however was clearly not enough to find a bid below oil which crumbled for a second day), while investors awaited minutes of the Federal Reserve’s latest policy meeting for clues on the path of monetary policy. Nasdaq 100 futures rose 0.5% by 7:30 a.m. ET, while S&P 500 futures rose 0.3% after gaining 0.5% earlier following a burst of European optimism which sent the Estoxx50 2% higher, aided by European inflation data lifting risk appetite. The risk-on mood was also boosted after Chinese authorities said they are planning to usher in further support measures to ease liquidity stress at some of the nation’s too-big-to-fail developers as the property downturn persists. The dollar fell, erasing all of yesterday’s sharp gains, while Treasuries continued their “peak inflation is behind us and the Fed will soon stop tightening” ascent and added to Tuesday’s gains with yields richer by at least 6bp following wider rally across core European rates after French CPI unexpectedly slowed in December.

 

ZeroHedge relates, “According to Macrotrends.netthe S&P 500 has only seen consecutive years of negative returns three times since 1957, in 1973/1974 and in 2001/2002/2003 with returns getting worse in the second (and third) down year on each of those occasions. Since 1957, the S&P 500 has ended the year in the red 18 times including 2022. On 14 occasions, the index returned to growth the next year.”

 

VIX futures opened beneath the 50-day Moving Average at 23.24.  Piercing the 50-day puts the VIX on a buy signal.  While there may only be two weeks left in the current Master Cycle, the Model suggests Trending Strength may be returning this week.  The upper Triangle trendline may be its initial target.

 

TNX futures are testing the trendline at 36.50 this morning.  It turns out that the trendline seen in this chart may be an intermediate degree, while the longer-term trendline may be located near the Cycle Bottom near 23.95.

 

BKX, our liquidity proxy, lingers above the neckline of its Head & Shoulders formation at 97.00.  Yesterday it reversed from  its 50-day Moving Average at 102.90 on day 260 of its Master Cycle.  A full reversal may be imminent.

ZeroHedge notes, “Money supply growth fell again in November, and this time it turned negative for the first time in 33 years. November’s drop continues a steep downward trend from the unprecedented highs experienced during much of the past two years. During the thirteen months between April 2020 and April 2021, money supply growth in the United States often climbed above 35 percent year over year, well above even the “high” levels experienced from 2009 to 2013.”

 

 

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January 3,2023

10:16 am

The Ag Index may also be reversing today after a Master Cycle high on day 255 (Friday ).  The Cycles Model calls for a possible month of decline.

 

9:00 am

Good Moring!

SPX futures rose to an overnight high of 3883.20, approaching the 50-day Moving Average at 3890.93.  This may be the last hurrah of the correction.  The 38.2% Fibonacci retracement value is at 3894.37.  Today may give us a pivot into the next leg down.

Today’s op-ex shows Maximum Pain at 3825.00.  Long gamma may start at 3850.00, while short gamma begins at 3800.00.  The JPM collar may have expired on Friday.

ZeroHedge reports, “US stock futures rose on the first trading day of 2023, with some of the most beaten down and shorted stocks and sectors outperforming, as optimism crept – however briefly – into the market on the one-year anniversary of the S&P 500’s last record high.  Contracts on the S&P 500 climbed as much as 1.1% before fading much of their earlier gains. One year ago, the S&P closed at 4,796.56: since Jan. 3, 2022, the US stock benchmark endured its biggest annual decline since the global financial crisis, ending the year down 19%. Nasdaq 100 futures rose 0.6% Tuesday. The dollar jumped as the euro tumbled, while Treasuries were headed for their strongest start to a year in more than two decades as investors scooped up government debt on wagers the Federal Reserve will further slow its pace of rate hikes.”

 

 

VIX futures are on the rise, approaching the 50-day Moving Average at 23.48.  The year-long Triangle formation has coiled the VIX into a spring that may unravel up to 100.00 or higher.  The Cycles Model suggests a possible super strength trending for the next two weeks.

 

TNX has had a reversal since Friday, 12-30, leaving a probable Master Cycle high on day 253.  The Cycles Model suggests a possible 5-week decline that may beak through the trendline.  Should the decline go beneath 34.02, it may probe for the Cycle Bottom at 23.96.  Should this take place, it may have an opposite effect on stock prices.

 

USD futures have bounced of the lower trendline after a brief challenge at 103.14.  Should it go lower, it may sink to the Cycle Bottom at 99.44 in the next 1-2 weeks.  A lower USD may indicate money flowing out of the US.  This may also weaken the Stock Market, as the majority of the inflow is going to the DJIA.

 

Gold futures continue to make new retracement highs as the current Master Cycle may last through the month of January.  It has been on a buy signal since November.  The Current Master Cycle may last through the month of January.

 

WTIC made a wide-ranging (key) reversal this morning.  It rose to 81.50, challenging the 50-day Moving Average, then declined beneath Intermediate-term support to 78.15.  Today is day 267, 4.3 days beyond its previous high, completing the corrective structure.  The new Master Cycle may decline through the month of February.

 

 

 

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January 2, 2023

Happy New Year!

Today I am spending time on analysis and corrections that may lead to better forecasting and more accurate placement of our position.  Primary Wave [1] consists of a 51-day Wave (A) followed by a 33-day Wave (B), then an 80-day Wave (C).  The number of days in Primary Wave [1] was 164.days.  Note that Intermediate Wave (C) was the strongest and the longest Wave of the Decline.  Primary Wave [2] took 60 days, clearly the longest correction of the series, since Intermediate Wave (B) of Primary  Wave [2] took 40 days.

Intermediate Wave (A) of  Primary Wave [3] took 58 days.  It was followed by a 40-day Intermediate Wave (B).  Intermediate Wave (C) may take 52 to 59 days.  Should the Cup with Handle formation be accurate, it may be the most powerful declining Wave, about 150% as powerful as Wave (C) of Primary Wave [1].

I am showing all this on a weekly chart to show that, even if the Cup with Handle performs as indicated, the SPX will still be on a secular bull market, since the target is higher than the March 23, 2020 low.

 

The NDX decline has the same Primary Waves, but began in November 2021.  Note that the Intermediate Waves are numbered differently.  Although it is due to decline through the uptrend line near 10900.00, most analysts don’t follow trading channel trendlines and therefore would consider NDX on a secular uptrend, since the proposed low would still be higher than the March 23, 2020 low.

 

 

 

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December 30, 2022

9:32 am

The Ag Index is now in its final week of the current Master Cycle.  It may rise as high as the mid-Cycle resistance at 492.99 as it is in a period of trending strength, but it may not last more than a few days beyond the holidays.  Support lies at the 50-day Moving average at 462.87.

ZeroHedge observes, “Believe it or not, now is a great time to be a farmer. Agricultural commodities are set to lock in another year of annual gains, the longest stretch in decades, prompting higher farm incomes.

The Bloomberg Agriculture Spot Subindex, which tracks everything from corn, soybeans, and wheat to sugar and coffee, will lock in the fourth year of annual gains today.

Bloomberg said this would be the “longest stretch of annual gains since at least the early 1990s as drought and war cut production and erode inventories, keeping global food inflation simmering.”

High prices for crops and livestock indicate boom times for the US farm belt, making farmers, ranchers, and agricultural firms all winners after a decade of sliding net farm income.”

 

8:00 am

Good Morning!

SPX futures declined to the JPM collar at 3825.00 in the overnight session.  The Cycles Model seems to agree by suggesting a quiet market for the next week or so.    Upside potential may be limited by the 50-day Moving Average at 3887.82 or the 100-day at 3905.40.  The 38.2%  Fibonacci retracement value is 3891.40.  The current hourly Cycle may last until (peak) Tuesday morning.  However, the danger of a sell-off intensifies beneath 3800.00.

Today’s op-ex shows Maximum Pain for options investors at 3830.00.  Long gamma starts at 3835.00, while short gamma begins at 3800.00, with the collar extending to 3850.00.

What is a collar?  A collar is an options strategy that involves buying a downside put and selling an upside call that is implemented to protect against large losses, but that also limits large upside gains. The protective collar strategy involves two strategies known as a protective put and covered call.

ZeroHedge reports, “US equity-index futures slumped on Friday, tracking European stocks lower, after Wall Street’s best session of the month and denting hopes that Santa Claus would make a late appearance on the last trading day of the year and ease the pain for investors as global stock markets are about to close the books on their worst annual performance since the global financial crisis in 2008.

Similarly to European bourses, US tech led the decline – after leading yesterday’s gain – with contracts on the Nasdaq 100 down 0.7% at 5:26 a.m. in New York. The tech-heavy index enjoyed a 2.6% jump during the previous session, thanks in large part to a sharp bounce-back in Tesla shares. The Nasdaq has lost a third of value this year as tech stocks emerged as some of the most vulnerable to rising rates. Optimism spurred by weaker than expected continuing job claims data signaling some easing in tight US labor markets faded overnight, taking contracts on the S&P 500 about 0.5% lower, and appears to be headed for that infamous JPM Collar strike of 3835.”

 

 

VIX futures are higher this morning, but still within yesterday’s trading range.  Trending strength may give VIX a boost above the Triangle formation as early as next week.  Strength may intensify through mid-January.

 

TNX is rising above the 50-day Moving Average at 38.19 this morning as it completes Minor Wave 1 from the trendline.  The current Master Cycle is due to end next week.  However, the rally may intensify after a brief pullback following the Pivot.

ZeroHedge reports, “And so, after a strong 2Y auction on Tuesday and a medicore, tailing 5Y sale yesterday, we finally came to the last bond auction of 2022 when just after 1pm ET, the Treasury sold $35 billion in 7 Year paper in what can at best be described as a sloppy affair.

The high yield of 3.921% was just above last month’s 3.890%, and tailed then when issued 3.913 by 0.8bps. This was the third consecutive tail if far smaller than last month’s 2.7bps gaping tail.

The bid-to-cover of 2.454 was higher than both October and November, but below the six-auction average of 2.512.

The internals were stronger, with Indirects taking down 68.1%, the highest since August and well above the 66.0% recent average; and with Directs awarded 16.2%, or slightly below the recent average of 19.8%, Dealers were left holding 15.8%, above the average of 14.2%.”

 

USD futures may have risen above the trendline at 103.50 this morning.   This indicates a potential move to test overhead resistance at 105.32 and above. Trending strength is due for a comeback during the second week of January, giving it an extra push above the 200-day and mid-Cycle resistance at 106.44..

 

 

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