The Practical Investor

9:35 am

BKX, our liquidity proxy, has declined beneath its Cycle Top support at 121.78, creating an aggressive sell signal.  The Cycles Model points to a three week decline, with possible targets at the Cycle Bottom at 92.15.  Should a panic develop, a possible target may be the neckline of a very potent Head & Shoulders formation.  This has implications for both banking and non-banking institutions.

ZeroHedge observes, “The transformation of banking and financial services away from traditional public markets and the banking system itself has been dramatic since the Global Financial Crisis (GFC) of 2008.

This shift has reshaped the financial landscape, as more activities that were once dominated by banks and public markets have moved into private and non-bank financial sectors.

In 2008, when the GFC struck, the financial world experienced a severe breakdown. Banks, which had been the backbone of lending and liquidity, stopped trusting one another, ceasing to lend in overnight markets, which are crucial for short-term liquidity. Simultaneously, public markets suffered immense losses, with the S&P 500 plunging by roughly 50%.

As a result, both the banking system and public markets effectively froze, becoming illiquid and dysfunctional almost overnight. What had once been highly liquid, smoothly functioning financial ecosystems ground to a halt.

ZeroHedge reports, “Money market funds saw yet another week of inflows (+$40BN), taking the total AUM to a new record high of $6.508 TN…

Source: Bloomberg

The inflow into MM comes as bank deposits (on a seasonally adjusted basis) dropped a modest $13BN to the week-ending 10/23…

Source: Bloomberg

But, on a non-seasonally-adjusted basis, total deposits plunged $133BN (the biggest weekly decline since April)…”

Source: Bloomberg

8:00 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

SPX futures are probing lower over the weekend, but still above the 50-day Moving Average at 5697.67.  The 50-day Moving Average is recognized by most traders as a major support and violating it may create a sell signal.  Last Thursday we recognized an early confirmed sell signal at Intermediate term support/resistance at  5765.91,, which may be briefly tested a final time this morning.  Should the 50-day Moving Average be broken, the Cycles Model claims a three week decline may lie ahead.  Should the red trendline at 5550.00 be broken, the initial target may be the Cycle Bottom at 4889.25.  Keep in mind, however, that a larger Cycle may be at play with its target at 4103.00, the October 23, 2023 low.

Today’s options chain shows Max Pain at 5750.00.  Long gamma becomes strong above 5800.00, while sort gamma is strong beneath 5700.00.

ZeroHedge reports, “US equity futures are higher with Mag7 names mixed but NVDA higher on its Dow inclusion with semis also ticking higher; the dollar and yields are lower as the Trump reflation trade took a hit after several polls over the weekend showed a rebound for Kamala Harris. As of 8:00am ET, S&P futures are up 0.1%, while Nasdaq futures are flat; small caps are underperforming as the yield curve bull flattens with the USD weaker on a reversal in the Trumpflation trade. Commodities are catching a bid, led by Energy as OPEC+ decided to delay its production increase again. Today’s macro data is likely to be ignored but given the weaker than expected NFP, investors may want to know the state of the economy as we get past the Election and the Thursday’s Fed mtg. ISM-Services tomorrow is the most important print this week with Sentiment updates on Friday.”

VIX futures appear to be consolidating over the weekend after breaking through the Cycle Top at 23.08.  The Cycles Model shows rising volatility this week, with a virtual explosion of strength in the following week.  Peak values may occur in early December, although the current SPX Master Cycle is due to mature earlier.  There may be a couple of fractal variations that may accommodate that pattern.

While there is an accumulation of puts at 15.00 and 18.00, the calls are beginning to dominate above 20.00-23.00.

TNX slid down to 42.81 this morning, but that may be short-lived as the Cycles Model proclaims a day of strength.  The action of the last week shows a possible phase-shift in which normal retracements are suspended due to unusual strength in the Cycle.  The Cycles Model supports that observation.  The new Master Cycle may las up to 2 months, with serious implications.

ZeroHedge remarks, “TLT.US, the long-dated US treasury ETF, is back trading below its 200-day moving average, and on current form is looking at its fourth year running of negative price returns.

Not that this sell-off reflects any lack of retail investor enthusiasm for US bonds. Quite the contrary.

As US treasuries pulled back, flows into TLT.US went parabolic – and the ETF’s market cap rose from US$10bn in 2019 to US$60bn today.

But long-dated bonds continue to sell off. And like successes, sell-offs usually have many fathers.”

USD futures declined from Friday’s high at 103.89 to a morning low at 103.49.  However, the Cycles Model shows today having a double dose of strength, suggesting a possible breakout above the USD previous high.  The current Master Cycle has about three weeks left as the USD forges higher.

Japanese Yen futures are continuing to climb, having reached 66.08 over the weekend.  The advance is showing growing strength, with a possible Cycle high by the end of November.  Should a panic develop, the Yen may target its September high.  The neckline of a potent Head & Shoulders formation lies at 71.55.

Crude oil futures are coming off a period of strength, having reached a retracement high at 71.81 this weekend.  Should crude fall back beneath the Head & Shoulders neckline at 66.72, that formation may be triggered with consequences shown on the chart.  The Cycles Model suggests that a decline may resume through the end of December.

7:45 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures have risen to 5732.50 thus far, but has not exceeded Intermediate support/resistance at 5763.10.  This action suggests a possible resumption of the decline beneath the 50-day Moving Average at 5695.13, due to a likely negative payrolls print.  The next support may be the 100-day Moving Average at 5589.03.  Beneath that is the year-long Ending Diagonal trendline near 5550.00.

Today’s options chain shows Max Pain at 5770.00.  Long gamma may begin above 5800.00.  Short gamma lies beneath 5750.00.

ZeroHedge reports, “Futures are higher on the first day of the month and ahead of what may be a very poor jobs report, with MegaCap tech leading. As of 8:00am ET, S&P futures were 0.4% with the benchmark on track for its worst weekly performance in more than a year amid unease over the outlook for artificial intelligence and cloud computing following results from Microsoft and Meta;  Nasdaq futures gained 0.5%, as AMZN and INTC surged 5.8% and 5.7%, respectively, after strong earnings while AAPL is down -1% after its guidance disappointed; NVDA is rebounding and is up +2.0% this morning. Bond yields are flat, and the USD is fractionally higher. Commodities are mixed, with oil higher (WTI +2.9%) amid renewed tension in the Middle East, base metals lower, and precious metals modestly higher. The main event today is the jobs report, but we also get the Mfg ISM, US Mfg PMI, and Construction Spending.”

NDX futures rose to 20009.00 this morning, short of Intermediate term resistance at 20051.32.  Last night’s earnings reports were a mixed bag.  Apple slid after guiding beneath consensus.  Intel shares jumped after upbeat guidance.  AMZN jumped on record profit report and solid guidance.  The problem is, everyone is all in, yet NDX is not making a new ATH.

Today’s options chain shows Max Pain at 19880.00.  Long gamma may begin above 19900.00 while short gamma resides beneath 19850.00.

VIX futures pulled back to 22..17 thus far, after breaking out above the Cycle Top resistance at 22.87.  The Cycles Model suggests a likely resumption of the rally should the VIX rise back above its Cycle Top.    The key to a huge volatility swing may be the upcoming payrolls report.  Pundits advise that VIX should fade after the elections.  The Cycles model suggests otherwise.  VIX intensity may increase during elections week and trending strength remains strong through the end of the month.

The November 6 options chain shows Max Pain at 19.00.  Short gamma resides between 15.00 and 18.00.  Long gamma begins at 23.00, but doesn’t have a lot of follow-through.  This may possibly be in anticipation of “calm” seasonality through the end of the year.  It may be anything but calm.

TNX reacted to the payrolls report by declining to 42.34 thus far.  There is support at the mid-Cycle level at 41.92.  Should it breach that support, it may continue its decline to the trendline near 40.00.  The alternate view is that, should support hold, TNX may launce a possible panic rally starting over the weekend.

ZeroHedge comments, “In our nonfarm payrolls preview last night, we said that the October payrolls report may show the first negative print since 2020. Well, moments ago the BLS reported the highly anticipated number and… it was close: the monthly print was only 12K, a huge drop from the pre-revision 254K in October (revised naturally lower to 223K), and just 13K away from a negative print.

The print was so low it was only above the two lowest estimates (those of Bloomberg Econ for -10K and ABN Amr0 for a 0 print). That means it was a 3 sigma miss to estimates.”

Japanese Yen futures climbed to 65.98 this morning as it emerges from a Master Cycle low.  A buy signal may be found above the mid-Cycle resistance at 66.03.

12:39 pm

SPX declined beneath the 3-month median at 5770.53 to a low of  5718.18, near the 50-day Moving Average at 5697.95.  It has triggered a confirmed sell signal at 5770.00.  Should it bounce, there may be a 2-day attempt to take back losses.  However, if SPX  cannot rebound past the median, then a resumption beneath the 50-day may be in order.

8:00 am     2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

NDX futures declined this morning to 20154.70, just above the diagonal trendline and Intermediate support at 20040.28.  A casual observer would conclude that recently the NDX was making a new all-time high.  A closer look, however, tells us otherwise, since the ATH was made on July 11 at 20672.10.  In other words, the NDX has been struggling to re-take a high made over 3 months ago!  While individual stocks may have made new all-time highs, the big picture shows a loss of strength in the index.  So, 20040.00 is the line in the sand.  As I have been warning that it is unwise to be long, crossing this line (20040.00) creates a confirmed sell signal.  

Today’s options chain shows Max Pain at 20425.00.  Long gamma may begin above 20450.00 while short gamma resided beneath 20400.00.

ZeroHedge reports, “Futures fell ahead of the busiest day of the earnings season, dragged down by META and MSFT which are both down about 4% following last night’s earnings releases. As of 8:00am ET S&P futures are down 0.6%, but off session lows; Nasdaq futures retreat about 0.7% after Microsoft and Meta growth outlooks fail to impress investors, with the pair together representing half of the losses in Nasdaq futures. The rest of Mag7 is also lower: AMZN, GOOG, NVDA are all down 1% – 1.4%. AAPL, which had been used as a funding source is -33bps. Bond yields are flat to down 1bps; the USD is flat. Cmdtys are getting hit with the global risk-off tone, but WTI is higher while Brent is lower. The macro data focus today is on ECI, Income/Spending, jobless claims, and the monthly PCE numbers. Mag7 earnings conclude (ex-NVDA which is Nov 20) with AAPL and AMZN.”

This morning the Industrials futures made a new low at 41916.20.  In doing so, it also may have triggered a confirmed sell signal beneath Intermediate support at 42320.00  The Dow Jones Industrials have made their all-time high on October 18 at 43325.00.  Commentators have been ignoring the DJIA simply because the NDX and SPX had resumed their advances.

Note that the SPX made its ATH on October 17.  The SPX sell signal may be confirmed beneath Intermediate support at 5760.76.  Thus far, its low was made at 5767.00.

Today’s SPX options chain shows Max Pain near 5820.00.  Long gamma may begin above 5835.00 while short gamma lies beneath 5800.00.

VIX futures ramped up to a morning high at 21.85, possibly confirming the Master Cycle low on October 18.  The VIX has been making higher lows since the August 5 spike high, establishing its new trend.  A breakout above the Cycle Top at 22.75 would be the icing on the cake.  Don’t buy the seasonality story.  This is a famous meme that has a mixed history.

The November 6 options chain shows Max Pain at 19.00.  Short gamma hovers between 15.00 and 18.00.  Long gamma becomes established above 20.00 with growing interest at 35.00.  An explosion in the VIX may catch the majority of options traders off guard, as there is little hedging.

Yen futures made a new high this morning at 65.94, confirming the Master Cycle low made this Tuesday.  The Cycles Model shows trending strength which may assist the Yen’s advance.Those in the Yen carry trade may find themselves falling behind as the advance in the Yen may cause higher repayments of loans originally taken out due to a low interest rate (.10%).

TNX futures rose to 43.10 this morning.  Should TNX advance beyond its prior high at 43.39, it may be considered to be in a phase transition, where the fractals overlap higher.  The Cycles Model shows a possible explosion of strength beginning over the weekend which may confirm that observation.  Lax attitudes about debt and increasing debt levels affect volatility, while major investors become increasingly wary about their investments in sovereign debts.  The Cycles Model suggests increasing rates through the end of the year.  here are two possible targets indicated.   The first is near 5.3%, a likely near-term target.  The longer-term (2025) target may be 8.2%.

Zerohedge comments, “Meditations In An Emergency

It’s now less than a week to go until the USA decides who is going to be their next President. The state of the political discourse recalls the ‘dramatic crossroads’ meme, where the respective labels attached to the sunny uplands and the grim castle of doom is a Rorschach test to confirm our political priors.

I’ve chosen my words deliberately to say that the USA will be deciding on their next President – rather than the next ‘leader of the free world’ – because one of the options on the table is a more isolationist approach to trade and foreign policy where the USA may decline to perform the leadership role, instead prodding oftentimes recalcitrant allies into shouldering more of the global security burden.

That could draw the curtain on the ‘Team America World Police’ neocon phase, or even Woodrow Wilson’s “making the world safe for democracy” idyll, if you prefer to cast your view further back. What’s now clear is that the bond market and the DXY is becoming sensitized to the potential implications of another Trump win.”

8:45 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures made an attempt at a new ATH, but stopped short at 5857.30.  The .5% rate cut in September has flooded the market with cash looking for a home.  However, smart money knows that it is temporary.  The normal Cycle may be inverted, but it is skating on thin ice.  A nominal new high near 5900.00 is possible

Today’s options chain shows Max pain at 5825.00.  Long gamma may begin at 5835.00 while short gamma lingers beneath 5810.00.

ZeroHedge reports, “US equity futures are flat, reversing modest overnight gains ahead of the next batch of earnings. As of 8:00am ET, S&P futures were flat while Nasdaq 100 futures are up 0.1%; GOOG was the second of the Mag7 to beat earnings, and the stock is +5.4% pre-mkt after beating across the board on strong cloud growth. AMZN, META, MSFT are all trading up at least 1.7% pre-market. Semis are lower with AMD -8.5% and NVDA -80bps. Bond yields are lower as the curve bull steepens ahead of ADP numbers and US Q3 GDP/Price releases. A Bloomberg gauge of the dollar snapped a three-day advance, and the commodity bid returned led by Energy. META and MSFT are the next Mag7 earnings today. Today’s macro US economic data calendar includes October ADP employment change (8:15am), 3Q advance GDP (8:30am) and September pending home sales (10am).”

VIX futures continue to consolidate at a higher level.  The Triangle in the VIX may be a continuation formation, but may not be complete without a rogue Wave (E) breaking beneath the lower Triangle trendline in the next few days.   This would be a perfect fake-out to bring longs back into equities.

The November 6 options chain shows Max Pain at 19.00   Short gamma lies from 15.00 to 18.00.  Long gamma may start above 20.00, but does not have conviction above 23.00.

TNX has pulled back from yesterday’s Cycle Inversion high.  It now has two options to complete the correction.  The first is to decline to the mid-Cycle support at 41.990 in a flat correction.  The alternate is to decline as far as the trendline at 40.50 in a strong push-back in conjunction with the VIX.  This sets up a maximum confusion for traders as they try to make sense out of the whip-saw.

The Japanese Yen rose to 65.60 this morning as it emerges from its Master Cycle low at 64.99.  A buy signal may be found above mid-Cycle resistance at 66.04.  The Cycles Model shows potential strength in the Yen today and again in the first week of November.  Those in the Yen carry trade got a 3% bonus by staying in the trade the past three weeks.  That may disappear quickly at the turn of the month, beneath critical support at 3286..

The Shanghai Composite fell today to 3244.91, beneath critical support at 3286.28.  It is now on a confirmed sell signal.  The Cycles Model suggests a decline to early December with a possible target at or beneath the Cycle Bottom at 2700.44.   Should it decline beneath it, the Head & Shoulders formation may be triggered, with consequences listed on the chart.

Crude oil futures tested its Head & Shoulders neckline at 68.50, then retreated beneath it this morning.  The formation has been triggered, with potential consequences listed on the chart.  The Cycles Model implies that the decline may last until the end of December.

7:45 am

Good Morning!

SPX futures declined to a morning low at 5814.50 thus far.  SPX is now beneath the Ending Diagonal trendline and Short-term support at 5820.00, reinforcing the aggressive sell signal in the past week.  An aggressive sell implies a lightening of the long exposure and a seeking hedges while they are inexpensive.  The Cycles Model suggests that the decline may intensify over the next few days, leading into a month-long rout for stocks.

Today’s options chain shows Max Pain at 5835.00.  Long gamma may begin above 5850.00 while short gamma dwells beneath 5820.00

ZeroHedge reports, “Futures are down small, reversing a modest overnight gain with small-caps underperforming. As of 8:00am ET, S&P futures are down 0.1%, near session lows, while Nasdaq futures are fractionally higher on the session with Mag7 names mixed while GOOG is higher ahead of earnings and semis are seeing a slight bid despite NVDA -60bps. The yield curve is bear steepening with the 10Y yield at 4.30%; the USD is flat. In commodities, oil prices climb along with industrial and precious metals after Reuters reported China is weighing approving over 10 trillion yuan ($1.4 trillion) in additional borrowing in the coming years to shore up the economy and address local governments’ debt risks. WTI is up 1% near $68 a barrel while copper rises 0.9%. Today’s macro data focus will be on JOLTS, Consumer Confidence, and Housing prices. GOOG is the first of 5 of the Mag7 that report this week which may present an inflection point for the group given the reduction in exposure since the summer which has not yet been offset by recent purchases.”

VIX futures have risen to a morning high at 20.10.  A potential breakout from the recent trading range lies above 20.50.  Note the potential Triangle formation, which offers a potential continuation signal.  It remains above the 50-day Moving Average, which is recognized as a confirmed buy signal.  However, few investors, with the exception of professional traders, have taken advantage of the rising VIX.  While the SPX has not made a new high since October 17, it is still perceived to be rising, leaving investors asleep at the wheel.  Commentators don’t know what to make of it.  That may be about to change today.

The October 30 options chain shows Max Pain at 19.00.  Short gamma resides at 17.00-18.00.  Long gamma begins at 20.00 and is populated to 30.00 with a couple outliers above.

The Shanghai Composite Index has declined today, resting on its Cycle Top support at 3281.44.  A breakdown beneath that support gives a confirmed sell signal, with a projected decline to early December.  The implied target may be the Cycle Bottom at 2700.38.  However, there is a substantial probability of declining beneath that level, triggering a massive Head & Shoulders formation.  H&S formations are very reliable, especially in the position shown in the chart.

TNX futures reached a morning high at 43.14, suggesting the cash market may be going higher today.  This correction is called an “expanded” formation, implying that the trend is too powerful for a normal pullback.  The Cycles Model suggests another possible week of expanded correction.  An alternate view suggests a possible “phase transition” which implies that a corrective pullback may be skipped altogether as TNX explodes higher.  Trouble is brewing in bonds and may begin to affect interest-sensitive stocks.  In the meantime, the Treasury is putting lipstick on the pig by trimming debt issuance in the fourth quarter and deferring it to the 1Q 2025.

ZeroHedge reports, “Back in July and exactly one quarter ago, when the US Treasury published its debt issuance forecast for the balance of 2024, we said that the “anticipated numbers came close to our estimates for Q3, but well above our forecast for Q4” with the highlight being the Q4 debt issuance number which the Treasury estimated at $565 billion, $115 billion above our estimate of $450 billion (in part due to the Treasury higher TGA estimate of $700 billion vs our assumption of $650 billion).”

Meanwhile, ZeroHedge comments, “90 minutes an ugly 2Y auction this morning, moments ago the Treasury sold its second coupon offering for the day, this one $70BN in 5Y paper in an auction that was even uglier.”

The Japanese Yen declined to 65.18 thus far this morning, on day 259 of the Master Cycle.  A normal Master Cycle would have ended at the mid-Cycle support at 66.06, but in times of high volatility, that support may be exceeded.  A potential rate hike may send the Yen soaring, with negative consequences for the Yen carry trade.

8:00 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures rose to 5848.10 in an apparent attempt to break out above Friday’s high at 5862.82, where it tested the Ending Diagonal trendline.  Remember, crossing beneath that trendline gave an aggressive sell signal last week.  An aggressive sell signal comes with the instruction to lighten up on long positions.  Selling on the bounce makes today s good day to do so.  The Cycles Model suggests this week may see an increase in trending strength.  Should the SPX remain beneath the trendline, the that translates into a strong decline.

Today’s options chain shows Max Pain at 5835.00.  Long gamma may begin above 5850.00 while short gamma lurks beneath 5820.00.

ZeroHedge reports, “As we enter the most hectic two-week period of the year, futures are stronger following the S&P’s first weekly loss in 7 weeks; both Tech and Small-Caps are outperforming with the yield curve bear steepening and USD flat reversing an earlier spike as a splunge in the yen also reversed following a shock outcome to Japan’s election this weekend which saw the ruling LDP lose its parliamentary coalition majority for the first time since 2009. A sense of relief swept through markets after Israel’s retaliatory strikes against Iran was just as performative as back in April, and avoided oil and nuclear facilities, with crude tumbling 5%. As of 8:00am ET, S&P futures were up 0.5%, but well off session highs; Nasdaq futures gained 0.6% with Mag 7 and semi stocks higher premarket. Oil/Energy commodities plunge, WTI down 6%, as the latest Israeli attack was another “straight to DVD” production and avoided energy facilities in Iran. Base metals have a bid but the balance of the commodity complex is lower. It’s an extremely busy week, with payrolls on Friday and over 40% of the S&P reporting earnings, but today’s macro calendar is light with only Dallas Fed calendar but keep any eye on Japanese politics and any potential read-through for the US yield curve and Credit demand.”

VIX futures continue to consolidate within recent trading ranges in a symmetrical Triangle formation (a continuation pattern).  VIX is on a buy signal and may be prepared to go higher until early December.  It is on a definite uptrend since July and is quite capable of exceeding the August 5 high.

The October 30 options chain shows Max Pain at 19.00.  Short gamma is limited to 17.00-18.00.  Long gamma begins at 20.00 and extends to 30.00 with an outlier at 80.00.  The outlier may indicate smart money taking an extreme position in the event of a blowout move.

The Shanghai Composite Index rose to 3321.22 today, unable to overcome the October 23 Master Cycle high at 3331.08.  A confirmed sell signal awaits beneath the Cycle Top at 3275.93.  The new Master Cycle may resume the decline until early December.  The Target may be the Cycle Bottom and Head & Shoulders neckline at 2701.27.  A decline beneath that level may have drastic consequences, including a possible market closure.

TNX futures rallied to 43.22 this weekend, while the cash market rose to 42.56 this morning.  Yields may go higher, as indicated by the weekend futures.  The Cycles Model indicates trending strength until Wednesday, suggesting a possible spike high in the TNX this week.  An alternate possibility may be a phase transition that allow the current Cycle to continue its uptrend with only a minimal pullback, since trending strength may return early next (election) week.

ZeroHedge remarks, “US 10 year is approaching the massive trend line that has been in place since October 2023. 4.3%, give or take, is the level to watch. Note RSI is at “extreme” levels, but on the other hand, we have traded in overbought land for a few weeks.”

The Japanese Yen futures may have bottomed out over the weekend at 65.175 while the cash market made a low of 65.46.  Today is day 258 of the Master Cycle, so we may see the low in the next day or so.  Change may be imminent in Japan’s political quagmire.  Runaway inflation may result in higher rates at the Bank of Japan and with it may come a dramatic strengthening of the Yen.

ZeroHedge observes, “In a surprising turn of events, Japan’s ruling Liberal Democratic Party and its coalition partner are set to lose their majority in Sunday’s election, according to a forecast from public broadcaster NHK, raising questions about the future of Prime Minister Shigeru Ishiba.

Amid voter discontent over a slush-fund scandal, not to mention Japan’s worst runaway inflation in generations, the LDP and Komeito appear likely to fall short of the 233 seats needed for a majority in the lower house of parliament, NHK forecasts. Ishiba had aimed to secure a majority with his coalition partner, recognizing that the LDP would not retain the 247 seats it held before the election.

Falling short of that goal would mark the first time the LDP has lost a coalition majority in an election since 2009.”

USD futures pulled back to 103.99 as it consolidates in a possible pullback to the mid-Cycle support at 103.65.  This week’s activities may be pretty calm, but next week’s trending strength shoots up for the entire week.  The Current Master Cycle may extend until the end of November (in strength).  Its target may be the Cycle Top resistance at 106.76.

Crude Oil futures dove to a morning low at 66.94 before a bounce to retest the Cycle Bottom (no resistance) at 67.89.  The neckline of the Head & Shoulders formation at 68.00 has been triggered, with potential consequences listed on the chart.  The current Master Cycle may last until the end of the year (in decline).  What does smart money know that we don’t?  Geopolitical risk plays a big part in this scenario.

ZeroHedge observes, “Oil at massive levels (again)

Oil is down big overnight. DB on the weekend Israel attacks: “The targeted scope of the attack and the absence of an immediate retaliation signal have seen markets price out some of the geopolitical risk premium”. Oil is trading at the massive $72 area again. We have dipped below on a few occasions, but these are make or break levels to watch.”

12:00am

Watch out!  BKX may be about to break down beneath its Cycle Top at 120.50, which gives investors an aggressive sell signal.  A confirmed sell signal lies beneath Intermediate support at 115.67.  The 10-year Treasury yield is back above 42.00, threatening bank investment portfolios.  Regional banks are closing branches in the Mid-West to lower expenses.  Warren Buffett may be right.

11:50 am

SPX has just completed its first mini-Cycle from the ATH.  The next week may see a stiff decline to the 50-day Moving Average at 5678.21.  It may be deeper.  In the meantime, commentators are claiming we aren’t long enough.

8:15 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures bounced back to the lower trendline of its 2-month Ending Diagonal near 5835.00 this morning.  The Cycles Model suggests the bounce may be over by mid-day.  From thee, the decline may extend to the   50-day Moving Average at 5668.44.  SPX is on an aggressive sell signal, suggesting lightening up the longs on the bounce.  The 50-day Moving Average is the most common recognition point that all is not well with the bull.

Today’s options chain shows Max Pain at 5835.00.  Long gamma may begin above 5850.00, while short gamma may prevail beneath 5800.00.  Today’s options are a mixed bag and same-day options may affect the outcome.

ZeroHedge reports, “US equity futures are higher for the second day in a row, trimming their weekly drop to less than 1.0%, and led by small caps as investors looked past a jump in borrowing costs that cooled market sentiment earlier in the week. As of 8:00am ET, S&P futures are up 0.3% with Nasdaq futures up 0.2%. Megacap tech are mostly mixed: META +1.0% and AMZN +0.7%, while TSLA -1.7% after its second biggest one day gain in history following blowout earnings, and AAPL is down 1% after China Q3 smartphone sales decline. Treasury yields drop for a second day, down 1-2bps, and leaving the rate on the 10-year note up about one tenth of a percentage point in the week at 4.18%; the USD is flat. Commodities are mixed with oil higher, base metals mixed, and precious metals lower. Today, the macro focus will be Durable/Cap Goods Orders, as well as the final revision to Mich. Sentiment.”

VIX futures continue to consolidate above the 50-day Moving Average at 18.02.  While the Master Cycle may have made its low on October 18, there is room for yet another low in the very near term (caution is advised).  In other words, there may be a “forced calm” in the VIX until after the election.  A possible target may be as low as the mid-Cycle support at 15.54, although the VIX has already “touched” that support twice since August.   Should that new low be made, the Cycles Model suggests an extended uptrend until early December.

The October 30 options chain shows Max Pain at 19.00.  Short gamma resides at 17.00 to 18.00, while long gamma may begin at 20.00.

TNX futures are challenging the 200-day Moving Average at 41.79 this morning.  The Cycles Model “allows” TNX to go lower for another day or two.  However, there may be a burst of strength by mid-week to elevate TNX to a new high.  This promises to make the next couple of weeks very confusing for traders, as bond volatility continues to rise.

The Japanese Yen is challenging its mid-Cycle resistance at 66.09 this morning.  The 200-day Moving Average is just above it at 66.35.  Those investors employing the Yen carry trade may be finding that the extremely low interest rate (.10%)  is a mixed bag, since the Yen has already risen 1.25% in two days.  While there is a (diminishing) probability of a lower low in the next few days,, the Cycles Model warns of a violent reaction in the Yen by mid-week.

USD futures declined to 103.80, in a pullback that may test the mid-Cycle support at 103.65.  While the USD may  correct to a lower level over the next week, the Cycles Model suggests a veritable explosion of strength in the first week of November.

8:00 am   2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures bounced to 20269.30 this morning, reaching its retracement target at 20231.00.  It is poised for a third Wave decline that may take it to its two-year trendline at 18500.00.  Should it surpass that target, a potential Head & Shoulders formation awaits, with an even deeper target.  Currently, the Cycles Model suggests another 4 weeks of decline.  Surging rates are putting pressure on the highly leveraged tech sector.  That being said, the largest source of financing has been from the Bank of Japan with its deeply negative loan rates and growing instability in the Yen carry trade. (read my report on the Yen)

NDX is on an aggressive sell signal, suggesting lightening the longs.  There may be a potential confirmed sell signal at Intermediate support at 19825.00.  Hedging may be employed at this time while hedging is cheap.

Today’s options chain shows Max Pain at 20100.00.  Long gamma may begin above 20200.00 while short gamma starts beneath 20050.00.

The Shanghai Composite Index declined to its Cycle Top support at 3265.26 after having reached its Master Cycle high at 3331.08 yesterday on day 261.  A decline beneath 3265.00 may trigger a decline to its Cycle Bottom at 2703.16.  A further decline may trigger a massive Head & Shoulders formation with dire consequences.  Stay alert!  This could have political as well as economic consequences.

SPX futures rose to 5830.30 this morning, above yesterday’s target for a bounce.  It has overlapped its prior Wave structure, suggesting the next decline may extend to the 50-day Moving Average at 5659.48.  An aggressive sell signal lies beneath Short-term support at 5800.00.  An aggressive sell signal implies lightening the long positions at the very least.  Keeping profits is the first and foremost rule of the market.

Today’s options chain shows Max Pain at 5800.00.  Long gamma may begin above 5835.00 while short gamma lurks beneath 5750.00.

ZeroHedge reports, “.After three straight days of selling, US equity futures are higher with tech stocks leading gains as Tesla surged 13% in premarket trading after it posted its biggest quarterly profit in more than a year. Contracts on the S&P 500 rose 0.5% as of 8:00 a.m. in New York, while futures on the Nasdaq 100 advanced 0.8%, setting up the tech index to rebound from its sharpest decline in almost seven weeks as traders look ahead to earnings from the rest of the “Magnificent Seven,” kicked off by Tesla’s strong performance. The benchmark has yet to fully claw back a summer slump. Overnight, NVDA supplier SK Hynix posted record profit amid strong AI demand; BA fell 2.7% as its bid to end strikes fails while IBM slumped after the it posted underwhelming revenue in the third quarter. Bond yields are lower and the USD is weaker; 2-, 5-, 10-year yields are 3bp, 5bp, 5bp lower. Commodities, including oil, metals and Ags, are mostly higher: Oil +1.9%, Silver +1.8%, Aluminum +1.8% but Palladium is the standout, surging 10% on news the US may impose sanctions on Russian palladium exports (the country produces 38% of global palladium). The main data highlight will be the October flash PMIs from around the world. In the US, we’ll also get the weekly initial jobless claims, along with new home sales for September.”

VIX futures are consolidating above the 50-day Moving Average at 17.98 after yesterday’s surge.  Rising bond volatility may spill over into the VIX, as the traditionally close relationship has recently widened.

The October 30 VIX options expiration shows Max Pain at 19.00.  Short gamma prevails at 17.00 to 18.00.  Long gamma may begin above 25.00, but the strength of conviction is still not there.

TNX has pulled back from its Master Cycle high at 42.58, made on day 265.  The first line of defense for the pullback may be the upper trendline near 40.50.  However, trending strength returns next week, suggesting a possible expanded correction, where the TNX may make a new high before completing the retracement.  This may be a wild and confusing time for bond traders as Treasury liquidity deteriorates.

ZeroHedge observes, “n a day when stocks are dumping, having finally noticed the surge in yields, one would have expected today’s 20Y reopening auction (of 19Y, 10M Cusip UD8) to be solid. It wasn’t.

Stopping at a high yield of 4.590%, this was 55bps higher than last month’s 4.039%, the highest yield since May and also tailed the When Issued 4.574% by 1.6bps, the second consecutive tail in a row (if not as bad as last month’s 2.0bps tail).”

If you have read my blog this far, congratulations!  You will now see why equities and especially the NDX is in such danger of failure.

The Yen has reversed its decline this morning after making its Master Cycle low yesterday, day 253.  It rallied to 66.07.   There is a potential for lingering near the low for a few more days.  However, once it rallies above its mid-Cycle resistance at 66.09, the carry trade party is over.

1:32 pm

SPX has fallen deep into short gamma territory beneath 5830.00.  In addition, it has declined beneath short-term support at 5798.00.  Should it bounce above this new resistance , it may rise back to 5820.  However, the aggressive signal is clear…it’s time to unload those longs.  The next possible bounce area may be Intermediate support at 5723.42.  If the decline goes further, there may be a confirmed sell signal.

8:30 am   2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures consolidated this morning within its very tight range.  A decline beneath 5820.00 breaks the pattern to the downside.  SPX is on an aggressive sell signal, having declined beneath the Ending Diagonal formation.  A confirmed sell signal lies beneath Intermediate support at 5706.0.

Today’s options chain shows Maximum Investor Pain at 5850.00.  Long gamma may begin above 5870.00 while short gamma lies beneath 5830.00.

ZeroHedge reports, “US equity futures are lower for the third day in a row on a busy earnings day with yield and the dollar both extending gains as the prospect of a Trump presidency sparking more inflation and leading to less aggressive rate cuts continued to weigh on markets. As of 8:00am ET S&P and Nasdaq futures are down 0.3%, with megacap tech names mostly lower: NVDA -0.4% and TSLA -0.6%. SBUX fell -5.3% as it missed revenue expectation; MCD is -6.0% lower given the E. Coli headlines. Global stocks trade mostly lower ex China with attention remaining on the micro before NFP next week and the Election/FOMC the week after. Bond yields are 2bp higher pushing the 10Y as high as 4.24%, the highest since July 26. USD surges while the yen plunges as low as 153 as yields on Japan’s 40-year notes reached the highest in 16 years. Commodities are mixed: base metals are higher, oil and precious metals are lower: oil fell 1.0%. Today, key macro data includes Existing Home Sales and Fed Beige Book. We will have a busy earnings schedule across sectors, including BA, IBM, KO, T, TMUS, TSLA, and VRT.”

VIX futures are consolidating at the high end of its trading range, but hasn’t yet broken out.  The Cycles Model indicates that VIX may get a dose of trending  strength over the next few days as it breaks higher.  It has already pulled back to the 61.8% Fibonacci retracement level with a completed declining Wave formation, so the likely direction is “higher.”  Thus far, VIX has been remarkably calm, given the exploding bond volatility.

The Shanghai Composite Index rose to 3331.08 today, a very weak bounce in an extended Master Cycle (261 days).  Time is running out for the retracement.  A normal minimum bounce would be targeted for 3350.00.  The Cycles Model suggests that, once the bounce is finished, the Shanghai Composite may resume its decline until early December.  Note the Head & Shoulders neckline at 2700.00.  Should it decline beneath it, the target may be 1500.00.

ZeroHedge remarks, “One week after China’s military launched massive encircling drills around Taiwan, widely dubbed in international press reports as ‘record-setting’, another round of smaller drills has kicked off Tuesday.

These new drills by the People’s Liberation Army (PLA) are ‘live fire’ exercises and are taking place in the disputed Taiwan Strait. Reports day they have been scheduled to last for four hours and are around China’s Niushan Island.”

TNX has reached a new high (thus far) at 42.46 on day 265 of the current extended Master Cycle.  It is above the mid-Cycle resistance and 200-day Moving Average at 41.85.  Should TNX reverse back beneath the mid-Cycle support, it may pull back to the trendline at 40.50.  However, an alternate view may emerge, called a phase transition, where rising rates may continue through the end of the year.  Wall Street is still in denial.  See below.

RealInvestmentAdvice claims, “The Mayo Clinic defines Post Traumatic Stress Disorder, or PTSD, as “a mental health condition that’s caused by an extremely stressful or terrifying event — either being part of it or witnessing it.” Within the field of PTSD research is a concept called “memory inflation.” Memory inflation occurs when memories of traumatic events become more intense over time.

Memory inflation of past events amplifies one’s emotions and behaviors. As we will discuss, distress from recent price inflation is causing many investors to overly fear that a similar situation will reoccur.”

The Japanese Yen sank to the 61.8% Fibonacci retracement level this morning and may be reversing as I write.  Today is day 253 of the new Master Cycle and the price target may have been met.  The prior Master Cycle landed on day 258.  Should the reversal materialize, the new uptrend may continue through late November.

Gold futures rose to 2772.55 this morning, above the Cycle Top resistance at 2750.96 on day 273 of its extended Master Cycle.  It has since reversed beneath the Cycle Top, giving a possible aggressive sell signal.    The sell signal may be confirmed beneath Intermediate support at 2644.01.  The Cycles Model suggests a decline that may last approximately 4 weeks.

Crude Oil was repelled from the 50-day Moving Average at 72.13 in the overnight market and has declined to 70.13 thus far in a day of strength.  Crossing the Head & Shoulders neckline at 68.50 may trigger that formation.  The Cycles Model suggests the decline may last until year-end.  This is no joke.

8:00 am   2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures slid to a morning low of 20217.60 thus far.  IT lies beneath the two-month Diagonal trendline near 20400.00 and is on an aggressive sell signal.  Short-term support lies at 20113.50 where the aggressive sell may be intensified.  The sell signal is warranted, since the NDX has not made a new high since July.  An aggressive sell signal implies a reduction of long positions.

Q3 earnings are now in high gear.  Investors and hedge funds are extremely long (with margin).  This is where disappointment may be the greatest and sharp reactions may ensue.  The Cycles Model suggests that panic may arise in the next week.

Today’s options chain shows Max Pain at 20375.  Long gamma arises above 20400.00while short gmma dwells beneath 20300.00.

SPX futures declined to 5823.1o this morning.  It also is on an aggressive sell signal beneath the Diagonal trendline near 5865.00.  The next support lies at 5784.00, doubling down the aggressive sell beneath it.    The sell signal may be confirmed at Intermediate support at 5702.00.  The 50-day Moving Average is near 5650.00, which is universally recognized as a confirmed sell signal.

Today’s options chain shows Max Pain at a highly contested 5850.00.  Long gamma lies above 5890.00 while short gamma prevails beneath 5800.00.

ZeroHedge reports, “US futures are lower, extending yesterday’s losses, as treasuries extended their recent rout sending 10Y yields surging briefly above 4.22% before retracing some of the move as traders priced in the growing probability of a red sweep. The Treasury rout has gone global, pushing interest rates across the world higher. As of 8am ET, S&P 500 futures dropped 0.3%, pointing to the first back-to-back decline in about 30 sessions for the gauge. Nasdaq 100  futures underperformed, dropping 0.4%, as tech stocks start to groan against the weight of surging rates; megacap tech all showed declines: TSLA -0.8%, GOOG -0.5%, AMZN -0.5%. The yield on 10-year Treasuries added one basis point to 4.21% after an 11 basis-point surge at the start of the week; the USD is flattish after reversing a modest earlier loss. Commodities are mixed: Oil added 0.5%, base metals are lower, and precious metals are higher: silver rises +1% to $34.5, a new 12 year high. The only macro today are the October Philly Fed and Richmond Fed reports.”

VIX futures rose to 19.40 this morning, breaking above yesterday’s trading range.  Friday’s low may have ended the Master Cycle, indicating a possible new trend.  The Cycles Model indicates a burst of trending strength beginning today with effects lasting through the end of the month.  Commentators are pointing out that investors may be too obsessed with hedging due to the hotly contested election, rising rates and war drums beating in multiple locations.  They claim that hedging may be overdone.  The Cycles, on the other hand, show a rising trend in the VIX, which may become more evident this week.

TNX rose to a morning high at 41.92 thus far.  Today is day 264 in the Master Cycle.  The change in directionality of the Cycles may indicate a change in trend.  Should the Master Cycle end today, TNX may pull back to the 50-day Moving Average at 38.55 over the next two weeks before moving higher.  Be aware that the new rally that follows may last into January.

USD futures are consolidating above the mid-Cycle support at 103.65.  We may see a minor Cyclical pullback this week.  However, the trend may continue through late November.