The Practical Investor

11:35 am

SPX has declined beneath 5840.00 and beneath its Ending Diagonal trendline.  This may be considered an aggressive sell signal.  Confirmation may come at short-term support at 5780.34.  Past performance is no guarantee of future results.

10:55 am

BKX, our liquidity proxy, has begun its decline after making its Master Cycle high on Thursday.  The Cycles Model suggests a month-long decline that may reach the Head & Shoulders neckline at 73.00.  it is on an aggressive sell signal with a confirmation beneath the Cycle Top at 119.49.  The top five banks made their earnings reports last week.  Now we may see the reports from the regional banks, with possible downgrades.

ZeroHedge reports, “After the massive deposit inflows the prior week, US banks saw total deposits plunge in the week-ending 10/09 (latest data released today), down a stunning $69BN (on a seasonally-adjusted basis), erasing the prior two weeks deposit inflows…”

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 are down this morning, making a low of 5841.10.  Friday’s low was 5840.21, so a reversal may not be complete.  However, the Cycle inversion may be substantially finished, leaving Thursday’s high at 5878.46 as the all-time high.   Should the SPX open beneath 5840.00, the SPX may reveal a truncation within the Wave structure.  Otherwise it may rally to 5900.00-5924.00 in a final blow-off.  Hedge funds are “all-in” on a Trump win.

Today’s otions chain shows Max Pain at 5860.00.  Long gamma may begin above 5900.00 while short gamma may start beneath 5810.00.

ZeroHedge reports, “US stock futures drop to start the week, trading near session lows as investors looked to a busy week of company earnings for further signs on the strength of the economy. Oil climbed and gold touched another record on mounting tensions in the Middle East. As of 8:00am, S&P futures are down 0.3% after the index capped its longest run of weekly gains this year, while futures for the tech-heavy Nasdaq 100 fell 0.5% while Nasdaq futures slide 0.6%, with megacap tech stocks all mostly lower: TSLA -0.7%, AMZN -0.3%, AAPL -0.3% pre-market after last week’s furious rally. 10-year Treasury yields rise five four basis points to 4.13% and the dollar edged higher. Commodities are higher led by oil and base metals after a bigger-than-expected China LPR rate cut announcement. Over the weekend, BA achieved a tentative settlement of the strike; BA is up +3.8% pre-market. This week, the key catalyst will be PMIs on Thursday. On earnings,  more than a fifth of the S&P 500 is due to report this week with Tesla Inc., Boeing Co., General Motors Co. and Coca-Cola Co. in the lineup. Approximately 40% of Industrials (including GE, LMT, MMM, BA, UPS, HON, UNP) and 30% of Materials companies will report. In addition, VRT (Wed pre-mkt; focus on data center), IBM and TXN will provide further color on tech and semis. Also keep an eye on DHR (Tue pre-mkt; housing), KO (Wed pre-mkt; consumer trends), TSLA (Wed aft-mkt; first Mag 7 earnings).”

VIX futures have risen to a morning high of 19.19 after testing the 50-day Moving Average at 18.03 on Friday.  That action may indicate that a Master Cycle low may have been made on Friday, as well.  The VIX has maintained its buy signal, despite the pullback, making a 61.8% Fibonacci retracement.  This may be a good time to accumulate shares.

TNX leaped above its declining trend channel, making a new Cycle high.  Wednesday’s low at 39.95 was a precise hit on day 258, suggesting TNX may be capable of going much higher.  However, the mid-Cycle resistance and 200-day Moving Average lie at 41.63 offering the possibility of a more substantial reversal.  Either way, the Cycles Model strongly suggests higher 10-year rates through the end of the year.  Investors are very long treasuries after Powell announced the 50 basis point cut in rates at the very bottom of the Cycle.

ZeroHedge observes, “UNNY HOSTIN: Would you have done something differently than President Biden during the past four years?

KAMALA HARRIS: There is not a thing that comes to mind in terms of — and I’ve been a part of most of the decisions that have had impact.

On Friday, the Treasury Department released a report showing the kind of impact Harris is talking about. If nothing else does, it should cost her the election.”

Gold futures made a new all-time high at 2755.30 this morning.  It may be in its final thrust as it threw-over its Cycle Top at 2741.89.  The Cycles Model anticipates a possible month-long decline post-reversal.  Should that be the case, a possible target may be the October 31, 2022 low at 1618.30.  Considering that the Cycle is extended and a throw-over has occurred, a move beneath the Cycle Top at 2741.89 should be a signal to “lighten up” long positions (a possible aggressive sell signal).  Meanwhile, experts are calling for gold above 3000.00.

ZeroHedge comments, “Catherine Austin Fitts (CAF), Publisher of The Solari Report, financial expert and former Assistant Secretary of Housing (Bush 41 Admin.), gives her take on gold, Kamala, Trump, control, cash, murder and water. ”

The Shanghai Composite Index may have reached its Master Cycle high at 3300.66 today and may have begun its reversal lower.  A move beneath the Cycle Top support at 3249.85 may confirm the reversal with a sell signal.  Those who went long at this bounce may find that they were attempting to catch falling knives.

Crude oil futures bounced from its Cycle bottom at 68.27, attempting to reach Intermediate resistance at 70.60.  Intead, it reached 70.34 before turning back down.  Crude now runs the risk of falling beneath the Head & Shoulders neckline at 68.50 and the Cycle Bottom support at 68.27.  Should it do so, it may trigger the Head & Shoulders formation with consequent results.  The Cycles Model suggests the ensuing decline may run until the end of the year.

10:25 am

BKX, our liquidity proxy, made its reversal from the upper trendline of its 10-month trading channel yesterday while completing its extended Master Cycle.  A sell signal awaits it beneath its Cycle Top support at 119.22.  The Cycles Model suggests a decline may be in order until late November.  Note the Head & Shoulders neckline near 73.00.  While the major banks appear to be basking in their good fortune to be profiting from the markets, the regional banks are pulling back due to increased loan losses and lagging interest income.

ZeroHedge remarks, “94-year-old Warren Buffett’s Berkshire Hathaway offloaded even more Bank of America shares this week to sustain <10% regulatory threshold, a move triggered by the bank’s own share buybacks, which pushed Berkshire’s stake back above the 10% mark. Buffett’s strategy is clear: keep the stake below this threshold to avoid constant SEC reporting that results with every sale.

Bloomberg data shows Berkshire’s total proceeds from selling BofA shares topped $370 million this week. The selling abruptly began in mid-July.”

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 rose to 5859.00 this morning.  Chances are better than even of a new all-time high this morning.  Should the previous high be broken, there are indications of a rise to 5924.00 in a blow-off.  In the event of a reversal, an aggressive sell signal may be found beneath 5800.00.

Today’s options chain (pm) shows Max Pain at 5840.00.  Long gamma begins at 5850.00 while short gamma may start beneath 5800.00.

ZeroHedge reports, “US equity futures are higher with tech leading once again, thanks to results from Netflix which beat lofty expectations and sent its stock to all time highs. As of 8:00am, S&P futures were up 0.2% to 5,900 while Nasdaq futures gained 0.5%, with most MegaCap Tech named higher: NVDA +1.2%, AAPL +1.1%, and NFLX jumped 6% post earnings beat. Bond yields are mixed and USD is lower; 2-, 5-, 10-year yields are 0.45bp lower, 0.23bp higher, and 0.6bp higher, respectively. Commodities are mixed with oil higher, base metals lower, and precious metals higher after China macro data beat estimates but reaffirmed the downward trend of China’s economy. Today, the key macro focus will be housing data (Housing Start and Building Permit), as well as AXP and PG earnings.”

VIX futures consolidated this morning, awaiting the outcome of options expiration.  It may have made its Master Cycle low yesterday at 18.88 on day 248.  The Cycles Model indicates a surge in trending strength starting next week, so today may be the last day to attempt a lower low.

The October 23 options chain shows Max Pain at 18.00.  There is no appreciable short gamma.  Long gamma is also in short supply with a possible long gamma starting at 20.00 and fizzling out above 28.00.  It is this type of scenario that catches the most investors off guard.

The Shanghai Composite Index rose to 3152.82 today in a retracement bounce that may reach the 50% retracement level near 3400.00 early next week.  The Cycles now give the Shanghai to early December to reach the Cycle Bottom.  Investors, on the other hand, have turned bullish after a 50% decline from the spike top.  The China trade has become crowded with longs hoping for a repeat of the earlier rally.

ZeroHedge comments, “On the day the Biden admin decided to flagrantly misrepresent the last retail sales report before the election, and used the biggest ever September seasonal adjustment on record to make an unadjusted retail sales decline into a blazing hot print, once again misleading the Fed that the economy is doing much better than it is, something Powell lamented after the BLS recently “revised out” some 818K jobs …

… China decided to out BS the BLS, and moments ago reported economic “data” that was fake, goalseeked and, well, BS from top to bottom.”

TNX futures rose to 41.23 this morning prior to the cash open.  It is currently resting on trendline support at 40.70.  Should it break lower, it may briefly decline to 40.00 to complete the Master Cycle.  However, the long term trend is to go higher through the end of the year.

The Japanese Yen futures rose to 67.07 this morning after extending its Master Cycle low to 66.52 yesterday.  Hedge funds and institutions have been piling back into the Yen carry trade, as interest rates from the Bank of Japan are still .10%.  The Yen is due to reach the Cycle Top by the end of the month.

Gold futures made another all-time high at 2732.10 today at 2732.10.  It may attempt to reach its Cycle Top at 2737.68 yet before making its Master Cycle reversal.  Ahead of it is a month-long decline that may reach the Cycle Bottom at 1988.89.  Gold’s inverse correlation to the USD has taken a hit recently.

USD futures have pulled back from its mid-Cycle resistance at 103.66 this morning.  It may consolidate for as long as two weeks to digest the overbought condition.  However, the rally may continue through mid-November once the retracement is over.

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 above the former all-time high at 5871.41.  The next level of fractal resistance lies at 5924.00 with additional short-term Cyclical resistance at 5902.00-5920.00.  There are multiple reasons for this inversion, some of which may include:

• Money fleeing from Chinese and European markets.
• Trump’s  ascendancy in the polls
• Interest rates temporarily easing
• The Yen temporarily easing.
• Technical support (Cycle Top) at 5843.00.
• Buybacks coming back.

However, there are unknowns that may reverse the SPX on a dime which I will not enumerate.  The Cycle Inversion is an outlier that may fall apart at any time.

Today’s options chain shows Max Pain at 5245.00  Long gamma may begin above 5870.00 while short gamma strengthens beneath 5800.00.

ZeroHedge reports, “Futures are higher and on the verge of another all time high with Tech leading: NVDA is up +2.5% pre-market as TSMC reported strong upside on margin, along with comments on “extremely robust AI related demand”. As of 8:00am, S&P futures rose 0.4% to 5,910, just shy of the 5,918 all time high; Nasdaq 100 futures climbed 0.9%, led by an advance in chip stocks after TSMC posted a better-than-projected 54% rise in quarterly earnings. That helped reverse the impact of ASML Holding NV’s lowered 2025 guidance, which halted a rally that had pushed US-traded shares to a three-month high. Europe’s Stoxx 600 index gained 0.7% ahead of the ECB’s second consecutive rate cut. China stocks extended their post-euphoria slump and erased gains on disappointment over the outcome of a joint ministry press briefing about the property market which again lacked critical details on the stimulus package. Iron ore tumbled to a three-week low ahead of data on Friday which is expected to show the economy grew at its weakest pace in six quarters. Bond yields are higher and USD is lower; 10-year yields are 2bp higher to 4.03%. Commodities are mixed: Oil and base metals are higher, while precious metals are lower.”

The Shanghai Composite Index consolidated beneath the Cycle Top, on a confirmed sell signal.  Should the Shanghai not be able to regain support at the Cycle Top, it may decline to the Cycle Bottom in short order.  The Chinese equities market may be one of the “unknowns” that may spill over into the US market, since the government may install capital controls to stop the bleeding.  One little-known item is that the surge in bitcoin may have been influenced by money finding its way out of China.

VIX futures have declined to a new low at 18.88.  The 50-day Moving Average is at 18.32.  Should the Cycle Inversion linger, the VIX may have its Master Cycle low in the next week.  The 50% retracement level is at 19.08 while the 61.8% Fibonacci retracement level is at 18.14.

Next week’s options chain shows Max Pain at 19.00.  There is no discernible short gamma.  Long gamma begins at 20.00 and may go as far as 28.00.

TNX rose to 40.79 this morning, challenging the upper trendline of the (former) trend channel and mid-Cycle resistance at 41.83.  Yesterday’s low at 39.95 was on day 258 of the Master Cycle.  Should the resistance hold, TNX may probe lower to complete the Cycle. in the next few days.

USD futures are consolidating beneath the mid-Cycle resistance at 103.58 after challenging it.  USD may take a short-term rest after outperforming for the past two weeks.

Japanese Yen futures may have completed their minor retracement this morning at 66.91.  It may go higher until the end of the month.

Gold futures extended their rally to 2014.17 this morning, on their way to a new all-time high.  Today is day 267 of the current Master Cycle.  It is extended, but within normal bounds.  It is possible that gold may rally to the Cycle Top at 2733.93.  However, that is not an absolute necessity.  It is likely  that the high may be made this week.  Contrary to popular thinking, gold is not a hedge against inflation.  Instead, it may more likely be an inverse indicator of political confidence, worldwide.

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 are consolidating beneath Cycle Top resistance at 5837.58.  Crossing beneath it gave the first aggressive sell signal.  The next support is a short-term trendline (not shown) at 5780.00, which offers a second, more insistent aggressive sell signal.  Aggressive sell signals imply a lightening of long positions and employing partial short positions, with a possible risk of a retracement.  Intermediate support lies at 5665.77, giving the first confirmed sell signal.  No longs should be owned and short positions may be actively employed.  Beneath that is the 50-day Moving Average at 5593.80, broadly recognized as a confirmed sell signal.  The Cycles Model had suggested a top on September 26, which I had inferred to be the all-time high.  That was not so.  Instead, the Cycles demurred to the Wave formation, a Cycle Inversion that required a marginal new high.  This created a throw-over above the Cycle Top for a new all-time high.  Now that it is beneath the Cycle Top, there is a possibility of reaching the Cycle Bottom over the next 6 weeks.

Today’s options chain shows Max Pain at 5825.00.  Long gamma may begin above 4845.00 whjile short gamma lurks beneath 5800.00.

ZeroHedge reports, “Futures are mixed as chip stocks recover partially from Tuesday’s rout and as traders looked ahead to more major earnings. As of 8:00am ET, S&P futures are up 0.1%, a day after a profit warning from Dutch chip equipment maker ASML rattled sentiment, and boosted by an across the board beat from Morgan Stanley which jumps 3%, Nasdaq 100 futs are up 0.2% with Nvidia rising 0.8% after sinking nearly 5% on Tuesday. Global equities trade mostly lower on follow through after ASML’s booking miss weighed on Semis and in turn broader markets (ASML call 9am EST today // Tokyo Electron -9%/SK Hynix -2% etc/Taiwan Semi -2% overseas overnight // watch for TSM earnings tomorrow). FTSE +55bps/DAX -35bps/CAC -50bps/Shanghai +5bps/Hang Seng -16bps/Nikkei -1.83%. Bond yields are lower with the 10Y yield dropping to just above 4.00%, the Bloomberg dollar index is unchanged. Commodities are mixed: precious metals are higher, while base metals are lower; oil edged higher as Israel said it was keeping options open in how to attack Iran: UST10yr -3bps @ 4.00% // WTI -$0.35 @ $70.20 // Bitcoin +2.10% @ $68,055. Main event for now is still earnings with ABT, CFG, FHN, MS, PLD, SYF, USB reporting pre open // AA, CCI, CSX, DFS, FR, KMI, PPG, REXR, SLG, STLD post close. Focus today in US will be earnings (ABT, MS, PLD); ASML earnings call will be at 9am ET.”

VIX futures are consolidating within yesterday’s trading range.  There is a small risk of a new low near the 50-day Moving Average at 18.48 today.  The Cycles Model then calls for strengthening trend over the next week.  There is a potential for a new high above the August 5 high by the end of the month.  Other experts (see below) imply that the VIX may stay rather range-bound.

The October 23 options chain shows Max Pain at 20.00.  There is a dearth of short gamma as today’s options expiration takes out the shorts.  However, long gamma is not highly subscribed.

RealInvestmentAdvice opines, “The financial media frequently opines on what the daily gyrations of the VIX (implied volatility index) signal regarding investor sentiment. Despite how often it is quoted and discussed, many investors do not truly appreciate what implied volatility measures.

We take this opportunity to help you better understand implied volatility. Furthermore, we discuss other lesser-followed measures of implied volatility that help better assess whether implied VIX readings infer bullish or bearish sentiment.”

The Shanghai Composite Index fell to 3167.64 in the overnight market, reinforcing its confirmed sell signal.  The Cycles Model suggests a possible panic decline to the Cycle Bottom in the next week or so.  In fact, should it fall beneath the neckline at 2700.00, it may trigger that formation.  Currently, there is still a 50-50 possibility of a bounce at the neckline.

ZeroHedge remarks, ” Two weeks ago, when the world was still enamored with Jim Cramer’s idiotic idea that Chinese stonks can magically double in just a few weeks simply because Beijing had some soothing words to say and because when it comes to greater fools, China has more than anyone else, and when Goldman laughably upgraded Chinese stocks after the 30% runup had already taken place,we warned that the party was about to end.”

TNX may have made its Master Cycle low this morning at 40.10. The futures dipped to 40.00 before reversing.  If so, it should waste no time rising back above the trading channel trendline at 40.70.  The mid-Cycle resistance and 200-day Moving Average lie at 41.73 to 41.84.  Above that, traders will have no doubt that yields may be on a secular rally.  The target may be the Cycle Top at 47.25.  In fact, the Cycles Model projects the rally in yields to continue to the first week of January.

Gold futures rose to a morning high at 2701.05 as it nears its Cycle Top resistance at 2730.30.  While gold appears to be on a gravity-defying, never-ending rally, the fact is both Cycles and the Wave analysis say it is on its last legs.  Today is day 266 of the Master Cycle.  This implies the rally in gold may end this week.  The implied target for the decline to follow may be the October 31, 2023 low at 1618.00.  The Cycles Model suggests the first leg of this decline may not terminate until late November.

Crude oil futures dipped to 70.06 this morning before a bounce.  The wild swings in price hides the long-term decline in oil.  Oil volatility is even leaving the VIX behind.  Note that crude is often a leading indicator of what may come in equities.  The Head & Shoulders neckline lies at 69.56, in conjunction with the Cycle Bottom.  Should that be broken, the Head & Shoulders formation may be activated, sending prices to a possible low near 40.00.

2:19 pm

SPX crossed beneath the upper trendline of its Rising Wedge formation and beneath its daily Cycle Top support at 5837.86.  This is a good time to reduce long exposure as an aggressive sell signal has been given.  The next support is the trendline at 5775.00 where a sell signal may be confirmed.  Further confirmation lies at 5755.00 for those demanding a double indicator.

2:03 pm

BKX made its Master Cycle high at 122.73 on day 271 of its current Master Cycle.  One of the reasons for this is that the 5 largest banks have all posted their 3rd quarter earnings.  Of course, their profits were buoyed by their investment portfolios.  Yet their bread-and-butter interest earnings and loan portfolios are giving them a massive headache.  And it may get worse as time goes on.  No one is taking into account the huge liquidity drain about to take place in the hurricane-hit regions.

ZeroHedge remarks, “It wasn’t just Goldman Sachs that reported better than expected Q3 earnings this morning: on the surface, Bank of America surprised to the upside as well, and in fact its FICC division reported an even better results than Goldman’s. The bank, which had gotten Warren Buffett’s seal of disapproval, after the billionaire investors dumped much of his shares in what was once a Top 5 position, performed better than expected as it benefited from volatile markets while net interest income topped analysts’ estimates. On the other hand, there were also quite a few red flag, with the company’s Net Interest Yield sliding to a cycle low even as charge offs and credit losses jumped to the highest in years.”

1:15 pm

NDX is the first to challenge its short-term trendline at 20200.00.   This may be considered a confirmed sell signal, since the NDX failed to make a new ATH.  The next support lies at 20050.00, giving additional confirmation to the sell signal.  Equity funds gurus are all trumpeting a higher market by the end of the year as the buyback blackout comes to a close and equity fund managers are being “forced” to buy back in.  However, “fundamentals” don’t tell the whole story as smart money stays out.  It’s the leveraged hedge funds and ETFs that may be affected first by an “unexpected” sell-off.

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 were flat in the overnight session.  Citigroup, Bank of America, Wells Fargo and Goldman Sachs. have all released their third quarter earnings, beating (lowered) estimates.  Later today will see investor meetings and press releases on the future outlook.  Of course, all made profits on their trading department, but net interest income fell and loan loss reserves were increased.  Should the market decline, the fourth quarter may be a stark contrast to this blow-off.  The SPX Cycle Top is at 5832.00, where an aggressive sell may reside.  A short-term trendline lies at 5775.00 where the aggressive sell becomes more imperative.  A confirmed sell signal lies beneath Intermediate support at 5660.00.

Today’s options chain shows Max Pain at 5850.00.  Long gamma may reside above 5885.00 while short gamma may begin beneath 5835.00.

ZeroHedge reports, “US equity futures pointed to an unchanged open as earnings from Bank of America and Goldman Sachs beat expectations while megacap tech stocks showed modest moves. As of 8:00am ET, S&P futures were unchanged after closing at a 46th record high on Monday, while Nasdaq futures dipped 0.1% as Nvidia shares fell 1% in premarket after Bloomberg reported Biden administration officials have discussed capping sales of advanced AI chips from Nvidia and other companies. Bond yields are lower and USD is weaker; 2-, 5-, 10-yr yields are down 0.36bp, 1.75bp, 3.53bp respectively. Oil tumbled as much as -5% from yesterday close after the WaPo reported that Israel may avoid targeting Iran’s crude infrastructure, although Israel later denied the claim. Chinese stocks slumped: HSI and CSI closed -2.6% and -3.7% lower today after the WSJ reported that the motivation behind the recent policies is not “massively stimulate demand but to fend off a brewing financial crisis.” Aluminum and Copper are both more than -1% lower this morning. On the macro front we get October Empire manufacturing (8:30am) and September New York Fed 1-year inflation expectations (11am), and three Fed speakers. All eyes on earnings from BofA and Goldman today.”

VIX futures declined to a marginal new low at 16.60 this morning, approaching the 50-day Moving Average at 18.84.  This is the highest level of support since last October.  The Cycles Model suggests a new high may be made by the end of the month.

Tomorrow’s op-ex shows Max Pain at 20.00.  Short gamma lies between 14.00 and 19.00.  Long gamma.  Long gamma intensifies at 25.00 and runs heavy to 55.00.

TNX declined to 40.51 this morning after breaking out above its declining trading channel.  The Cycles Model suggests a corrective low may be made by the end of the week.  Following that, TNX may rally until the first week of January with a potential target near 53.00.

The Japanese Yen futures are emerging from its Master Cycle low at 66.66 and may be poised to take out the neckline of the Head & Shoulders formation at 71.50.  The Yen carry trade is about to become a thing of the past.  The Cycles Model suggests aa possible panic rally above the neckline by the end of the month.

Gold futures are consolidating after a bounce from its Master Cycle low on October 10.  The Cycles Model infers a possible rally to the Cycle Top at 2726.89 by mid-November.  An alternate view may arise should the Cycle Top be made in the next week or so.  The reason is that the current Cycle may show weakness until the end of the month.

Crude oil futures declined to 69.72, at the Cycle Bottom and Head & Shoulders neckline, then bounced.  The Cycles Model shows another week of possible decline, suggesting it may trigger the Head & Shoulders formation.  This is not good at two levels, the first is tha it shows a declining economy.  The second it that the price of oil may be an advanced indicator of the equities market.  Pundits claim there is no longer term trend.  However, their focus is too short.  Crude oil has just emerged from a time-consuming Triangle formation that is breaking to the downside.

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 probed to 5829.60 this morning, challenging the Cycle Top  currently at 5825.65.  The Cycle Top is dynamic.  It is recalculated every day and offers resistance to the Cyclical movements at the end of the Cycle (Wave 5).  The expectation today is that the SPX may briefly exceed the Cycle Top but go into full reversal by mid-day.  A Key Reversal may be in the making.

Today’s options chain shows Max Pain at 5800.00.  Long gamma becomes strong at 5840.00.  Short gamma may begin at 5770.00.

ZeroHedge reports, “US bonds may be closed for the Columbus Day holiday, but stocks are open and merrily melting up on pace for their 46th record high of 2024. As of 8:00am, S&P futures are higher by around 0.2% and trading above Friday’s all time high while Nasdaq 100 futs rise 0.2% with NVDA, AAPL, and GOOG leading in MegaCap Tech as investors gear up for the latest round of corporate earnings and turn increasingly turn their focus toward the US election where a pro-market Trump victory looks more likely by the day. In China, the CSI 300 Index closer ~2% higher after a choppy session where markets pumped, then dumped, then rebounded once the National Team stepped in as traders digested the latest disappointing pledges from Beijing over the weekend to support the economy. Europe’s Estoxx 50 is flat. US cash bond markets are closed today; the Bloomberg Dollar index is higher. Commodities are mixed: oil prices are -2.3% lower, base metals are higher, and precious metals show mixed movements. This week, we will have a busy earnings calendar, along with Retail Sales release on Thursday.”

VIX futures consolidated beneath the Cycle Top at 22.12 as it awaits the SPX reversal.  VIX may be poised to beak through the Cycle Top and may exceed the August high by the end of the month.

The October 16 options chain shows Max Paina at 21.00.  Short gamma is strong between 14.00 and 19.00.  Long gamma may begin at 25.00 and remain strong to 55.00.

TNX futures rose to 41.43 over the weekend, but subsided as the cash market (for treasuries) opened.  It is likely that TNX  may challenge the mid-Cycle resistance at 41.85 by mid-week, when a reversal may take place.

The Shanghai Composite Index bounced to 3294.00 in an attempt to test the weekly Cycle Top at 3387.61.  Th e weekly chart shows a massive Head & Shoulders formation that may be triggered in the next two weeks.  We must be aware of a decline to the bottom, as it indicates a lack of liquidity that may spread worldwide.  A failure of this magnitude may lead the Chinese government to consider alternatives to their attempts to reliquify the markets.  Studies show that Chinese M1 (total money supply)grew  this year but M2 (cash and savings) shrank more than M1 grew.  This shows a lack of confidence in the Chinese economy.  To counter the lack of confidence the Chinese government may turn to war as a distraction.

ZeroHedge observes, “On Monday China has launched large military drills encircling the self-governing island of Taiwan, which Taipei has blasted as an “unreasonable provocation”. China’s PLA military deployed warships and fighter jets to send a “stern warning” against “separatist acts of Taiwan independence forces”.”

Japanese Yen futures may be making their Master Cycle low today on day 265.  The era of “easy money” may be over as the rise in the Yen may overcome the attraction of low interest rate loans from the Bank of Japan.

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.”

The Shanghai Composite Index declined to a low of 3187.99, triggering a confirmed sell signal by declining beneath the Cycle Top support at 3225.07.  The Cycles Model suggests a continued decline to the Cycle Bottom at 2712.42 in a little over a week’s time.  Should this occur, it may snuff out all urges to speculate in Chinese stocks for a long time.

SPX futures declined to a morning low at 5764.70.  Note the Master Cycle high may have been made on September 26, but is not the all-time high.  The final high appears to be targeted for the Cycle Top at 5821.04 with a possible overshoot.  Should the ATH be made today, we may also see a Key Reversal by the close.

Today’s options chain shows Max Pain at a highly contested 5750.00.  Long gamma may begin at 5775.00 while short gamma may start below 5735.00.

ZeroHedge reports, “Futures are lower ahead of the last trading day of the week, but well off session lows as JPM earnings were solid enough to push the stock higher and reverse some of the market’s losses as Q3 earnings season was officially launched. As of 8:45am, S&P futures are down fractionally, while Nasdaq futures dropped 0.2%, hammered by TSLA which is down -5.8% pre-market as the Robotaxi event failed to meet market expectations. Bond yields are higher with the 10Y rising 3bps to 4.09%, while the Bloomberg Dollar index reversed earlier losses. Commodities are mixed with Oil fractionally lower, base metals higher, and pPrecious metals mixed. Today’s macro focus will be banks earnings and PPI, which came in fractionally light MoM (headline 0.0% MoM, Exp. 0.1%; core 0.2%, exp. 0.2%), but hotter on a YoY basis (core 2.8% YoY, Exp. 2.6%). Over the weekend, key macro catalysts will be China finance minister’s press conference on stimulus package.”

VIX futures have declined to 20.64 this morning.  Should there be a final rally in the SPX, VIX may decline to the 50-day Moving Average at 18.88.  However, it may resume its rally by the weekend.

The October 16 options chain shows Max Pain at 20.00.  Short gamma inhabits the space between 14.00 and 19.00.  Long gamma may begin at 21.00 and rises to 50.00.

TNX is consolidating at the trendline.  The current Master Cycle may have only a week to go, but the Cycles Model suggests maximum trending strength over that period.  The Cycle Top at 47.25 may be the intended target.

The Japanese Yen may be consolidating after yesterday’s potential Master Cycle low at 66.86 on day 261.  Traders have been given the all-clear to reenter the Yen carry trade.  However, the uptrend may receive a new burst of energy this weekend.

BKX may be poised for its final probe toward its Cycle Top at 117.56.  JPM, Wells Fargo and Citigroup are scheduled to report earnings today.  While these early reports may, on balance, be positive, there is danger lurking in the regional banks, especially in the southeast, as victims scramble to raise cash to rebuild after hurricanes Helene and Milton.  In addition, having survived the quarter-end repo surge, banks may be approaching another repo crisis as the demand for liquidity spikes.

9:52 am

BKX may have reached its Master Cycle high at 116.27 yesterday, on day 265.  Should that be the case,  a sell signal may be obtained beneath Intermediate support at 113.05.  Further confirmation lies beneath the 50-day Moving Average at 111.57.  The double hurricane season and associated stressors may bring the demand for cash far beyond the bank’s capabilities to supply through loans or withdrawals.  In addition, insurance companies will also be coming under stress.  This event may be the economic equivalent of the Great San Francisco Earthquake.

ZeroHedge observes, “Hurricane Milton moved off Florida’s east coast early this AM, downgraded to a Cat. 1 storm. Milton made landfall around 2030 ET on Wednseday near Siesta Key, Florida, a barrier island next to Sarasota. The storm’s destructive winds and torrential rains sparked widespread power outages to over 3 million customers in the state.”

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 remained flat overnight, but have started to decline at the release of the CPI report.

The rally may be complete as of yesterday’s close at 5796.80.  The chances of reaching the Cycle Top at 5818.00 may diminish with the passing of time.  The nearest support lies at 5726.67, offering an aggressive sell signal beneath it.  A confirmed sell signal may be obtained beneath Intermediate support at 5641.59.  Should the reversal take place today, it may do so with elevated volatility.

Today’s options chain shows Max Pain at 5755.00.  Long gamma may start at 5790.00 while short gamma begins beneath 5745.00.

ZeroHedge reports, “US equity futures are lower as traders awaited the latest inflation data that will determine if the Fed opts for a slower pace of interest-rate cuts. As of 8:00am, S&P 500 futures are down 0.2% after hitting a record high on Wednesday; Nasdaq futures are down by the same amount with most Mag7 stocks flat; TSLA is leading with a +1.1% pre-market move ahead of its Robotaxi unveil event tonight. Delta Air Lines Inc. kicked off the third-quarter earnings season, with profit and sales forecasts falling short of expectations. JPMorgan Chase & Co. and Wells Fargo & Co. are scheduled to report on Friday. Ten-year Treasury yields held above 4%, near the highest levels since end-July. Bloomberg’s dollar index was steady after an eight-day streak of gains, its longest since April 2022. Commodities are mixed with Oil higher, Base Metals lower, and Precious Metals higher. Today, key macro focus will be CPI, along with AMD (Advancing AI) and TSLA (Robotaxi) events.

The Shanghai Composite fell to 3228.12, finding support at the Cycle Top at 3216.66.  It is on an aggressive sell signal with a confirmed sell signal pending a decline beneath the Cycle Top.  The Cycles Model gives the Shanghai another week of decline in which the Cycle Bottom at 2717.08 may be challenged.  A decline beneath that level may induce an even greater decline.  Often when stimuli fail, short sales are banned with an increases probability of a market closure.

VIX futures are tentatively rising again.  The Cycles Model suggests trending strength reappears by the weekend.  However, should the SPX attempt a rally, the VIX may briefly visit the 50-day Moving Average at 18.79.

TNX tested the upper trendline of its former trading channel at 41.12.  Futures rose as high at 41.39, suggesting the cash market may do the same today.  There may be a brief pullback.  However, the Cycles Model offers a triple dose of strength over the weekend and the following week.  Volatility is on the rise as well.

ZeroHedge reports, “After yesterday’s ugly, tailing 3Y auction, which saw a plunge in foreign demand as a result of the recent spike in yields as faith in the Fed’s easing plans has been deeply shaken in recent weeks, moments ago the Treasury sold $39BN in 10Y paper (in the form of reopening of 9Y-10M cusip LF6), in a sale that was substandard at best.

The auction stopped at a high yield of 4.066%, up sharply from last month’s 3.648% (which was the lowest since May 2023), and tailed the When Issued 4.062% by 0.4bps, a big reversal from last month’s 1.4bps through auction (but nowhere near as bad as the 3.1bps tail in August).”

Japanese Yen futures may have bottomed out its Master Cycle at 6690.00 this morning,  on day 261 of its Master Cycle.  Shold that be the case, a reversal may be imminent.  The Cycles Model suggests trending strength may return by the weekend.  The window for exiting the Yen carry trade may be closing.  A buy signal for the Yen may occur at the 50-day Moving Average at 68.78.

12:30 pm

SPX may be taking aim for either its daily Cycle Top at 5817.52 or its 2-hour Cycle Top at 5829.87.  The Master Cycle has extended to 278 days, a very unusual event.  Despite the extension, the structure makes perfect sense.

12:21 pm

BKX may be attempting to reach the Cycle Top at 117.48 before reversing.  There has been a valiant attempt at keeping prices high as the internals deteriorate.  It is likely that there may be a bank failure or two about to hit the fan.  No wonder Warren Buffett is getting out.  Hurricane Milton may cause a demand for cash that simply cannot be met after the last hurricane.

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!

The Shanghai Composite Index fell to 3262.26 this morning, beneath the weekly Cycle Top at 3400.00.  That action offers an aggressive sell signal.  The Daily Cycle Top is at 3211.42, offering a confirmed sell signal.  The Shanghai Composite has made a 42% retracement of the entire 9-day rally in just two days, causing many speculators to “swear off” investing in China.   Chinese stocks have always been a hotbed of speculation, including the use of margin.  The current Master Cycle may be over in the next week.  Take this however you want, but either we hit a very low Cycle Bottom (below 2718.59) or the Chinese markets may be closed.

SPX futures dipped to 5732.00 this morning, but bounced back to the flat line.  There is a certain desperation to keep the SPX above 5700.00.  However, margin calls abound in those dipping into China stocks.  The Cycles Model suggests the ability to make a new ATH is fast approaching zero.  It warns that, should the SPX fall beneath  5700.00 a panic decline may set in.

Today’s options chain shows Max Pain at 5735.00.  Long gamma may begin above 5750.00 while short gamma resides beneath 5715.00.

ZeroHedge reports, “US equity futures are lower on news that the DOJ is considering a breakup of Alphabet’s Google search engine, in what would be a historic antitrust crackdown on Big Tech; Europe was flat while Asian markets slumped after Chinese A-shares suffered their biggest one-day plunge since February 2020 as investors are getting restless and demand stimulus actions from Beijing instead of just more words. ”

VIX futures are consolidating around the Cycle Top at 21.88 this morning.  The Cycles Model calls for an increase in trending strength through the end of the month.  However, the VIX may resume its climb through the end of November.

The October 16 options chain shows Max Pain at 20.00.  Short gamma is heavily populated between 14.00 and 19.00.  Long gamma begins at 21.00 and may extend to 45.00.

TNX is consolidating this morning after yesterday’s new high.  The consolidation may not last, as trending strength may be on the rise by this weekend.  Today is day 251, giving TNX a week or so of additional gains.  Should it break out above the mid-Cycle resistance at 44.85, the Cycle Top at 47.25 may be next week’s target.  Talk of further interest rate cuts are being squelched by this rally.

ZeroHedge reports, “One would think that the first coupon auction after the Fed’s rate cut would have passed better; one would be wrong.

Moments ago the Treasury sold $58 billion in 3Y paper, matching the all time high issuance for the tenor, in an auction that was unexpectedly ugly. The sale stopped at a high yield of 3.878%, the highest since July, and tailing the When Issued 3.871% by 0.7bps, the first and biggest tail since June and followed the biggest stop through since August 2023.”

 Japanese Yen futures are consolidating this morning as the market digests its gains from the Master Cycle low.  The Cycles Model shows growing strength into the weekend with the rally continuing through the end of the month.  The window for closure of the Yen carry trade is closing fast while the consensus is that its time to jump back in to the Yen carry with expectations that the decline may continue.

USD futures are also consolidating this morning after a searing rally from the Master Cycle low on September 18  The Cycles Model suggests the consolidation may be short-lives, as a burst of trending strength may be due today and extend to the weekend.  What people may not understand is, as chaotic as the financial situation is here, it may be even worse in ?Europe and China, driving liquidity toward the USD.

Crude Oil futures fell to a morning low at 71.84, beneath the 50-day Moving Average at 72.76.  The signal is changed from an aggressive sell signal to a confirmed sell one day after its Master Cycle high.  There is a possibility of a bounce off the neckline of the Head & Shoulders formation, but the longer view may be that crude may continue its decline to the year-end.  Should that occur, those that believe that the 2023 low may hold may want to hedge their bets.

Gold futures declined to 2625.40 this morning, leaving the September 26 high intact.  Should gold pass through Intermediate support at 2599.00 and the 50-day Moving Average at 2556.00, we may see the Cycles Model continue its decline into late November.  Latecomers to the rally are already feeling some pain, but that may palle as gold declines beneath the 50-day.

3:48 pm

SPX has met both time and price elements for this micro-Cycle.  Prepare for a rapid decline.

9:54 am

BKX, our liquidity proxy, may have made its Master Cycle high on Monday, day 263, at 115.20.  For the third consecutive time since its July high it has made lower highs at each peak.  It now faces a possible 6-week decline.

ZeroHedge comments, “94-year-old Warren Buffett’s Berkshire Hathaway has been on a multi-month dump-a-thon of Bank of America shares. The reason for the abrupt selling, which began in mid-July, has yet to be officially disclosed but should be viewed as an ominous sign that the ‘Oracle of Omaha’ foresees economic trouble ahead.

The latest Bloomberg data shows that Berkshire’s total proceeds from selling BofA shares have now topped a whopping $10bln.”

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!

After a more-than-week-long hiatus, the Shanghai Composite opened with a bang, then puked the better part of its gains.  However, it remains above its weekly Cycle Top at 3390.25.  This process may have created a top on day 264 of its Master Cycle.  The Cycles Model suggests a brief, but savage decline back to the origin of this short squeeze over the next two weeks.  Once the liquidity injection is over, there is likely to be only sellers.  Based on this chart, an aggressive sell signal lies beneath 3390.00 while the sell signal on the daily chart lies beneath3197.00.

ZeroHedge remarks, “There is some good news and some bad news for China bulls this morning (local time).

First the good news: since mainland China (aka A-shares) were closed for the past week, mainland Indexes such as the Shanghai Shenzhen CSI 300 are up – just barely – because after opening up almost 11% to catch up with the frenzied rally in offshore markets and ETFs, the index has erased almost all gains since it closed for trading on Sept 30.”

SPX futures rose to 5722.10 overnight, but eased back somewhat.  Short-term support lies at 5710.00 where an aggressive sell signal may be found.  The Cycles Model suggests that the support beneath SPX is getting very shaky.  However, stimulus leaking from China may boost the SPX temporarily.  Resistance lies near 5750.00.   Should it decline beneath 5700.00, we may see a panic decline lasting the rest of the week.  The sell signal may last up to 6 weeks.

Today’s options chain shows Max Pain at 5710.00.  Long gamma may begin above 5730.00 while short gamma may start at 5700.00.

ZeroHedge reports, “US equity futures are higher, even as Europe and Asia stumble after a horror show in Hong Kong as China’s record rally hit a brick wall. As of 8:00am ET, S&P futures are 0.4% higher, recovering about half of Monday’s drop which was the worst day since early September, while Nasdaq futures rise 0.5% led by the Mag 7 (NVDA +1.4%, MSFT +0.8% and GOOG +0.6%). Both indexes slid Monday after traders faded bets on rate rate cuts, pushing 10Y bond yields above 4.0% for the first time in 2 months. Taking a step back, US stocks remain unchanged since the Fed’s jumbo rate cut.”

VIX futures have pulled back from yesterday’s new high, but remained above the Cycle Top support at 21.78.  Trending strength appears later this week and may extend to the end of October.  VIX is stressed and needs to catch up to market conditions.  Or possibly, the market needs to react appropriately to the stress building up in the VIX.

Tomorrow’s options chain shows Max Pain at 22.00.  Short gamma inhabits the zone from 15.00 to 20.00.  Long gamma starts at 23 and may go as far as 45.00.  However, the consensus is on the short side.  In conditions such as these, it does not pay to follow the consensus.

TNX continues its rising pattern with a new morning high at 40.51.  Trending strength is building into the weekend and may persist through next week.  Should the mid-Cycle resistance be overcome, the ultimate target may be the Cycle Top at 47.25.

ZeroHedge observes, “Last month, we – and many others – were stunned when after several months of progressively declining revolving credit growth, in July credit card debt unexpectedly soared by the most since January, sending total consumer credit growth surging by just under $27 billion, the single biggest monthly increase since 2022. We called it a “Last Hurrah” moment (literally “In “Last Hurrah”, Credit Card Debt Unexpectedly Soars Despite Record High APRs As Savings Rate Hits Record Low“) and said that “with consumers ever more strapped for actual cash and equity, as the personal savings rate in the US collapses from over 5% to 2.9% – the lowest since the Lehman bankruptcy – in just one year, as all the excess savings from covid are long gone there is only so much more credit card maxing out that can take place before reality finally sets in.“”

Japanese Yen futures continue their advance to 67.84 thus far.  Should the rally persist, it may last to the end of November.  The window for exiting the Yen carry trade is almost over, despite calls for jumping back in.  Prospects for the carry trade don’t look good should the Yen rise over the 50-day Moving Average at 68.69.

Crude oil futures rose to a high of 78.46 after the close, then plummeted to a low of  74.52 before a bounce, creating a possible Master Cycle high..  In doing so, it may have created an aggressive sell signal beneath the mid-Cycle support at 77.58.  Confirmation may lie beneath the 50-day Moving Average at 72.85.  A lot may transpire until then.