The Practical Investor

9:

BKX appears to be “stuck” just beneath its Cycle Top at 115.98.  It gives the impression of a continuous rally, but has not exceeded the July 31 high at 116.07.  The powers-that-be may be attempting to keep BKX elevated, but the Cycles Model suggests that a reversal may happen at any time in the next week.  Last week the Fed revealed massive portfolio losses.   Could it be that banks are also suffering those same kinds of losses?

ZeroHedge remarks, “Oops. Last week the SEC accidentally published internal commentary along with a speech by Chair Gary Gensler.

Here’s one of the comments which was mistakenly included.

I strongly recommend that a sentence be placed here (or somewhere [sic] in the first part of the speech) to reassure markets that you are not making the speech because you think there is an imminent crisis.”

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 rose  to 19928.50 this morning, but was unable to exceed Thursday’s high at 19951.79 (on day 258 of its Master Cycle).   The NDX top is extended, with the 50-day Moving Average at 19288.11.  Beneath that may lie a confirmed sell signal.  While NDX has not exceeded its July 11 ATH at 20672.10, investors continue to defy logic by piling onto the tech ETFs despite consistent hedge fund and smart money selling.  NDX has the appearance of the wheels ready to fall off.

Today’s options chain shows Max Pain in the vicinity of 19750.00.  Long gamma exists above 19800.00 while short gamma lies beneath 19700.00.

ZeroHedge observes, “A new chatbot-powered exchange-traded fund (ETF) aimed at replicating the investment prowess of Wall Street titans has been launched by Minneapolis-based Intelligent Alpha. The Intelligent Livermore ETF (LIVR) is built around portfolio decisions generated by three prominent large language models (LLMs); ChatGPT, Gemini, and Claude – dubbed the fund’s “investment committee.””

SPX futures rose to a weekend high at 5722.40 before pulling back.  It has not exceeded Thursday’s high at 5733.57.  The Master Cycle may be complete.  Earnings reports anticipate a slowdown.  FDX reports,  “the magnitude of the Fed rate cuts yesterday signals the weakness of the current environment.”  Should the SPX decline beneath the upper trendline at 5675.00, the first confirmation of a reversal may emerge, giving a potential aggressive sell signal.  The DJIA futures have barely made a new high this morning measured in ticks, so there may be some leeway in calling a top in the total equities market.

Today’s op-ex shows Max Pain at 5680.00.  Long gamma may lie above 5700.00 while short gamma may emerge beneath 5650.00.

ZeroHedge reports, “Futures are higher with both tech and small-caps outperforming as a record $9 billion surge in dealer gamma stabilizes markets and buoys the ongoing meltup despite the start of buyback blackout.

VIX futures rose this morning, but not exceeding the 50-day Moving Average at 18.07, where a buy signal may be found.  The Master Cycle low may have been made on Friday at 15.81.  The Cycles Model calls for increasing volatility during this week.  Trending strength may intensify at month-end.

The September 28 options chain shows short gamma most intensely at 16.00 with 9427 contracts while long gamma gains ascendancy at 18.00 and extends to 60.00.

TNX futures made a weekend high at 37.73, showing a resumption of the rally off the Master Cycle low made on September 17.    Intermediate support/resistance is at 37.99, just beneath the trendline at 38.30.  A breakout above the trendline may give TNX some recognition of its change in trend.  Some commentators are observing that rates volatility (MOVE) is very depressed, suggesting that may be good for the SPX.  However, MOVE may be in sync with the VIX, which has just made its Master Cycle low.  Never try to make projections with a ruler.  It may backfire.

ZeroHedge quotes Powell, “”Today, unemployment is up to 4.2 percent, inflation’s down to a few tenths above 2. So, we know that it is time to recalibrate our policy to something that is more appropriate given the progress on inflation, and on employment, moving to a more sustainable level, so the balance of risks are now even,” answered Chairman Powell. He had just cut interest rates by 50bps.

“The labor market is actually in solid condition. And our intention with our policy is to keep it there. You can say that about the whole economy. The US economy is in good shape. It’s growing at a solid pace, inflation is coming down, the labor market is in strong pace, we want to keep it there. That’s what we’re doing,” explained Jerome, the financial reporters gently tossing him the usual softballs.

Naturally no one asked him how he felt about initiating an easing cycle with the stock market at all-time highs .”

The Japanese Yen bounced from its Intermediate support at 69.17 on Friday and may make another run at its high.  This may be a shakeout period for those participating in the Yen carry trade.  The Cycles Model suggests that the decline may resume later this week (with strength).  The Master Cycle low is not due until the first week of October and may reach mid-Cycle support at 66.21.  Thereafter, XDN may rally to challenge the Head & Shoulders neckline.

1:05 pm

SPX bounced off the rising wedge trendline near/at 5675.00 in a throw-over.  A further decline beneath it may signal the end of the rally and offer an aggressive sell signal.

10:15 am

The upward progress of the BKX was halted yesterday at the Cycle Top resistance at 115.70.  This morning we may be watching the beginning of its reversal.  Since BKX turned at a lower high at resistance, we may take that as an aggressive sell signal.  For those more cautious, the next support is the 50-day Moving Average at 111.16.  Just as the Fed has experienced massive losses in its portfolio, so have the banks.  The lower TNX has put a bandage over a mortal wound.  However, the prospective rise in the 10-year treasury yield may expose the inadequacy of this move.  The Yen carry trade may be offering some temporary relief, (see the Japanese Yen below) but may make things worse should the banks choose not to exit that trade in a timely fashion.

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!

NDX futures have consolidated overnight, neither making new highs or new lows.  There are increasing comments of a melt-up until Christmas due to the oversized rate cut.  What is not being taken into account is that the Fed is suffering serious losses in its portfolio and may have a concern for bank losses, as well.  Today is day 259 of the current Master Cycle and may be the last.  The 50-day Moving Average lies at 19300.00, providing final support of this probe.  A decline beneath it provides a clear sell signal.  A further confirmation lies at Intermediate support at 19105.50.

SPX futures remained flat overnight after yesterday’s all-time high as $2.6 trillion SPX options expire at the open.  Investors may be unaware of the negative seasonality that may follow as the options are unwound.  The Cycles Model anticipates the end of the current Master Cycle and a strong reaction in the opposite direction.  The anticipation of a shortened negative seasonality may be crushed by the looming election.  The Cycles Model suggests a decline that may last through late November.

Today’s am options chain shows long gamma above 5600.00.  Traders will be taking their profits this morning.  The pm options are less clear and may be subject to 0DTE traders.

ZeroHedge reports, “After yesterday’s delayed (and technically-driven) post-rate cut meltup, futures are set to close the week on a downbeat note as they slide across the board, following European stocks lower, but still just shy of the all time high they hit yesterday. As of 8:00am S&P futures are down 0.3% as disappointing earnings (FDX cratered -13% after missing and cutting guidance, dragging UPS -2.4% and logistics names lower) tempered the euphoria around the trajectory for interest rates; Nasdaq futures were down 0.4% with most MegaCap Tech names lower: TSLA (-3.6%) is the top mover, followed by META (-1.8%) and AAPL (-1.7%). The yen plunged more than 1% after the BOJ announced no hike to its policy rate, in line with expectation, and further signaled the gradualist approach to its rate hikes. USDJPY +0.8% to 143.8; NKY +1.5%. PBOC left loan prime rates unchanged. Throwing a potential wrench in what may have been a quiet end to the week is that today brings the ninth option expiry of 2024, and the last “quad witch” before the US election, where a record for September $4.5 trillion in notional will expire between now and 4pm ($2.6 trillion of this is SPX Sep regular / the remaining is split across etf and single stock at end of day) potentially triggering volatility, although market implied vol is low enough to rent delta in either direction. Yields are mostly higher, and USD is largely unchanged; 5-, 10-yr yields are 5bp, 10bp higher. Commodities are mixed with oil and metals higher, while ags are mostly lower. There is nothing on the macro calendar.”

VIX futures re down to a morning low of 16.06 on day 253 of the current Master Cycle.  This may be the low of the season.  A buy signal lies above the 50-day Moving Average at 18.00.

The September 25 options chain shows Max Pain at 17.00.  Short gamma is building at 14.00-16.00.  Long gamma begins at 17.00-18.00 and runs strong to 60.00.  Equities options may have a gamma flip on Monday, reinforcing long gamma in the VIX.

TNX is consolidating this morning, digesting its gains.  The Cycles Model suggests trending strength may arrive this weekend as it prepares for multiple breakouts on its way to the 50-day Moving Average at 39.28., signaling the end of the massive throw-under.  It may have been this throw-under that influenced the Fed into the jumbo rate cut.

ZeroHedge notes, “The last time the Fed cut by 0.5% was in October 8, 2008, three weeks after the collapse of the venerable investment bank Lehman Brothers. This was the time when panic was gripping the markets with the Great Financial Crisis (GFC) surfacing with the failure of Lehman Brothers (the crisis had been brewing under the surface since September 2007).

Make no mistake. 50bps cut, is a panic cut. So, why did the Fed panic?

Most likely, there were four reasons:

1. The Fed is racking up massive losses.
2. Political pressure to not crash the markets before the Presidential elections on November 5 (last FOMC meeting before).
3. The Federal Reserve is genuinely worried about the economy, but especially about debt levels.
4. Banking sector fragility.”

Japanese Yen futures continue to correct to a morning low of 69.44.  This may produce a sigh of relief within the Yen carry trade, but the decline may be merely a correction of the new uptrend.   A normal Wave (2) correction may decline to the mid-Cycle support at 66.22.  However, should the trend be strong, the correction may find support at the 50-day Moving Average at 67.39.  ZeroHedge offers an extensive explanation of the Yen carry trade.

ZeroHedge comments this morning, “After a week full of central bank fireworks, at least there were no surprises from the Bank of Japan last night, which was in focus as it kept policy unchanged, as expected However, after initially rising, the yen tumbled more than 1% after Governor Kazuo Ueda proved less hawkish than many traders expected, especially after his dramatic hawkish pivot back in July when he not only hike rates but signaled an aggressive tightening campaign, crushing the yen carry trade in the process and sparking the biggest Japanese stock market crash since Black Monday. Ueda signaled little urgency to hike rates, and said that upside risks to inflation are easing, pushing the likelihood of an October rate hike further to the sidelines Friday with a cautious message that pointed to ongoing concern over the market meltdown that followed July’s rate increase.”

Crude oil futures have reversed this morning to resume its decline, targeting the Cycle Bottom at 68.95.  Just beneath it is the Head & Shoulders neckline, beneath which confirms its target near 40.00.  The Cycles Model sees this decline extending to late October, giving ample time for this destructive phase.  The decline may pick up momentum in early October, giving way to a possible panic.

1:15 pm

SPX has spent the required amount of time on this rally.  While it may take another hour or so to finish the top, a reversal may be imminent.  The first support is the upper trendline of the rising wedge formation that provides support for this melt-up.   Once the throw-over is complete, there may be an opportunity for an aggressive sell signal as it declines beneath the trendline at 5670.00.  Note that monthly options expiration occur tomorrow.  Since Cycles are organic, they  may allow the melt-up to reach for the Cycle Top near 5768.72 over the next several hours or into tomorrow.  However, all the pieces of the puzzle are in their place for a reversal.

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!

NDX futures rose to 19778.40 this morning.  The Wave structure calls for a final probe above the August 20 high at 19938.89.  It is not likely to make an new all-time high.  Analysts tell us that  equities typically rally following the first Fed cut if no recession.  While the consensus is that the NDX will go higher, the Cycles Model calls this the end of the line, as this may be the last day of the rally, day 258.

Today’s options chain shows Max Pain at 19420.00.  Long gamma may begin at 19440.00 while short gamma may start at 19400.00.

SPX futures rose to 5716.50 this morning.  Earlier this week I mentioned that 5750.00 may be possible.  While this may be the final day of the rally, it may have time to do just that, as the Cycle Top is at 5756.55.   Unfortunately, this action is drawing in weaker hands that have been reluctant to participate until now.  Market decline come when the last dollar is put into the market.  From that point, there is no liquidity to buy as the market decline.  Experts recognize this as a low liquidity rally.  So, despite the favorable optics, equities are skating on thin ice.  The Cycles Model suggests a turn by mid-day.  An aggressive sell signal resides beneath Short-term support at 5660.00.

Today’s options chain shows Max Pain at 5625.00.  Long gamma may begin at 5650.00 while short gamma may start at 5600.00.

ZeroHedge reports, “The Fed’s first (jumbo) rate cut since the depths of the covid crash resulted in mixed reaction in markets, with initial gains for stocks fizzling and ultimately tepid moves in Treasuries, corporate bonds and commodities. However, this reversal to the kneejerk reaction has also since reversed, and US stock futures are bouncing this morning, rising to new record highs, amid gains across Europe and in Asia, while gold is heading back toward a record high and copper prices hit the strongest level in two months to lead a broad rally in base metals in what appears to be a gradual awakening of the reflation trade. As of 8:00am, S&P futures are up 1.7%, and Nasdaq futures surged more than 2.1% as part of a global risk-on trade. Similar to past rate cuts in slowing macro environments, the Nasdaq and Russell are outperforming. Pre-mkt, Mag7 names are all higher by at least 1.6%, Semis are stronger too with NVDA +3.3%. Europe’s Stoxx 600 index advanced as much as 1.4%, while Asian stocks were a sea of green, as a basket of Asian currencies notched up a 14-month high even as the Japanese yen plunged with traders once again eyeing yield differentials. The yield curve is bull steepening though 30Y is unchanged and USD is flat. Commodities are higher led by the Energy complex with precious metals outperforming base (Gold +1.3%, Silver +4.0%). The macro data today (Jobless Claims, Home Starts) will be ignored given the dovish press conference from Powell; expect multiple indices and sectors to make ATHs today.”

VIX futures are lower this morning, sliding to 18.00.  Should the 50-day Moving Average at 17.93 hold, the VIX may begin its trek higher.  Today is day 252 in the Current Master Cycle.  It is capable of making a moderate new low before a turn higher.

The September 25 op-ex shows Max Pain at 17.00.  Short gamma may start beneath 16.00, while long gamma may begin at 18.00 and strengthens above 20.00.

TNX futures have broken out above the Cycle Bottom support/resistance at 36.74, reaching a morning high at 37.70.  The Fed may have just lost “control” of the bond market.  (They didn’t have control in the first place.)  The trendline beneath it is solid and the Cycles Model suggests a new uptrend in rates has begun.  Strength may return to the 10-year yield by the weekend.   Powell may have made a tactical error in releasing a jumbo rate cut.

ZeroHedge comments, “The day after The Fed slashes rates by a crisis-like 50bps, jobless claims data plunges to multi-month lows signaling an economy that is anything but ‘soft landing’ let alone landing at all…

Adjusted initial claims tumbled from 231k to 219k (lowest since May) while unadjusted claims continued to tumble to 12-month lows…

Source: Bloomberg

Continuing claims also continued its (economically positive) downtrend, sliding from 1.843mm to 1.829mm Americans…”

Japanese Yen futures sank to a morning low at 69.70.  The Yen is in a retracement pattern that may decline to the mid-Cycle support at 66.22 over the next two weeks.

4:00 pm

At the last minute SPX did something I had anticipated for a long time.  It made a Key Reversal by 21 ticks.  In this case, an inch is as good as a mile.

ZeroHedge comments, “Well, once again the majority – make that the vast majority – of “economisseds” were dead wrong, and as we noted earlier, 105 of 114 economists predicted a 25bps cut… and were wrong. But don’t blame them: it really is the Fed’s fault – again – because while odds of a 50bps rate cut were only 10% as the Fed entered its “blackout period”, these surged after an unprecedented media leak campaign in the past week pushed 50bps odds to 70% (and yes, we can now confirm that Powell used Nick “Nikileaks” Timiraos not once but twice in the past few days to ease the blow of the 50bps cut), which brought us to today, when the Fed shocked with a 50bps rate cut, and slashed its expectations for the 2025 rate cut…”

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 are consolidating within a very narrow range this morning between 19413.00 and 19483.00, on day 257 of the Master Cycle.  We may see a reversal within the next two days as this Cycle draws to a close.  There has never been so much confidence in a .5% rate cut, mainly supported by a couple of dealers and media chatter.  These are considered trial balloons and not reliable, since the Fed has left us with a multitude of confirmations that the cut may only be .25%.  Of course, the NDX is the most interest-sensitive of all the indices.  The vast majority of economists polled by Bloomberg are keyed in on the .25% rate cut.  Nevertheless, positioning has surged, expecting the jumbo rate cut, leading to huge potential losses should the Fed cut only .25%.

Today’s options chain suggests Maximum Investor Pain (minimum payout to investors) at 19350.00.  Long gamma may begin at 19400.00 while short gamma may start at 19300.00.

SPX futures are trading in a very narrow range between 5633.00 and 5648.00.  The surprise factor may swing the SPX as high ats the Cycle Top, but a sell signal awaits beneath the 50-day Moving Average at 5515.00.  The FOMC release will be examined in great detail to catch any nuances that may affect the outcome of future rate cuts, as well.

Today’s options chain shows Max Pain at 5590.00.  Long gamma may gain ascendancy above 5625 while short gamma may gain control beneath 5550.00.

ZeroHedge reports, “It’s finally Fed day, and futures are up up small with Tech in line and small-caps lagging having largely priced in a 50bps rate cut already (the risk clearly is to the downside if Powell goes 25bps). As of 8:15am, S&P futures are unchanged and less than 1% from all time highs, with the cash index rising for 7 consecutive days, while Nasdaq futures gain 0.2% with Mag7 mixed, and Semis weaker with NVDA -40bps; GOOG +70bps and MSFT +29bps.”

VIX futures probed to 17.90, above the 50-day Moving Average at 17.82.  A buy signal hovers above the 50-day.  however, there is a high probability of one last probe lower, possibly to 16.00 in the next couple of days.  Today is day 251 in the Master Cycle.  This Cycle may end near the FOMC announcement.

There are multiple events that turns seasonality negative for stocks and increase volatility.  (1) Mutual fund tax loss selling occurs at the end of the third quarter.  (2) Tax payments due by corporations in September and individuals in October.  (3)  Corporate buyback window closes until mid-October.  (4) The drums of war are louder.  (5) Worry about the upcoming election.

The September 25 op-ex shows Max Pain at 17.00.  Short gamma is concentrated at 15.00-16.00.  Long gamma is amply distributed from 18.00 to 30.00.

TNX is challenging the Cycle Bottom resistance at 36.77 this morning.  A close above it gives a TNX buy signal (UST sell).   The bond market is telling us that the 50 basis points cut is unlikely, especially when rates may be breaking above resistance.  Mortgage applicants should lock in their rate today.

ZeroHedge remarks, “After last week’s solid auction which saw stellar demand no doubt on the expectation that the Fed will soon be slashing rates, moments ago we got the results of this week’s sole coupon offering: a $13 billion reopening of 19Y-11M cusip UD8, where we learned that demand for 20Y paper was far weaker than expected.

Stopping at a high yield of 4.039%, the 20Y reopening yield was down from 4.16% in August, and even though this was the lowest 7Y yields since July 2023, it was the auction this month to still yield above 4% (thanks to the infamous 20s-30s kink, the 30Y trades at 3.96%). Notably, it also tailed the When Issued 4.019% by 2.0bps, the biggest tail since February’s catastrophic – and record – 3.3bps tail, and followed 6 consecutive stop throughs.”

The Japanese Yen has begun a possible 2-week pullback that may set the stage for another run higher.  This morning it retested its Cycle top at 71.00.   Should it not exceed resistance at 71.00, it may retrace as much as 50% of the the breakout Wave.  This would be a good time to unwind the carry, but most will simply heave a sigh of relief and ignore the signs.

7:45 am

Good Morning!

The DJIA futures have made another all-time-high this morning at 41746.10 with more room to move higher, though limited by the Cycle.  The possibility exists that the Dow may make a run to the upper trendline at 42500.00.  This has analysts salivating that the Dow may continue its run through October.  However, the Cycles Model indicates that this may be the last hurrah for stocks.  Why is this happening now?  There are multiple reasons for this breakout.  The first is that the Dow has been underperforming until now and is a perfect target for rotation out of tech.  The second is that it has the least exposure to overseas markets that are now falling.  Finally, there is room for domestic growth while Europe stagnates, or worse.

SPX futures have risen to a morning high at 5658.00, breaking out above the August 26th high at 5651.62.  It has not yet broken above the July 16 high at 5669.70.  Today is day 256 in the Master Cycle, leaving just this week to make a new all-time high.  Should it break above it, the next resistance is the Cycle Top at 5750.69.  Today is another day of trending strength, suggesting the breakout may occur.  A warning, though.  Thursday may be a high volatility Pivot Day.  The decline that follows may not be a “correction.”  The Cycles Model suggests a decline to follow that may not end until late November, suggesting political turmoil may rear its ugly head.  We await the retail sales report for a reaction, one way or the other.  A potential sell signal waits beneath the 50-day Moving Average at 5513.00.

Today’s options chain shows Max Pain (the least payout to investors) at 5625.00.  Long gamma may begin from 5650.00 to5670.00.  Short gamma occupies the zone beneath 5600.00.

ZeroHedge reports, “US equity futures gain, and trade just shy of all time highs, led by Tech (especially Mag7 and Semis) as global markets trade higher ahead of the FOMC tomorrow as traders continue to increase probability of 50bps cut (~70% chance now) prompted by another Nick Timiraos WSJ article saying the decision between at 25 vs 50bps rate cut is complicated but withholding a larger cut could raise awkward questions. As of 8:00am ET, S&P futures are up 0.4%, rising for a 7th consecutive day, while Nasdaq 100 futs gain 0.5%, with INTC (+6.9%) the standout and MSFT +1.9% on a new $60 billion buyback. European stocks are also broadly higher as Asian markets are mixed and Japan stocks tumbled 2% after reopening from holiday and getting dragged lower by the surging yen.  Bond yields are lower across the curve as the 10Y TSY yields drop to 3.60%, a new 2024 low ahead of tomorrow’s Fed rate decision where odds are now 70% of a 50bps rate cut. The USD remains under pressure, dropping for a fifth consecutive session, falling 0.1% to the lowest since January. Commodities are mixed: crude down, natgas up, precious down, base up, and Ags higher. For the US session, focus is on retail sales this morning, with the market looking to firm up expectations for tomorrow’s FOMC meeting (currently ~-40bps priced). The latest BofA card spending data suggests retail sales will miss estimates (est are for headline retail sales at -0.2%, control group +0.3%) reflecting mixed card spending and a moderation from the 7.7% annualized pace of retail control growth over the prior two months, but a potential boost from back-to-school shopping. Also this morning we have IP, NAHB housing market data and pre-recorded remarks from FOMC non-voter Logan (note, her remarks will not address monetary policy or the economy, reflecting the FOMC’s blackout period).”

NDX futures rose to 19556.70 (Friday’s high) and awaits the retail sales release.  NDX now appears to be the laggard, which may limit the scope of the rally beneath the all-time high.  Retail sales may produce less of a reaction in the NDX than the interest rate outlook.  Should (when) the decline begin(s), a sell signal may be found at the 50-day Moving Average at 19347.01.

Today’s options chain shows Max Pain at 19490.00.  Long gamma may begin at 19500.00 while short gamma may be found beneath 19480.00.

VIX futures are consolidating inside yesterday’s range.  There is little warning of the turmoil that exists just beneath the surface.  Today is day 250 of the Cycles Model.  The directional change may occur at any time.

Tomorrow’s monthly op-ex shows Max Pain highly populated in both directions from 17.00, which is Max Pain.  Short gamma is loaded with over 1.5 million contracts at 17.00 and below.  Long gamma is populated with over 3.5 million call conttracts (100 shares each) from 17.00 to 45.00.

TNX made a new Master Cycle low this morning and a pivot, on day 265 of the Master Cycle.  Rising interest rates may dominate the markets for the next month, putting pressure on equities.  A buy signal may be made above the Cycle Bottom resistance at 36.81.

The Japanese Yen lies threateningly above its Cycle Top at 70.99.  The Cycles Model calls for another 3 weeks of rally before it is exhausted.  The rally in the yen may have wiped out any gain made by those who have borrowed at the BOJ window at .1%.  Borrowers must now pay back the loans at the appreciated value of the yen.  As more borrowers buy back the yen (repaying the loans), the demand may cause the payback to skyrocket higher.  Note the Head & Shoulders formation which suggests another 11% appreciation to come.  Those owing their debt in yen need an exit plan, fast.

10:11 am

BKX has reached its 50% retracement level at 111.13 this morning.  A reversal back beneath the 50-day Moving Average at 110.50 may offer an aggressive sell signal.  Another large bank takes a hit as Goldman exits the consumer lending business.

ZeroHedge comments, “Amid all the volatility of the last few weeks in stocks, money markets have seen a constant inflow of funds (six straight weeks) with the last week adding $23.4BN to total MM fund AUM to a new record high of $6.324TN…

Source: Bloomberg

That is $188BN of inflow in six weeks – the biggest since the turn of the year seasonal flows.

At the same time, US banks saw almost $53BN of deposit inflows in the week-ending 09/04, pushing total (seasonally-adjusted) deposits to their highest since before the SVB collapse…”

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!

NDX futures are consolidating within Friday’s trading range as we enter day 255 (of an average 258 days) of the Master Cycle.  NDX has retraced 75% of the decline starting on August 22 to September 6.  This is within the high/normal retracement range.  The Master Cycle may have a few more days to go but does not appear likely to exceed its August high.  Price may remain sticky near the top as the market awaits the pronouncement of the FOMC on Wednesday.  The upcoming reversal may produce a sell signal beneath the 50-day Moving Average at 19358.33.  Further confirmation lies at the combined Intermediate and 100-day Moving Averages at 19045.00.

Today’s options chain shows Max Pain at 19250.00.  Long gamma may start at 192701.00 while short gamma may begin beneath 19200.00.

ZeroHedge mentions, “Shares of American chipmaker Intel are marginally higher in premarket trading following a Friday evening Bloomberg report indicating the company could secure up to $3.5 billion in federal grants to manufacture chips for US military and intelligence applications.

The report was based on sources familiar with the chipmaker’s binding agreement with US officials. They said the secretive Pentagon program, ‘Secure Enclave,’ that awarded Intel $3.5 billion, is a move by the military to produce chips domestically, more especially in several states, including a facility in Arizona.”

SPX futures are also consolidating inside Friday’s trading range.  The SPX retraced 93.8% of its recent decline.  SPX may not make a new all-time high unless the DJIA also does so.  Despite the excitement about the potential rate cut, this is a negative seasonality for equities, due to the buyback blackout.  Market watchers are surprised it has gone this far.  A sell signal may be made beneath the double support s at 5489.60.  Hedge funds have been net sellers for the past 5 weeks.

Today’s options chain shows Max Pain at 5625.00.  Long gamma may begin at 5655.00 while short gamma may start at 5495.00.  Dealers may work to keep the strike price near Max Pain as that offers the lowest payout to options investors.

ZeroHedge reports, “Futures are flat, erasing an earlier modest gain, ahead of a very busy week which will see the first Fed rate cut since March 2020. As of 7:45am, S&P futures were down fractionally, with small-caps outperforming following a trend from late last week as investors price in a 50bps rate cut on Wednesday. Nasdaq futures are down 0.3% as Semis lag and the Mag7 are mixed and AAPL slumps as much as 2.4% as noted analyst Ming-Chi Kuo notes that, based on his first weekend pre-order analysis, demand for the iPhone 16 Pro series is lower than expected. There was little reaction in markets to the second attempt to assassinate Donald Trump. Shares of Trump Media & Technology rose as much as 10% in premarket trading after the former president said he has “absolutely no intention of selling” his stake when a lockup expires this week. While JPM’s Andrew Tyler asks rhetorically this morning “let’s see if last week’s bid returns“, it does not look very likely since we just entered the worst 2 week calendar period for the year, and stocks enter a buyback blackout, plus there is no tech conference to spike the euphoric AI narrative yet again. Bond yields are down as the curve bull steepens, pressuring the USD which slides for the 4th day in a row to its lowest level in more than eight months. The move was driven by strength in the yen, which touched the highest since July 2023 amid speculation this week’s slew of central bank decisions will lead to a narrowing interest rate differential between the US and Japan. Commodities are higher with Energy and Metals boosting the index. Today is a light macro day ahead of tomorrow’s Retail Sales and Weds’ Fed Mtg where the market remains split on 25 o5 50bps.”

VIX futures have risen of their Friday low this morning.  That is likely to be a minor Trading Cycle low.  The Cycles Model calls for a high in the VIX by the end of September.  That is not all.  VIX has strong seasonality usually through October.  However, the Cycles Model calls for a rising volatility trend through the end of November.  A buy signal awaits above the 50-day Moving Average at 17.72.

The September 18 options chain shows Max Pain at 18.00.  Short gamma dominates the chain between 13.00 and 17.00.  Long gamma may begin at 20.00 and is strong to 50.00.

TNX has been lurking near its trendline, making a morning low at 36.26.  It appears to have made its Master Cycle low last Wednesday at 36.14, on day 259.  A probe above the Cycle Bottom resistance at 36.88 may create a buy signal for TNX (a sell signal for UST).  The Cycles Model calls for rising rates until mid-October.  In the meantime, experts claim that the policy rates must drop beneath 3.5% to avoid a recession.

Japanese Yen futures have risen even higher, to 71.61 this weekend.  The Cycles Model suggests the Yen may continue to rise t o the end of September.  This heightens th pressure on the carry trade, as borrowers (in Yen) seek to escape the crushing currency trap.  It’s not just hedge funds that are affected.  It may also be banks. credit card companies, mortgage companies and insurance companies that have been decimated by this reversal in the payback rate.

USD futures made a new Master Cycle low on day 263 at 100.25.  The USD and TNX Cycles are highly correlated.  That suggests a very powerful ris off the lows is imminent.  The Cycles Model suggests a rising USD through late November.

8:15 am

Good Morning!

NDX futures remained flat overnight, as the 4-day rampage loses steam.  The Cycles Model suggests the retracement is nearly over, as visible targets (the 50-day Moving Average) have been met.  The time element of the Cycle has also been met, or is about to be fulfilled.  NDX may have the capability to probe as high as 19575.00 this morning.  Whether it makes it that far is uncertain, since it is in a high resistance zone in both price and time.   The 50-day support/resistance is at 19364.00, beneath which lurks a possible sell signal.  The possibility of higher interest rates are a dark cloud on the horizon for the NDX.  Last night, investors were dreaming of a .50% rate cut.  Reality may strike this morning.

Today’s option chain shows Max Pain at 19500.00, suggesting dealers have the least payout there and prefer the NDX close at that level.  Long gamma may begin at 19530.00 and is reinforced at 19600.00.  Short gamma may start at 19460.00.

ZeroHedge observes, “2024 was the year when the runaway US budget deficit was supposed to gradually normalize, and after two crisis-years, the US was supposed to end its drunken sailor spending ways. And for a while there, it seemed touch and go, with the cumulative US deficit initially overtaking 2023 – forget about the batshit insane 2021 and 2022 when the deficit hit a mindboglilng 18% of GDP…

… before slowly easing back for a few months, only to sprint ahead  of 2023 once more in August…

… when THIS happened: an August budget deficit of a staggering $380 billion, up more than 50% from the $243 billion in July, and up more than 55% from July, and up 66% from last August… oh, and almost $100 billion more than the median estimate of $292.5 billion, which may be why the Treasury quietly snuck the number out by leaking it after 5am ET when everyone was sleeping, not at its regular time of 2pm ET.”

SPX futures rose to 5613.10 thus far this morning.  Few realize there may be a possible limit on this retracement near 5623.00.  Once the realization that a .50% rate cut may be out of the picture the market may throw a tantrum.  It may mark the end of the current Master Cycle today on day 252.  Should the SPX reverse today, it may do so forcefully, as trending strength may be powerfully launched over the next week.  Remember, the market makes big moves when investors are all wrong-sided.

Today’s options chain shows Max Pain at 5570.00.  Long gamma may start at 5600.00 while short gamma tentatively begins at 5550.00.

ZeroHedge reports, “US futures pointed to modest gains after a rally that lifted the Nasdaq 100 more than 5% this week thanks to Nvidia, and the S&P 500 by 3.5%. As of 8:00am ET, S&P futures rose 0.2% led by small-caps which rose 1% as hopes of a jumbo 50bps rate cut jumped overnight; Nasdaq futures were 0.1% higher, with GOOG, META, and NVDA the top performers in megacap land despite a plunge by Adobe on poor guidance. Treasuries yields fell with the 10Y trading at 3.65% and the policy-sensitive 2Y yield down 5bps, while the dollar continues to slide, dropping for a third day, and retreating 0.3% after an article by the WSJ’s Nick Timiraos and comments by Nevertrumper Bill Dudley restored speculation that a 50bps rate cut is possible next week. The yen soared to a fresh 2024 high. Commodities are higher. Today, the data focus will be on Michigan Sentiment and inflation expectation. The consensus is at 68.5 vs. 67.9 prior.

VIX futures made a new low overnight at 16.80.  Volatility may be about to rise significantly starting this weekend (possibly today).

The September options chain shows Max Pain at 18.00-19.00.  There are over 1.2 million put contracts between 13.00 and 17.00.  However, there are over 2 million call contracts scattered between 20.00 and 35.00.  Volatility may become violent next week.

TNX futures ventured as low as 36.22 last night, but had recovered to 36.51 this morning.  Yesterday it challenged the Cycle Bottom by rising to 37.04.  Today TNX may stage a breakout, rising above the Cycle Bottom at 36.95.  Bond volatility has been low.  However, the Cycles Model shows increasing volatility/strength in the following week.

ZeroHedge reports, “After two stellar auctions, where both Tuesday’s 3Y and yesterday’s 10Y sale may have been two of the best auctions in history for the respective tenors, moments ago the Treasury concluded the week’s coupon issuance when it sold $22BN in 30Y paper in a decidedly uglier sale.

The auction stopped with a high yield of 4.015%, 30bps below last month’s stop and the lowest since July 2023, but the auction also tailed the When Issued 4.001 by 1.4bps, the 3rd consecutive tail in a row.

The bid to cover was 2.376, a modest rebound from last month’s 2.31 but below the six-auction average of 2.39.”

The Yen futures rose to 71.24 this morning, throwing the Yen carry trade into crisis mode.  Since July, the value of the Yen in US dollars has risen 15%, wiping out any savings that borrowers may have expected with the .1% annualized loan rate.  The Yen carry trade is most visible in the NDX, where the inverse of the Yen (price) closely matches the rise and fall of the Magnificent 7.  The effects of the Yen carry trade are unreported by the banks as net interest income (interest earned on investments minus the cost of money) is being pressured for those banks involved in the carry trade.  The largest banks may  have been involved in the carry trade as the Yen is the world’s third largest currency.

2:30 pm

SPX may be in the home stretch of this extended retracement after a 79% recovery.  This is usually the limit to the Fibonacci numbers.  In addition, SPX has made a 4.3-day retracement after an 8.6-day decline.  The Cycle may be complete.  A sell signal may be invoked beneath the 50-day Moving Average at 5510.00.

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 reached an overnight high at 19315.00, just beneath the  61.8% Fibonacci retracement at 19355.06 and the 50-day Moving Average at 19369.05.  While it has eased back from its overnight high, it is likely that there may be an attempt to reach one or the other of those targets.  At the same time, the retracement bounce/rally may have run out of steam, or nearly so.  The rally may have been coordinated.  There were 17 impulses averaging 17.6 minutes each.   Today is day 251 of the current Master Cycle.  Resolution may be made within a week.  A sell signal may be incurred beneath Intermediate support at 19017.00.

Today’s options chain shows Max Pain at 19180.00.  Long gamma emerges at 19200.00 while short gamma begins at 19200.00.  Gamma may remain sticky for a couple of days.

ZeroHedge remarks, “Never was so much owed by so many to so few

It is basically one man that lifts the whole market….

“Huang spoke this morning at the GS Communacopia + Technology Conference.. not sure I’ve ever seen so much energy & excitement at an industry conference before” (GS sales)”

SPX futures have maintained a narrow range in the overnight market after nailing short-term resistance and  the 61.8% Fibonacci retracement at 5556.14 near yesterday’s close (a double resistance).  While the NDX Wave structure allows another probe higher, the SPX structure appears complete, or nearly so.  As mentioned above, today is day 251 of the current Master Cycle.  It may be due for a reversal within the next week.  A sell signal may reside beneath the 50-day Moving Average at 5508.00.

Today’s options chain shows 5515.00 at Max Pain.  Long gamma starts at 5525.00 while short gamma may begin at 5510.00.

ZeroHedge reports, “Futures are trading higher ahead of today’s PPI report, extending on yesterday’s post-NVDA rebound momentum, as a rally that started in the US spread to stock markets in Asia and Europe Thursday as the Goldman Communacopia tech conference enters its final day. As of 8:00am, S&P and Nasdaq 100 futures are up 0.1%, with NVDA, GOOG, and META the top performers among MegaCap Tech. European stocks zoomed 1% higher led by Dutch chip-equipment maker ASML as traders braced for another rate cut by the European Central Bank. Asian stocks are also broadly higher with the exception of Chinese equities, which fell to the lowest since early 2019. Bond yields are higher, with the 10Y trading at 3.67% and the 2s10s curve is almost inverted again; the USD is flat. Commodities are mixed with Oil and Base Metals higher, while Precious Metals are lower. Today, the key focus will be PPI and Jobless claims: consensus est are for PPI to print 0.1% MoM vs. 0.1% prior and Core PPI to print 0.2% MoM vs. 0.0% prior. On earnings, keep an eye on consumer read-through from KR (before market-open) and AI/Tech sentiment from ADBE.”

VIX futures remained flat above the 50-day Moving Average in the overnight session.  The Cycles Model shows growing trending strength into the weekend, suggesting new heights in the VIX.

The September 18 options chain shows Max pain at 19.00.  Short gamma fills the space between 13.00 and 17.00.  Long gamma may start at 20.00 and is heavily populated to 45.00.

TNX rose to a high of 36.74 this morning after making a Master Cycle low yesterday at 36.14, on day 259.  New trending strength may begin to shoe this weekend and continue to mid-October.  A buy signal may be found above the Cycle bottom resistance at 37.00.

ZeroHedge reports, “After yesterday’s stellar 3Y auction, moments ago the Treasury sold $39BN in a 10Y reopening of 9Y-11M cusipg LF6, which for the second day in a row, saw remarkable demand.

The auction stopped at a high yield of 3.648%, which was 31.2bps below last month’s 3.96% and was the lowest since May 2023; it also stopped through the When Issued 3.662 by 1.4bps, the 3rd through in the past 4 auctions, and a clear reversal to last month’s ugly 3.1bps tail.”

Yen futures are consolidating after yesterday’s probe higher.  The Cycles Model suggests the trend may continue to early October.  This is causing the carry trade to unwind, affecting banks and insurance companies as well as leveraged hedge funds.  The carry trade is more pervasive than most would perceive.

2:00 pm

SPX rose above the 50-day Moving Average, probing to 5514.94.  There is a minor possibility of a slight probe higher, possibly to the 50% retracement level at 5528.02.  However, the bounce has fulfilled its purpose to totally confuse weaker hands into buying high and selling low.  This is called a “shakeout.”  We should be looking for a close/decline beneath the 50-day at 5507.47, giving us a sell signal.  A further confirmation of a sell signal lies beneath Intermediate support at 5481.21.

ZeroHedge remarks, “For the second day in a row, the market needed a sticksave, and got it thanks to – guess who – Nvidia.

Earlier this morning we reminded readers that NVDA was set to present at the Goldman Tech conference in San Fran…

… an event we said would have greater significance than the CPI print, and sure enough that’s what happened, because as stocks were slumping and were threatening to take out Friday’s lows…”

10:30 am

SPX did not create a new high in the cash market this morning, although the futures did go to 5500.40.  Instead, the cash market reversed within a point of the 38.2% Fibonacci retracement at 5498.50.  The sell signal has remained intact, thus I did not mention it this morning.  There is no reason to be long beneath 5400.00.  However, should SPX not make a new low, it may attempt another retracement, possibly to the 50-day Moving Average at 5507.47.  It appears to be testing its boundaries, the Friday low being the bottom and the 50-day as possible resistance.

10:05 am

BKX may be accelerating its slide beneath the 50-day Moving Average at 110.19.  It is on a confirmed sell signal with the trendline at 103.00 as its next target.  The mid-Cycle support is at 102.47 and the 200-day Moving Average is currently at 101.32.  The Cycles Model suggests the decline may go to early October, making the Head & Sholders neckline a distinct possibility by month end.

ZeroHedge comments, “94-year-old Warren Buffett’s Berkshire Hathaway has been on a multi-month selling spree of Bank of America shares, raising many questions about the motivation behind abruptly dumping billions of dollars worth of BofA stock. Berkshire’s latest filing indicates that the selling pressure is finally easing as share price slides.”

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!

NDX futures varied from a low of 18678.50 to 18828.20 in the overnight session, consolidating within yesterday’s trading range.  The markets await the CPI report  due at 8:30 am.  The consensus   is a .2% rate of change.  Above that may encourage the lower rate of change.  Should the CPI come in at .2% or lower, it is believed that the rate reduction may be .50%.  NDX is interest rate sensitive so an inflationary reading may have an adverse affect.   Currently, the NDX has only retraced 29% of its decline.  Should the reading be lower, we may  see the NDX rise to the 100-day Moving Average at 18979.71, just beneath the 38.2% retracement at 18986.82.

Today’s options chain shows Max Pain at 18920.00.  Long gamma gets serious above 19000.00.  Short gamma lies beneath 18910.00.

SPX futures have also consolidated within yesterday’s trading range.  An interest rate friendly report may send SPX higher, as it has currently been resisted at the 38.2% Fibonacci retracement level at 5497.53.  The 50-day Moving Average is currently at 5504.00.

Today’s op-ex shows Max Pain at 5500.00.  Long gamma may begin at 5540.00 while short gamma may begin at 5450.00.

ZeroHedge reports, “US futures, the dollar and treasury yields are all lower post-Debate and pre-CPI but off session lows. As of 8:00am, S&P futures are down 0.1%, recovering from a loss of 0.5% earlier; Nasdaq futures were down 0.2% with Mag7 and Semis lower as Energy stocks rebound from yesterday’s drubbing. Treasuries had minimal moves during the debate, but yields are 3-4bps lower now, hitting fresh 2024 lows. USD is lower and commodities are higher led by Energy, Ags, and Precious, with oil rebounding from Tuesday’s rout. The macro data focus today is on the CPI print (full preview here) and the 10Y bond auction.”

8:30 am

CPI for all items rises 0.2% in August; shelter up

“09/11/2024

In August, the Consumer Price Index for All Urban Consumers rose 0.2 percent, seasonally adjusted, and rose 2.5 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in August (SA); up 3.2 percent over the year (NSA).”

9:00 am

ZeroHedge reports, “Following last month’s modest miss in CPI which sparked speculation about a 50bps cut, which was then boosted by the jobs report miss and the huge downward revision, moments ago the BLS reported that – as only a handful of Wall Street strategists warned – CPI actually came in hotter than expected at the core level, rising 0.3% MoM vs expectations of a 0.2% print, with all remaining metrics coming in line, to wit:

• CPI 0.2% MoM (or 0.187% unrounded), Exp. 0.2% – in line
• CPI Core 0.3% MoM (or 0.281% unrounded), Exp. 0.2% – hotter than expected
• CPI 2.5% YoY, Exp. 2.5% – in line
• CPI Core 3.2% YoY, Exp. 3.2% – in line”

VIX futures were lower this morning, as it remains in a corrective pattern.  In order to maintain its impulsiveness, it may not decline beneath 18.00.  Otherwise alternate structures may be inferred.  VIX may have begun its new secular trend.  However, short-term Cycles may alter perceptions of what is really transpiring.

The September 18 (monthly) options chain shows Max Pain at 18.00-19.00.  Short gamma is very enthusiastic between 13.00 and 17.00.  Long gamma may begin at 20.00 and is well populated to 50.00.

TNX made its Cycle low at 36.14 this morning and may have begun its bounce on day 259 of the Master Cycle.  Futures made their low at 36.02.  While the Cycles Model suggests rates may rise to mid-October, it also suggests this may be the beginning of a secular rise in the 10-year rate and undo the 2yr-10yr rate inversion.

ZeroHedge reports, “With the stock market rollercoaster stuck in “down” mode today, it is probably not a surprise that the flight to safety would be strong to quite strong, and sure enough moments ago when the US sold $58BN in 3Y paper, the demand was the strongest since at least last summer.

Pricing at a high yield of 3.440%, the 3Y auction was not only 37bps below last month’s 3.81% and the lowest since August 2022, but also stopped through the 3.457% When Issued by 1.7bps, the biggest Through since August 2023 and the 4th biggest on record.”

USD futures are on the rise, hitting 101.80 in anticipation of rising interest rates.  That, and the deteriorating European economy may propel the USD considerably higher.  However, the USD is due for a correction that may last a number of days before forging higher.

The Yen futures probed higher to 71.10 this morning as it forces the unwind of the carry trade even further.  The Cycle Top at 70.92 may not stop the rally in the Yen.  It may cease being the source of liquidity/financing for our economy, at least for the time being.  The rally is due to continue to early October.

9:50 am

BKX is hovering above its 50-day Moving Average at 110.15 this morning.  Beneath that level is a confirmed sell signal.  While stocks are beginning to show the effect of the unwinding of the Yen carry trade, the banks are lagging behind, even as the carry trade is now causing losses.  Warren Buffett, of all people, is keenly aware of this condition.  Thus, the unloading of Bank of America stocks.  Yen carry baskets are fundamentally unattractive and may become more so as the Yen rises.  Coupled with deteriorating loan portfolios due to a recessionary economy, the outlook looks bleak for banks on a forward looking basis.  The Head & Shoulders formation is there for a reason that is becoming clearer as time goes on…

3:00 pm

BKX has declined beneath the 50-day Moving Average, confirming the sell signal.  Banks are not talking about the Yen carry trade, but the effects are there.  Note how net interest income has fallen for JPM.

ZeroHedge notes, “The stock of the largest US bank is tumbling this morning after Daniel Pinto, JPMorgan’s president, said that analysts were too optimistic in projecting next year’s expenses and net interest income, sending the shares down more than 6%, and tumbling to 1 month lows..

The current NII estimate of $89.5 billion is “not very reasonable” given interest-rate expectations, Pinto said at the Barclays annual financial services conference Tuesday. The figure “will be lower,” he said, which is surprising because the bank’s own latest outlook just two months ago forecast $91 billion in net interest income.”

ZeroHedge further states, “Yesterday we said that the latest consumer credit numbers, which saw a bizarre surge in credit card debt as consumers – their savings now depleted and at record low levels – now have to charge their credit card for every day staples, were the “last hurrah” for consumption in the US.”

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.”

NDX futures completed its retracement slightly higher after the close at 18708.50.  However, it could not hold that elevation and is now back to a flat line position at present.  Should the NDX attempt a further bounce, the 38.2% Fibonacci retracement lies at 18986.00.  The bounce thus far has been weak and has done nothing to relieve the oversold condition.  That may lead to another 1-2 days of rally toward Intermediate resistance at 19038.00.  The alternate view is that , not having escaped short gamma, the NDX may continue in an oversold decline, a very dangerous condition.

Today’s options chain shows Max Pain at 18710.00  Long gamma may begin at 18750.00.  Short gamma may start with a bang at 18700.00.  This is a “must do” level for the dealers who may be overwhelmingly long.

ZeroHedge comments, “After the worst week for the S&P since the March 2023 bank crisis…

… which sent the Nasdaq to one of the most oversold levels since the covid crash…

… and with the market starting off September in typical “whimper” style: deep in the red as the following chart from Bespoke shows…”

SPX futures rose to 5485.00 thus far this morning thus far.  The 38.2% Fibonacci retracement level is at 5497.50.  The 50-day Moving Average is at 5504.54, where there is heavy resistance.  The SPX is not as oversold as the NDX, so there is room for a further decline, as well.  The Cycles Model allows another possible 1-2 day bounce.  However, that may depend on the condition of the options market.

Today’s options chain shows Max Pain at 5475.00.  Long gamma may begin at 5500.00.  However, short gamma threatens at 5450.00.  It appears that the dealers are attempting to  to keep the SPX out of short gamma.

ZeroHedge reports, “US equity futures rose, trading near session highs after they rebounding off overnight lows as markets head into a crunch period, with key inflation data on Wednesday followed by the Fed’s interest-rate decision next week. As of 8:00am ET, S&P futures were up 0.1% trading in a narrow range after the underlying gauge rose 1.2% on Monday, rebounding from its worst start to the month in data going back to 1953; Nasdaq futures were down 0.2% as Mag7 and Semis are weaker while Financials rise following a Bloomberg report of lower capital requirements. Treasury yields rose a second day, higher by 1-2 bps while the USD held Monday’s gains. Commodities are mixed with metals up, energy down, and Ags mixed. The macro data in focus is on the Small Biz Optimism print (which dropped to 91.2 from 93.7, missing estimates) and the Presidential Debate.”

The NYSE Hi-Lo Index shows the NYSE in a positive light.  Selling has not yet overtaken net purchases.  As a result there were 85 net new 52-week highs yesterday due to the continued rotation out of the NDX into mid- and small caps.  What is amazing is this is after last week’s selling.  What is missing is that this index is not cap weighted, which ignores the tech sell-off.

VIX futures have declined modestly beneath the Cycle Top at 21.07.  What is interesting is that the VIX refuses to go lower, despite the heavy short gamma in the options market.   Smart money (longer-term) is positioned for the SPX to decline and VIX to rise further.  The retail trade is still stuck on (short-term) 0-DTE trades.

Tomorrow’s op-ex shows Max Pain at 22.00.  Short gamma resides from 15.00 to 20.00.  Long gamma may begin at 25.00.  However, there is not much conviction on the long side this week.  However, the monthly op-ex on September 18 shows Max Pain at 17.00-19.00.  Long gamma is positioned above 25.00 with over 3 million long positions.   The right conditions may trigger a runaway train in the VIX.

TNX has pulled back in a retest of trendline support near 36.50.  Today is day 257 in the (former) Master Cycle.  There may be a couple of days needed to gain strength to push higher.  The Cycles Model suggests rising rates may take center stage to mid-October.  Despite lower 10-year rates, credit card rates are at an all-time high.  That may be due to the unwind of the Yen carry trade, which banks may have used to encourage no-and low-interest loans.  That may be coming to an end as the carry trade backfired  over the  last two months.

ZeroHedge remarks, “One month ago, when multiple discount retailers (here and here) were lamenting the sudden collapse in US consumer purchasing power, we observed the reason this unexpected hit to US consumption: as the US personal savings rate had collapsed, the growth in consumer credit was slowing, and in July, credit card debt growth posted its first decline since the covid crash, just in time for another month of record high credit card rates.

But fast forwarding just one month later, when in a stunning reversal, July consumer credit growth unexpectedly reversed the dramatic June slowdown, and soared more than $25 billion, to a new record high of $5.093 trillion.

The Japanese Yen broke out to a new high on Friday.  This has been forcing the great carry trade unwind in stocks, which may be why the SPX declined last week, despite low 10-year treasury yields.  Today’s pullback in the Yen may also explain the bounce in stocks.  The Cycles Model brings more bad news for equities investors as the pullback may not last more than a day or two.  The trend may be higher in the Yen through the end of September.