May 11, 2021

12:15 pm

I was dubious about the NDX filling the gap this morning.  However, it managed to bounce back to the 50-day Moving Average as resistance, just a dozen points short of yesterday’s close at 13359.40.  The selling pressure may not be over if the 50-day cannot be breached.

ZeroHedge remarks, “Nomura’s “futures imbalance” monitor showed enormous sell pressure all day in NQ futs across all lots sizes (the largest in at least 1m), but particularly in our medium- and large- lot buckets, proxies for large HFs and Asset Managers aggressively selling / shorting…

Two things were behind the QQQcrash – ARKK’s vicious circle and CTA Deleveraging.

Nomura’s Charlie McElligott warns that the monstrous ~$20B ARKK active ETF is getting absolutely torched in recent weeks amid a negative feedback loop from the mega-high growth / high multiple / “unprofitable” single-names.

Critically, he explains, the ETF itself now acting “shadow leverage” pressuring this selloff, especially with their dubious risk management practice of heavily concentrated positioning into what are extraordinarily illiquid names.”

Additionally, ZeroHedge observes, “Late on Monday, we made two important observations: i) hedge funds had never been more levered to market moves, with gross leverage at all time highs, as hedge funds strive to extract every last ounce of beta from the market (net leverage was also extremely high, but not record high, and is more a reflection of any given hedge fund’s alpha preference)…

… and ii) hedge funds had scrambled to short tech shares explaining the recent decline in the Nasdaq, with Goldman Prime pointing out that Info Tech stocks were net sold for a third straight week and saw the largest week/week $ net selling since last August, and that Info Tech was by far the most net sold sector on the GS Prime book driven by short sales outpacing long buys 7 to 1.

One day later and the bearish pile up is reaching epic proportions.”

 

9:40 am

The NDX Hi-Lo Index plummeted to -91.00 this morning, effecting the confirmed sell signal in the NDX.  The VIX and VXN both climbed above their respective 50-day Moving Averages, confirming the SPX/NDX sell signals.  Volatility is high, so pick your  entry carefully.

The NYSE Hi-Lo opened at -6.00 and barely climbed to 1.00 at this time.  We have selling confirmation on all fronts.

7:30 am

Good Morning!

NDX futures again lead the decline and is now beneath the 50-day Moving Average, plunging to a low (thus far) of 13079.88.  It is on a confirmed sell.  The Cyclical path becomes more certain, with a minimum decline to Wednesday of options week.  It may go much further, but we will have to monitor it for progress during this time.  This may be a vicious decline, since virtually no one has been short until a few days ago.  Options may play a big influence on the decline, with a possible extension of the decline through options week.

ZeroHedge observes, “Hedge funds had another rough week according to Goldman’s Prime Brokerage, with the GS Equity Fundamental L/S  Performance Estimate falling -1.68% between 4/30 and 5/6 (vs MSCI World TR -0.33%), driven by alpha of -1.11% – the worst weekly alpha in two months – and to a lesser extent beta of -0.57% (from market exposure and the market sensitivity factor combined). As a result, global fundamental equity L/S hedge funds lost almost two-thirds of their YTD gains in just the past week, bringing their total YTD return to just 0.97% in what is setting up as another dismal year for the 2 and 20 crowd.”

 

The NDX Hi-Lo has been predominantly been resisted at the mid-Cycle line at 175.00, but it has not declined beneath 0.00 for more than a day.  That should change today.

 

SPX futures have declined thus far to 4127.62, approaching the Broadening Wedge trendline, which may confirm the sell signal today.  As mentioned previously, as the NDX becomes less liquid, the selling migrates to the more liquid indices.

ZeroHedge reports, “Yesterday was bad, but not too bad, and we titled our morning market wrap “Futures Flat As Soaring Commodities Depress Tech Stocks.” 24 hours later it’s much worse, as the rout that hammered US tech stocks on surging inflation fears (see “This Is Not Transitory”: Hyperinflation Fears Are Soaring Across America“) has now gone global, with markets in Asia and Europe hammered and S&P futures sliding 0.8%, while Nasdaq futures tumbled by another 1.3% after Monday’s 2.6% rout. Treasuries were steady ahead of today’s 3Y auction while the dollar erased its gains and dropped to session lows.

Here are some of the notable bloodbath highlights: the Hang Seng Tech Index sank as much as 4.5%, extending its tumble from a February high to about 30%. In Europe, the Stoxx 600 Index fell the most since January as tech sector losses drove the gauge lower. One of the biggest winners over the past year, Cathie Wood’s Ark Innovation ETF, was down more than 3% in pre-market trading after plunging 5.2% yesterday.

“It seems to be a combination of inflation fears making a comeback and some market participants moving higher along the value spectrum, cutting their exposure to anything with a stretched valuation,” said Marios Hadjikyriacos, investment analyst at online broker XM in Cyprus.

In a late session reversal on Monday, inflation jitters drove investors away from growth stocks to cyclicals, which benefit the most as the economy reopens, resulting in the S&P 500 logging its worst day in nearly eight weeks. At 700 am ET, Dow e-minis were down 159 points, or 0.46%, S&P 500 e-minis were down 31.5 points, or 0.75%, and Nasdaq 100 e-minis were down 169.25 points, or 1.27%.”

 

The NYSE Hi-Lo illustrates the move over to value vs growth.  However, the Orthodox Broadening Top formation shows a potential for a very deep dive.  The entire market may be about to have its Wile E. Coyote moment.

 

VIX futures rose to 22.60, potentially breaking above its previous high.  The rally above the 50-day Moving Average at 19.94 confirms the VIX buy signal (SPX sell signal).  This is not at the broad recognition point for a market sell signal.  It is likely that that may come above the upper trendline near 25.00.

 

TNX is challenging the 50-day Moving Average at 16.07 this morning.  A close above that level produces a buy signal.  The Cycles Model affirms that the rally may continue through the month of May.

 

USD futures appear to have consolidated near the bottom that was made yesterday on day 251.  It is not clear whether that is the Master Cycle low or not.  Time will tell, so I am assigning a neutral stance to the USD for the week.

 

Light crude oil futures declined this morning as (lack of) liquidity affects all classes of assets.  Crude has quit making new highs since March 8, leaving it in a vulnerable position to decline more radically than one would expect.  There may be, literally, no bottom in oil.

 

Commodities have reached their Master Cycle high in the past few days.  In addition, they may also have reached their secular high, as well.  Copper futures peaked at 4.89 yesterday and appears to have begun their decline.  This is not a new super Cycle.  It is an errant Cycle Wave b that drank too much Fed juice.  Wave c of II may end up near .73 for a low.

ZeroHedge reports, “There was some good news for the (transitorily hyper)inflation-ravaged US economy today when copper, wheat and lumber futures all fell after days of surging – in the case of the latter, the first drop in 13 days…

… pushing the Bloomberg commodity index lower after six straight days of gains.”

 

 

Posted in Published | Leave a comment

May 10, 2021

10:15 am

The Dow Jones Industrials Exceeded 35000.00 and may briefly touch the Fibonacci 3.25 X Wave [1] at 35152.00 today.  It is also up against the 1987 trendline that has defined tops and bottoms for the past 33.54 years.  The trendline may trump Fibonacci, so don’t expect a perfect target acquisition.

 

10:05 am

NDX has declined beneath the mid-Cycle support at 13599.56, giving a potential sell signal.  It is likely that resistance will be retested before proceeding further down.  The NDX Hi-Lo Index is at 119.00, not confirming the sell signal, while the VIX  (VXN) are alsl hovering near their lows.  I would be very careful with this move until it declines beneath the 50-day Moving Average at 13351.35.

ZeroHedge warns, “After a relatively calm overnight session, all hell broke loose at the US cash open with The Dow (new record high) bid while Big-Tech and Small Caps puked hard…

While the S&P is more neutral, Nomura’s Charlie McElligott’s options in both “Secular Growth” QQQ and “Cyclical Value” IWM implying Dealers remaining incrementally “SHORT Gamma vs spot” (QQQ “gamma neutral” line flips up at 335.34, IWM “gamma neutral” line flips up at 226.50), thus at current levels, both are susceptible to “accelerant” –type moves in both directions…”

 

 

7:30 am

Good Morning!

NDX futures made a low of 13639.88 thus far, declining toward the mid-Cycle support at 13592.59.  Should it remain above that support, there may be an outside chance of a panic rally to a high of 14450.00.  Beneath that support reinforces the sell signal.

The current Master Cycle ends during options week.  Both the NDX and SPX a possible low on Wednesday of options week.  However, that may become a high, should the other indices continue to make new highs.  A panic decline will settle the issue.

ZeroHedge observes, “Earlier today, Morgan Stanley’s chief equity strategist Michael Wilson looked at what was likely the highlight of Q1 earnings season, pointing out that “the vaunted FAANMG stocks sold off on terrific 1Q earnings results after an outsized run into the event. This was… a reminder that stocks often peak on good news.”

Not to make a too fine point out of it, suddenly everyone is focusing on the performance of the FAAMG stocks which, after soaring for much of 2020 when they returned 56% and accounted for 7% of the 18% S&P 500 return last year, have gone nowhere in recent months prompting concerns that it’s all downhill from here.

Not surprisingly, FAAMGs were also the topic of the latest weekly note from Goldman’s chief equity strategist David Kostin, who writes that confronted with the prospect of decelerating US economic activity, the bank’s clients are suddenly freaking out about a breakdown in the 5 Generals, and are “asking about the potential for a transition in market leadership” even as “many investors have expressed the view that economic deceleration should support the outperformance of the largest “Big Tech” stocks in the market”, a topic which Goldman analyzed recently and which view the bank supports.”

 

After making a new high at 4237.88, SPX futures have settled down to a nearly flat regimen.  However, it appears to be forming a Broadening Wedge which may still be incomplete.  Adding to the mix is the Industrials, still making new all-time highs in the futures.

ZeroHedge reports, “S&P futures started the weak flat with Nasdaq futures falling offset by surging commodity stocks as a new record in copper and iron ore prices stoked concern about whether inflation will derail a growth rebound in the world’s largest economy and spoil a record stock rally.  Metal producers were among the biggest gainers in premarket trading, with Freeport-McMoRan, Cleveland-Cliffs and United States Steel all up at least 3%.

At 715 am ET, Dow e-minis were up 109 points, or 0.31%, S&P 500 e-minis were up 3.25 points, or 0.08%, and Nasdaq 100 e-minis were down 35.5 points, or 0.26%. The tech-heavy index has been whipsawed by the prospect of inflation which threatens longer-term profit expectations typical of the industry A downgrade by Citi of Internet stocks such as GOOGL did not help. Treasury yields steadied as traders brace for a busy week of auctions.”

 

VIX futures have firmed up, but still beneath the trendline near 18.00.  The VIX has made an 8% retracement of the rally from its Master Cycle low.  Should it be able to gain traction above the bottom trendline, it may see a Master Cycle high by late May or early June.

 

USD futures have made a new low at 90.10 this morning.  USD is in the latter part of the next Master Cycle, due to bottom out during options expiration.

 

TNX has bounced off Friday’s Master Cycle low after bottoming on day 274.  The new Master Cycle appears to project a high in early June.  I see this as one of the disrupters that will affect the market

 

 

Posted in Published | Leave a comment

May 7, 2021

12:02 pm

While the DJIA and SPX have gone on to make new all-time highs, the NDX appears to have completed a nearly exact 61.8% retracement of its decline.  It’s time to step back and see what happens here.

On the same note, SPX hit 4238.o4, just shy of its daily Cycle Top resistance at 4246.30.

INDU hit its high at 34734.30, slightly above its daily Cycle Top resistance at 34720.82.  A reversal from the Cycle Top may be considered a sell signal when the EW structure is complete.

Finally, VIX tested its 2020 Gap support at 17.09 with a decline to 17.13.

Gold futures have also rallied to 1844.40, a 60% retracement of its decline since the beginning of the year.

BKX, our proxy for liquidity, appears to have peaked yesterday at 132.23, an all-time high on day 268 of its Master Cycle.

11:52 am

GKX stretched its Master Cycle all the way to day 275 to make its high.  From here, the likelihood is a decline back to test the Head & Shoulders neckline, an approximate 62% retracement.  While Head & Shoulders necklines are rarely pierced on a back-test, I am neutral until we see the end of the new Master cycle in early June.

ZeroHedge reports, “Global inflation is headed into overdrive as the leading food price indicator that is the United Nations’ Food and Agriculture Organization’s food price index increased for an 11th consecutive month in April, hitting levels not seen since May 2014, with sugar prices leading the rise in the main index.

The Rome-based FAO released data Thursday showing the food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat, and sugar, surged 2 points from 118.9 points in March to 120.9 in April.

That is a 30.7% YoY jump – the fastest rise since 2011…”

 

10:35 am

The action this morning shows a broadening Wedge formation which has a minimum downside target of 3375.00.  It appears to be nearing its end, if not finished already.  This may be the “disturbance” that I mentioned earlier this week.

Robert Edwards and John Magee write in Technical Analysis of Stock Trends, page 140, “…the Broadening Formation may be said to suggest a market lacking intelligent sponsorship and out of control – a situation usually in which the “public” is excitedly committed and which is whipped around by wild rumors.”  Further, it states, “…the very fact that chart pictures of this type make their appearance as a rule only at the end or in the final phase of a long Bull Market…”

The Cycles Model may not recognize this as a top because of the drawn-out nature of this formation.  Today is day 247 of the Master Cycle.  A subsequent decline, which may punctuate the end of this Master Cycle, could take up to three weeks to accomplish.

 

8:10 am

NDX futures ventured above the mid-Cycle resistance at 13566.67 to 13660.00, but not above the first correction high at 13676.90.  The correction appears complete, or nearly so.  We await the April Jobs Report.

ZeroHedge observes, “After years of lackluster performance, Warren Buffett’s Berkshire Hathaway has seen its Class A shares climb 20% so far this year, bolstered by the reflation trade that has sapped tech stocks. But Buffett’s old-fashioned resistance to a stock split is creating serious problems for the engineers who maintain Nasdaq’s data feeds, which are used by everyone from discount brokerages like Robinhood, to financial news websites that offer live stock quotes.

The problem, according to a report published in Wednesday’s WSJ, is that the biggest number that Nasdaq’s data feeds can handle is $429,496.7295. However, surpassing that level could create a Y2K-style meltdown, so the exchange was forced on Tuesday to suspend price quotes for Berkshire’s Class A shares when they closed at a record high above $421K.”

8:43 am ZeroHedge reports, “Well that escalated quickly. The dismally disappointing payrolls data has sparked chaos across capital markets as investors consider ‘tapering the taper’ talk.

Market-implied Fed Rate expectations collapsed with the odds of a rate-hike before Dec 2022 now less than 50%…

The equity market is very mixed as the rotation back to ‘growth’ explodes with Nasdaq soaring and Small Caps plunging

9:00 am  NDX futures jumped to 13813.50 after the DOL announcement.  This is strange, since the Industrials are declining.

 

INDU futures ventured higher to 34558.50.  Futures are about 110 points lower than the cash market.    I am showing a monthly chart to highlight the fact that the industrials have touched the green 1987 trendline again.  The last time it touched was January 3, 2018.  It crossed beneath the trendline in August, 2008.  The Industrials are ripe for a turn.

At 8:34 am, ZeroHedge reports, “For once the disappointing ADP report was right.

With expectations of today’s payroll print soaring, consensus expecting a whopping 1 million number and some forecasters calling as high as 2+ million, few were prepared for a miss. And of course the market gods made sure to inflict the most possible pain with the BLS reporting an April payroll of just 266K in April, a huge miss compared to the 1 million consensus estimate.”

At 8:45, the US 30 futures are down 155 points.  This may be an indicator of foreign and institutional withdrawal.  Sould this continue, the SPX and NDX may follow very soon.

 

SPX futures ventured to 4213.62 this morning.  Since the futures are roughly 7 points lower than the cash market, there is a threat of a new all-time high this morning.  This may happen despite the fact that the Industrials have already declined 150 points since the DOL announcement.

At 8:00 am  ZeroHedge reports, “S&P futures rose overnight alongside European and Asian market in another quiet session, as commodities smashed higher ahead of a blockbuster jobs report (whispers of a 2MM+ print) which will cap a series of strong economic reports this week. Global stocks headed for their first weekly gain in three with MSCI’s world index rising about 0.1% and on course for a 0.4% gain this week amid a surge in commodity prices. Copper joined iron ore and steel by hitting a new all-time record as expectations that rebounding economies will spur a boom in global demand, while the Bloomberg Commodity Spot Index jumped to its highest level since 2011.

At 730 am ET, Dow e-minis were up 80 points, or 0.22%, S&P 500 e-minis were up 9.00 points, or 0.22%, and Nasdaq 100 e-minis were up 31.50 points, or 0.23%.”

 

VIX futures are still hovering near the trendline, despite the decline in the DJIA.  The Cycles Model shows a possible disturbance in the VIX, starting today and lasting through the end of the month.  The  nature of it has yet to be revealed, but the possibility of a wickedly strong surge is the first thing that comes to mind.

8:34 am  ZeroHedge reports the shocking news, “With expectations of today’s payroll print soaring, consensus expecting a whopping 1 million number and some forecasters calling as high as 2+ million, few were prepared for a miss (just 2 forecasters out of 79 were calling for a sub 800,000 print). And of course the market gods made sure to inflict the most possible pain on as many as possible, with the BLS reporting an April payroll of just 266K in April, a huge miss compared to the 1 million consensus estimate.

 

TNX extended its Master Cycle low to day 274, a very long Cycle.  As a reminder, we allow for plus or minus 17 days from day 258, the median Cycle length.  Should the new Master Cycle begin today, TNX may see four weeks of rally ending in a probable high during the first week of June.

Zerohedge notes, “After a turbulent start to the year for the treasury market, which posted its worst quarterly total return since 1980 as 10y Treasury yields rose more than 80bp, leaving markets to consider just how much further yields might move once the expected economic acceleration went from forecast to fact, Treasuries have found themselves stuck in a very narrow range, gripped by an eerie calm even as the US economy continues to power ahead and is on pace for the strongest expansion in GDP since the record Q3 of last year.

However, hile one can analyze CTA flows, extrapolate Japanese pension positioning and even speculate about stealth central bank intervention in seeking an answer for the recent bond market calm, there may be a far simpler reason why bond moves have fizzled out even as economic surprises continue coming hot and heavy: as Goldman’s William Marshall writes, yield sensitivity to data surprises tends to decline at higher levels of forecast uncertainty – a key feature of the macro environment since the onset of the pandemic. As a result, until there is some convergence in projections, “yield responses to data releases may remain muted by historical standards.”

 

USD futures are making a potential new low at 90.35 this morning.

 

Posted in Published | Leave a comment

May 6, 2021

1:15 pm

Certain dealers and hedge funds are using their past experience to predict a possible short squeeze imminently.  NDX has been battling at mid-Cycle resistance at 13560.00 this morning and its Wave structure may not be complete.  Two possible outcomes are:  1.  NDX loses the battle and plunges beneath the 50-day, which opens the gates to a panic decline, or 2.  NDX rallies to Short-term resistance at 13854.81.  The Cycles Model suggests option 1.  As mentioned this morning, it marked yesterday’s high as a (mini) Cycle top.

ZeroHedge warns, “With the Nasdaq set for its biggest weekly drop since the end of February, when the infamous, catastrophic, “near-failed” 7Y auction sparked reflation fears and hammered tech stocks and duration in general…

… it will not come as a surprise that “someone” has been puking tech stocks, especially after we reported on Tuesday that in the past 4 weeks BofA’s hedge fund clients had sold a record amount of stocks.”

 

7:20 am

Good Morning!

NDX futures made an overnight high at 13570.00, but eased back beneath the mid-Cycle support/resistance at 13549.00.  The aggressive sell turns confirmed beneath the 50-day or with confirmation from the VIX and NDX Hi-Lo Index.  NDX is in negative gamma territory and the further down it goes, the more pressure is on dealers and hedge funds to unload their FAAMGs.  Once beneath the 50-day Moving Average at 13348.20, the trap door opens to the netherworld.  Point 6 of the Orthodox Broadening Top is at 6503.00, a 54% decline.  (Update) Yesterday’s close created the all-time high for the DJIA, which gives us a minimum of 8.6 days to May 18.   Most crashes took a minimum of 12,9 days, so we may be looking at Monday, May 24 as the Master Cycle low.

ZeroHedge comments, “Kids, you tried your best and failed miserably. The lesson is, never try..”

Forget fears of rising interest rates – the big threat is how the global economy will cope with supply chain bottlenecks and the coming commodities supercycle. These will create all kinds of friction. The West is particularly vulnerable to microchip supply instability – which could take years to resolve. 

There is an enormous difference between savouring a “Eureka” experience when one gains a realisation of how the universe works, and a “D’oh” moment when something so blindly obvious finally becomes clear – hitting one between the eyes like the swing of the proverbial sledgehammer.

 

SPX futures made an overnight high at 4174.62, but eased back slipped back beneath Short-term support at 4173.93.  It remains on an aggressive sell signal pending either a cross beneath mid-Cycle support at 4091.27 of confirmation from the VIX and NYSE Hi-Lo.  Yesterday’s high marks the first 4.3 days of the decline with 8.6 more days to go.  An alternate view shows a possible extension beyond options week, although it needs more confirmation.

ZeroHedge reports, “For the fourth morning in a row, futures are barely changed – a stark reversal to the previous euphoria that would see a big jump in risk sentiment in the overnight session – with Emini futures flat ahead of data that is expected to show a decline in weekly jobless claims, while shares of vaccine makers tumbled further after President Joe Biden’s plan to back intellectual property waivers on COVID-19 shots. The dollar weakened amid unchanged Treasury yields even as Japan and China returned from holiday.”

 

VIX futures slid from yesterday’s close, but stayed above the trendline at 18.20.  It has started to regain strength this morning, but still negative as I write.  The Cycles Model suggests a VIXplosion possibly starting no later than tomorrow with repercussions lasting another week thereafter.  The current Master Cycle ends on June 1.  It is uncertain whether it will be a high or low, which depends on how this rally develops through options week.

 

USD futures are consolidating beneath the 50-day Moving Average at 91.83.  The Cycles Model shows growing strength until options week.  There is a possibility of an extension through options week, which indicated a possible panic in the markets.

 

TNX made a low of 15.61 during the overnight session.  It triggers a buy signal above the 50-day Moving average at 15.91.  Confirmation comes above the Intermediate-term resistance at 16.31.  The minimum target appears to be 19.71, with the possibility of a further extension.  The current Master Cycle indicates a potential high on June 2.

 

The BKX, a proxy for liquidity, made a new all-time high yesterday on day 267 of he Master Cycle.  Structurally, BKX should not have gone above the March 2007 high at 121.16.  But this is a Cycle Wave b, which is an outlier.  BKX now has the ignominious challenge of declining beneath the March 9, 2009 low of 17.75.  The inevitable has simply been delayed.

ZeroHedge warns, “The Buffett Yardstick, or total market capitalization of the U.S. equity market relative to the overall size of the economy, now stands at a gaudy 270%.

For reference, at the peak of the Dotcom Mania, this measure only reached 188% so we are now over 40% more expensive than the most expensive stock market peak in history! Another way to think about this is to understand that, at today’s valuation, the stock market would need to fall 30% overnight in order to match the peak of what is widely considered the greatest bubble in modern history.

And not only is the current stock market bubble that much bigger than the previous record, it is also far broader. The median price-to-sales ratio of S&P 500 Index components is now almost 75% higher than it was at the peak of the Dotcom Mania just over 20 years ago. In other words, unlike that previous bubble which was confined to just a subset, the current bubble encompasses a much greater proportion of the overall stock market.”

 

 

 

Posted in Published | Leave a comment

May 5, 2021

8:00 am

Good Morning!

NDX futures climbed to a morning high of 13627.00, above the mid-Cycle resistance at 13533.94, an approximate 34% retracement.  The futures page contains some inaccuracies that lead me to take that information with a grain of salt.  There is likely to be another push lower that may complete an impulsive (5-Wave) decline.

 

The NDX Hi-Lo closed at 26.00, not far from where it began yesterday.  Remember, due to the presence of the mega-tech stocks, there only needs to be a handful trading positively to keep the NDX elevated.  A confirmed sell signal won’t be registered until it falls beneath zero.

 

SPX futures may have hit a high at 4185.12, but have eased back down to Short-term support/resistance at 4173.92.  Again, the market feed is giving troublesome information.  Nevertheless, the Short-term line also denotes the 50% retracement level of the decline thus far.  Should the SPX resume its decline, it may proceed to mid-Cycle support at a minimum, at 4083.13.  The NDX decline may exert a greater downward pull on the blue chips, extending this decline even further.

ZeroHedge reports, “US index futures rebounded from Tuesday’s tech-led rout, with Nasdaq futures leading gains alongside shares in Europe as focus shifted away from inflation fears and turned to strong earnings and the global economic recovery. Nasdaq futs gained the most, rising 70.25pts or 0.52% to 13,606, S&P futures were up 14.25 points or 0.34%, and Dow futures were back over 34,000, up 57pts or 0.17% to 34,077. Oil and the dollar also climbed.”

 

VIX futures hovered between the trendline and the 50-day Moving Average in the overnight session.  Again, the data-feed appears problematic, so we should know more at the open.

 

TNX rose back above the 50-day Moving average at 15.94 which it tested yesterday.  The Cycles Model indicates that strength may come back to this uptrend in the next week.

ZeroHedge observes, “Two days after the US Treasury surprised rates watchers by unveiling that it would sell nearly 5x more Treasuries in the current quarter than previously expected ($465BN vs $95BN) and $1.3TN over the second half of the fiscal year, while reducing the amount of cash released from the TGA…

Source: Treasury Sources and Uses Table

… at 830am on Wednesday in its latest quarterly Refunding Announcement, the Treasury announced that it would keep its quarterly auction of long-term coupon debt unchanged, and at an all time high, of $126 billion (vs $84 billion a year ago) to refund approximately $47.7 billion of Treasury notes and bonds maturing on May 15, 2021.  This issuance will raise new cash of approximately $78.3 billion. ”

 

USD futures appear to be stalled beneath the 50-day Moving Average at 91.60.  The Cycles Model suggests strength rising into options expiration week.

ZeroHedge observes, “A little over a week ago, we reported on one of the biggest deflationary threats looming over the global economy: that is, China’s shrinking population, as deaths outpace births for the first time, a trend that demographers believe will only worsen as the impact of China’s one-child policy is felt on its population numbers.

And as Wall Street banks and America’s largest corporations complain about growing inflationary pressures in their sell-side research and earnings calls, the latest population update from the CDC has just confirmed that the deflationary trend of a falling birth rate continued last year in the US. In fact, one could argue this trend has been supercharged by the pandemic, thwarting theories about a lockdown “baby boom” as the number of births in the US fell by 4% in 2020, dropping to the lowest level since 1979.”

Put another way: thanks to the pandemic, US birth rates have fallen to their lowest level in a generation.

 

 

Posted in Published | Leave a comment

May 4, 2021

1:56pm

NDX bounced just above its 50-day Moving Average and shows no intention of taking back its losses.  Based on the Chart Model, NDX is likely to retest the mid-Cycle resistance at 13531.05 before going lower.  A decline beneath the 50-day opens the possibility of testing the March low.  In addition, the volume of selling in the NDX may bleed over to the blue chips, as well.

ZeroHedge observes, “Two weeks ago, Bank of America warned that it had observed a sharp reversal to “increasingly euphoric sentiment” among its institutional, hedge fund and HNW clients, all of whom sold in the previous week even as stocks continued their grind higher. This happened around the time that Goldman’s Prime Brokerage had observed a startling streak as hedge funds sold stocks for 7 days out of 8, which prompted us to warn that a short squeeze was coming… we were right, because just a few days later the S&P was back at all time highs on – you guessed it – another whopping short squeeze.

Then, last week, when looking at its latest client flow data, BofA found that bearish sentiment accelerated and for the second week in a row the bank’s clients were net sellers (-$2.0B) of US equities with net sales in both single stocks and ETFs (only the third time this year clients sold ETFs), while retail clients were the “least dumb money”, and according to BofA were once again the only client group to buy stocks, albeit at the weakest level since mid Feb.

So after two consecutive weeks of sheer “smart money” revulsion did buyers finally emerge?

Well, according to the latest BofA Client Flow Trends report published overnight, not only did buyers not return – as the bank’s clients were net sellers (-$2.2B) of US equities for the third week in a row…”

 

10:12 am

SPX has declined beneath its “negative gamma” line at 4150.00.  This could lead to more declines as dealers and hedge funds shed their longs.  The decline is further reinforced beneath the Wave [iv] low at 4118.38.

ZeroHedge remarks, “Just like late February, when we had 2021’s first inflation scare-cum-Treasury tantrum, Tech is breaking down and look no further than Amazon for the evidence. In just the three days since reporting blowout Q1 earnings which sent its stock to a new all time high, AMZN stock is down over 9% and is on the verge of a correction. Other FAAMGs, most notably Apple which had a just as impressive quarter, are not faring any better.

However, unlike late February when tech was monkeyhammered largely due to sharply higher yields, this time there is the double whammy of dealers caught in a self-reinforcing negative gamma trap. As SpotGamma wrote overnight, “both SPY & QQQ remain in negative gamma territory which implies higher relative volatility.”

 

 

10:05 am

VIX has rallied above the 50-day Moving Average at 20.26.  It may retest the area and go back beneath it.  However, it has now broken out which gives us a buy signal (SPX sell).  Time to take appropriate action.

 

9:52 am

NDX is well on its way toward the mid-Cycle (2-hour) at 13526.70 and the 50-day Moving Average at 13352.96.  The signal changes from aggressive to confirmed beneath the mid-Cycle.

My daughter took her 4-month old baby girl to the doctor’s office for her evaluation.  She was given an MMR shot and the nurse started pushing hard to administer a series of vaccines, including the covid shot!  My daughter wisely refused, but she was shaken by this experience.  My daughter is an RN and knows her medicine.  How many others just “trust the science?”  Consider this website that monitors the VAERS site.  People are catching on that something is not quite as it seems. See for yourself.

 

7:37 am

NDX futures made a new low at 13652.62 thus far this morning.  It appears to be heading for mid-Cycle support at 13525.60 for a bounce.  Having made a new low beneath the April 22 low adds confirmation to the aggressive sell signal.  However, should it bounce, it may retest Short-term resistance at 13902.76 before resuming its decline.  The Cycles Model tells us a low may be expected during the week of May 17.

 

SPX futures declined to a low of 4162.12 thus far, adding confirmation to the aggressive sell signal.  The decline is still shallow, so a decline beneath the April 20 low at 4118.38 may also trigger the VIX over its 50-day Moving Average.

ZeroHedge reports, “For the second day, US equity futures traded in a narrow range, dipping during the muted Asian session where markets in Japan, China and Thailand remained closed on Tuesday, but then rebounding as Europe came online to trade mostly unchanged as investors continued to move out of megacap growth stocks amid fears of rising inflation and into companies that are expected to benefit more from the reopening of economies. At 715 a.m. ET, Dow e-minis were up 17 points, or 0.06%, S&P 500 e-minis were down 4.00 points, or 0.1%, and Nasdaq 100 e-minis were down 42 points, or 0.30%. The dollar jumped, while Treasuries dropped along with most European bonds. Ethereum extended its surge to set another record as larger rival Bitcoin slipped.

Nasdaq 100 Index traded down 0.4% a day after tech giants such as Tesla and Amazon.com dragged the underlying index lower on signs of quickening inflation. Tech shares were also the biggest laggards in the Stoxx Europe 600 Index, with semiconductor firm Infineon Technologies AG slumping as much as 5%. In contrast, cyclical shares such as miners and travel stocks helped power the European benchmark as a gauge of commodity prices hovered at the highest level since 2012.”

 

US 30 futures were positive until 7:15, when they plummeted.  There is no explanation yet, but a decline beneath 33800.00 may give a sell signal, leaving a truncated Wave [v].

ZeroHedge reports, “Three months ago, the Treasury surprised markets when in its quarterly borrowing forecast, it revealed that in the first calendar quarter of 2021, it wouldn’t need to borrow as much debt as it had recently because the Treasury’s cash balance (held in the Treasury General Account, or TGA, which is simply the Treasury’s cash balance held at the Fed) would plunge to just $800 billion, down a record $929BN from $1.729 trillion at Dec 31, 2020.

This forecast for a flood of liquidity emanating from the Treasury prompted us (and subsequently others) to predict that as a result of the “mind-boggling liquidity” of just under $1 trillion in cash set to be unleashed by the Biden admin, stocks would soar as the Treasury’s monetary injection would be far bigger than the $120BN in liquidity injected by the Fed every month.

And while stocks indeed surged to new all time highs, the Treasury’s cash flood plan stumbled as the latest, just released Treasury Marketable Borrowing Estimates have revealed.”

 

VIX futures reached a high of 19.79 this morning, threatening a potential breakout and nearing the 50-day Moving Average at 20.30.  This would bear watching today as the indices deteriorate.  The Hi-Lo Index is not in retreat, yet.  A close beneath 50.00 would suffice to confirm the sell signals.

 

 

USD futures rose to a high of 91.39 thus far, testing the 50-day Moving Average at 91.59.  USD appears to be poised to go as high as the Broadening Wedge trendline at 96.00 by options expiration.  The flow of liquidity into the USD may come from investors selling stocks and bonds, looking for a safe haven.

 

TNX is hovering above the 50-day Moving Average at 15.89 this morning.  It appears to have made a 70% retracement of its bounce out of the Master Cycle low, so little, if any, further decline is expected.  The Cycles Model suggests growing strength into mid-May.  Two potential targets offer themselves.  the first is the November 2019 high at 19.71.  Should it exceed that, the weekly Cycle Top at 25.78 is in reserve.

 

 

 

 

 

Posted in Published | Leave a comment

May 3, 2021

7:30 am

Good Morning!

While the SPX and NDX appear weaker, SPX has  not declined beneath Short-term support to establish a bearish pattern.  The DJIA has been riding the up-sloping Short-term support while the upper probes have been declining to form a possible Triangle formation, which may be short-term bullish.  One of two possibilities exist.  The first is a breakdown, not just Short-term support/resistance at 33880.00, but also mid-Cycle support at 33419.66, which may establish the bear market.  The second is a probe higher to a new all-time high.  The minimum target is 34300.00.  The upper end of that range is near 35000.00.

US 30 futures have risen to a morning high of 33997.00, short of the Friday high of 34087.21.   The bullish probe higher may be established above that level.

ZeroHedge observes, ““We believe we are at the early stage of the biggest Cobra Effect in the history of economics. As the massive monetary and massive fiscal stimuli (over $15T globally) conjoin to save the economy from a deflationary depression, instead they risk hyperinflation – overweight commodities.”

Vaccination parties have broken out on many street corners as explosive human energy has come roaring out of the cage. To us, this is a preview of what is about to transpire around the planet and the “Cobra Effect” has entered the 4th inning. When governments tinker in capital markets there are always unintended consequences. Above all, we must keep in mind – what transpired in Q1 to Q4 2020 was NOT a mere tinkering.

We have just lived through a colossal public-private experiment where fiscal and monetary policy globally have been unleashed at unprecedented proportions. It is easy to sit back and think the 2021-2022 recovery will be much like the 2009-2010 vintage. This is a mistake.’

 

SPX futures have risen to 4198.62, still not climbing above round number resistance at 4200.00.  The Elliott Wave structure appears complete, potentially leaving the DJIA alone to make new highs.  The Cyclical period of strength ended last Thursday, leaving this week to sort out directionality without any help from the Cycles.  Should a breakdown beneath 4150.00 occur, we may see 2-3 weeks of serious decline.

ZeroHedge reports, “S&P and Nasdaq futures, and European bourses were volatile but ultimately rose on Monday to kick off a new month in a quiet session which saw several major markets closed, following a week of record earnings beat which however resulted in big stock drops with investors also keeping an eye on India covid cases and economic data to gauge the pace of recovery.

Trading was subdued with several including Japan, China and the U.K. closed for public holidays. S&P 500 futures added 0.6%, Dow e-minis were up 216 points, or 0.64%, and Nasdaq 100 e-minis were up 40.25 points, or 0.30%. Europe’s Stoxx 600 Index gained 0.4%. The yen weakened, while gold advanced.

With more than 60% of companies already having reported mostly stellar results so far, profits are now expected to have risen 46% in the first quarter, compared with forecasts of 24% growth at the start of April, which however has failed to propel stocks to new highs.”

 

VIX futures climbed to 19.12 before subsiding back to the trendline near 18.20.   A breakout above the 50-day Moving Average at 20.36 gives a buy signal.

 

NDX futures have risen to 13913.75, but have receded back beneath Short-term resistance at 13898.07.   NDX appears to be the weakest of the major stock indices.  Should this persist, we will monitor the NDX Hi-Lo Index (must close below zero) and the VIX/VXN to obtain confirmation.  The Shanghai Composite is closed for the holidays, so we may monitor it as the Chinese market re-opens later this week.

ZeroHedge comments, “Three weeks ago, just before th start of Q1 earnings season we said “Q1 Earnings Will Be Stellar, But Are Fully Priced-In” noting that “the past quarter is already fully priced in – and expected to be spectacular – which is why actual earnings may only disappoint.”

We were right.

As of this weekend, 303 S&P500 companies have reported first quarter results (75% of total market cap). 69% of companies reporting have beat street wide earnings estimates by >1SD (significantly higher than 46% historical avg) whereas only 6% have missed estimates by >1SD (significantly lower than historical avg of 14%). In short a spectacular earnings season not only in absolute terms, but also relative to expectations. Here is Goldman’s John Flood describing just how spectacular:

This earnings period we are seeing the highest percentage of companies beat street wide earnings ests (by >1SD) in the 20+ years that we have tracked this data. Very few companies are missing.”

 

TNX appears to be testing Intermediate-term support at 16.39 in a probable brief dip in the Trading Cycles.  This indicates at retest of the 50-day Moving Average at 15.83 before moving higher, falling into place with the 10-year auction announced for Wednesday.  The Cycles Model proposes a possible month-long rally to follow that breaks above the current high and targets the area near 19.71.

 

 

 

 

Posted in Published | Leave a comment

April 30, 2021

3:00 pm

Here’s a binary question; Which comes next, the sellers or the buyers?  All the indexes are hovering near their daily lows, but are short-term oversold.   As we observed yesterday, the short squeeze ran out of fuel before it did any serious damage.  The market’s gumption (risk appetite) seems to have withered.  Is there something lurking beneath the surface that we are not aware?  Option Gamma turns negative beneath 4150.00.

ZeroHedge comments, “When the family office Archegos Capital abruptly imploded in late March, prompting $50 billion in block trades and $10 billion in losses at Credit Suisse, Nomura, UBS and Morgan Stanley, many bank analysts were taken by surprise. Last week, many of these analysts sounded frustrated listening to Credit Suisse’s earnings call in which senior management skirted round without giving any real detail about the disaster.

“Do you think it’s possible that this could produce a very fundamental reset in how your IRB credit risk models work?” wondered Stefan Stalmann of Autonomous Research. “I mean you have only CHF20 billion to CHF25 billion of counterparty credit risk-weighted assets on literally hundreds of billions of equity swaps and repos”.

 

7:15 am

Good Morning!

SPX futures tested yesterday’s low by declining to 4175.12 after retracing, but not exceeding, yesterday’s all-time high.    A pattern of lower highs and lower lows may be developing that may cascade into a steep decline.  Yesterday’s surge may have been the last of the trending strength to the upside.  The Cycles Model suggests we may see a Master Cycle low during options week, making the next three weeks extremely volatile.

ZeroHedge remarks, “”As good as it gets.”

U.S. index futures slumped on the final trading day of April, dragged lower alongside European and Asian markets, despite stellar economic data and blockbuster earnings as traders took a month-end breather amid a record high for the S&P 500 Index and some earnings disappointments. The dollar pared April losses, and the VIX jumped.

Russell 2000 futures tumbled 1.1% and Nasdaq 100 futures dropped 0.8% after China’s antitrust crackdown weighed on Asian technology shares. Twitter plunged 13% in premarket trading after forecasting second-quarter revenue below some expectations, while Amazon’s blockbuster earnings helped push the stock to all time highs, although gains were trimmed in the premarket.”

 

VIX futures rallied to an overnight high of 18.80, back above the trendline and a potential aggressive buy signal.  Trending strength appears next week and continues on the rise through options week.  This portends a potentially sharp rally in the next three weeks.

ZeroHedge observes, “Blow out earnings from tech giants, everything feeling great, the bull keeps pushing, but did you know NASDAQ has done nothing for basically 2-3 weeks…

It sure doesn’t “feel” NASDAQ has been stuck in a range at highs, but that is the reality.

We have seen a lot of “erratic” moves up here, relatively high vol, but no direction.

As we have pointed out over past days, despite everything feeling awesome and tech earnings doing great, NASDAQ “fear” has stayed bid.

VXN is up from recent lows and has stayed “up here” since that pop higher some 2 weeks ago.”

 

NDX futures also tested yesterday’s low, making a potentially new low at 13833.62.  My comment yesterday about the resistance at 14000.00 were more accurate on the NDX than the 4200.00 resistance on the SPX.  Short-term support is at 13881.50 and appears to be broken, giving NDX an aggressive sell signal.  I would like to see more follow-through to the downside to build confidence in my outlook, but yesterday’s weakness spoke volumes regarding the outlook for the NDX.

My comments regarding the influence that China is having on the tech industry may be justified.

ZeroHedge remarks, “Following reports that Beijing was looking to scapegoat regulators responsible for initially permitting the ill-fated Ant Group IPO, which was scuttled by the CCP leadership back in October after Alibaba founder and Ant Group Chairman Jack Ma criticized Chinese tech regulation, saying it was “stifling innovation”, at an obscure industry conference, it appears China’s anti-trust regulators are imposing new restrictions on the financial arms of other Chinese tech giants after hobbling Ant.

As Beijing reportedly prepares to slap Tencent with an antitrust fine commensurate with the $2.8 billion recently demanded from Alibaba, news that Chinese regulators had summoned 13 internet companies and ordered them to rectify their digital financial businesses dealt another blow to market sentiment. The wide-ranging restrictions could weigh on credit growth and hurt the prospects of public share offerings by fintech firms, analysts have warned.

 

The Shanghai Index challenged Intermediate-term support at 3442.58 before bouncing back above it.  Remember, the 50-day Moving Average is at 3474.88, leaving it on a sell signal while going sideways for the past two months.  A decline beneath the Intermediate-term support and especially mid-Cycle support at 3408.97 reconfirms the sell signal.

ZeroHedge reports, “For the 4th time in the last 5 months, China’s Services and Manufacturing PMIs missed expectations in April.

China’s official manufacturing purchasing managers index declined to 51.1 in April from 51.9 in March (and well below the 51.8 expectations), according to data released Friday by the National Bureau of Statistics.

The non-manufacturing gauge, which measures activity in the construction and services sectors, dropped to 54.9 (from 56.3 in March), compared to 56.1 projected by economists.”

ZeroHedge also observes, “Earlier this week, we highlighted an interesting article in the FT this according to which China’s population was set to decline for the first time since the 1950s when the national census data is released soon. However, in response to the report which prompted widespread speculation over implications of this demographic inflection point, the Chinese National Bureau of Statistics (NBS) best known for faking every possible piece of data, released a statement this morning saying that the population continued to grow in 2020 ahead of the official release. Watch for 2016-19 revisions though.

So although a decline was avoided, the NBS recently said that China’s demographics “has reached an important turning point”.

 

USD futures climbed to an overnight high of 90.88, adding credence to yesterday’s stretched (272 days) Master Cycle low.   USD is set to rally into options expiration week in May, bolstering the notion of an equity liquidation seeking a safe haven during that same period.

 

TNX appears to be back-testing Intermediate-term support at 16.39 after breaking above it.  The Cycles Model suggests increasing strength, especially during options week.

 

 

 

Posted in Published | Leave a comment

April 29, 2021

1:20 pm

According to Nomura, a “Crash Up” is possible.  Investors are buying hedges and may be subjecting themselves to a potential short squeeze.  I disagree for two reasons.  First, look at the Industrials.  It made a high of  34032.83 against the April 16 high of 34256.80.  The largest investors invest in the DJIA for liquidity and size.  This does not compute with the new highs in the SPX and NDX, telling us that smart/institutional money may be leaving.  Second, the inability of the SPX to remain above 4200.00 and the NDX to stay above 14000.00 tells us that demand may be tapering off and ammo for a short squeeze may be in short supply.

Read the ZeroHedge analysis for yourself.  Even the best of analysis may be wrong, including my own!

 

12:04 pm

SPX has declined beneath the Ending Diagonal trendline just above 4185.00, giving an aggressive sell signal.  Confirmation comes beneath Short-term support at 4148.98 (4150.00).

The NDX has declined beneath its Short-term support at 13874.41.  It is also on an aggressive sell signal.

Interestingly, the DJIA did not make a new high, leaving April 16 as the high.  It also has declined beneath its Short-term support at 33841.30, giving an aggressive sell signal.

VIX is also above its trendline at 18.20.  This may also be considered an aggressive buy (SPX sell) signal.

The NYSE Hi-Lo Index has ramped up to a high of 597.00.  Considering the weakness in the SPX, it appears that the Hi-Lo may be influenced by retail investors buying small caps.

ZeroHedge reports, “‘Government knows best’ is clearly the message from the Biden administration as once again this morning, they unveil their latest target for the nanny state… gig workers.

In November, millions of Americans voting against state-imposed laws forcing gig workers to be employees (with the victory of Proposition 22 – by a convincing 58% to 42% margin).”

 

7:00 am

Good Morning!

NDX futures made an overnight high of 14047.00, not exceeding the April 16 high of 14051.50 thus far.  Whether the options market has failed to establish sufficient mass of calls above 14050.00 due to a lack of confidence or the Cycles simply have turned is not yet determined.  However, failure to move above the April 16 high may have the effect of turning sentiment despite the reassurances of the Fed.

ZeroHedge comments, “One week ago JPMorgan’s chief equity strategist, Dubravko Lakos-Bujas, joined the bearish sellside bandwagon aka the “Doom Chorus” we profiled previously and which included such bank as Morgan Stanley, Goldman and Deutsche Bank, when writing that after “aggressively pushing the upside case for equities” for the last 12 months, and arguing for a continued melt-up  with S&P 500 reaching 4,000 in 1Q and the majority of the upside to our year-end PT of 4,400 being realized during 1H”, he warned that “easy equity gains for the broad market are likely behind us” and as a result JPMorgan’s “bullish conviction is now lower.”

Remarkably, Lakos-Bujas’ bearish reversal followed just hours after his fellow JPM Croat and permabull, Marko Kolanovic, appeared on CNBC and said that “It’s time to buy the dip” (it wasn’t clear just what dip he was referring to).

So fast forward to today when after this afternoon’s extremely dovish FOMC statement in which there were no changes to policy, and Powell presser in which the Fed Chair pushed back on questions about rampant reflation (stagflation) as purely “transitory” despite casually mentioning that capital markets seem “frothy”…”

 

SPX futures made a new all-time high at 4207.62 after having bounced from the Ending Diagonal trendline yesterday.  Wave [v] is equal to Wave [v] at 4240.00, while the Cycle Top resistance is nearing 4260.00.  his appears to be the final probe to the top.

ZeroHedge reports, “S&P Futures roared to new record highs above 4,200 and Nasdaq futures jumped 1% on Thursday as Powell’s dovish assurances and blow-out earnings from Apple and Facebook powered a rally in tech stocks and cemented conviction the world’s largest economy is resurgent ahead of GDP numbers and jobless claims data which are expected to show further improvements.  At 7:30 a.m. ET, Dow e-minis were up 130 points, or 0.38%, S&P 500 e-minis were up 28.00 points, or 0.67%, and Nasdaq 100 e-minis were up 144  points, or 1.03%.”

 

VIX futures made a low of 16.78 in the overnight session, a 69% retracement of the surge out of the Master Cycle low.  The coiling action of the last week appears to be making a bullish pennant, with the potential of sending the VIX above the 50-day Moving Average.

 

USD futures made a new low at 90.42 on day 272 of a very stretched Cycle.

ZeroHedge reports, “It’s “not time yet to think about tapering”… was the simple confirmation of what everyone already knew and yet that sent the dollar lower, yields lower, stocks higher, gold higher, and crypto higher…

The Dollar made the biggest headlines, dumping to two-month lows…

 

 

The GSCI Ag Index pulled back from its Tuesday Master Cycle high (day 265).  However, the price of foodstuffs continue to rise.  In addition, the Elliott Wave structure may not be complete to the upside.  The standard correction above a Head & Shoulders neckline is to retest it before moving higher.  Ag prices have risen by 79% in the past year.  It may rise considerably more, given the global conditions.

ZeroHedge observes, “Yesterday we explained why with prices already soaring, global inflation was about to go into overdrive as the leading food price indicator that is the Bloomberg Agri spot index hit the highest level in six years.

In a nutshell, this is a problem since food is a large component of CPI baskets in Asia, and “this large inflationary impulse in the region that houses more than half the world’s population should result in higher wage costs in the factory base of the world. As CPI and PPI rise in Asia, it will feed through globally in the months ahead.”

 

TNX rose to a new high at 16.72 this morning.  The Cycles Model shows a building strength starting in May ands rising through the first week of June.

ZeroHedge observes, “In case you gave up on yields moving higher yesterday, take a look again. US 10 year at 1.65% and the 5 year at 0.89%.

This space trades like a cork in water, you push it down and it pops back up.

This could get “dynamic” to the upside should we close a little higher…Key levels for the 10 year are 1.70, then 1.75%, and for the 5 year 0.9% and then recent highs around 0.95%. ”

 

 

 

 

Posted in Published | Leave a comment

April 28, 2021

2:30 pm

The usual 2:00 pm jolt from the FOMC announcement fell short of the morning high.  SPX tested the trendline by declining to 4181.79.  It has made a weak bounce.  Confirmation of a decline may be made at Short-term support , now at 4145.00, just beneath the lower call option level at 4150.00.  Nobody sees a decline coming.  See ZeroHedge analysis.  

 

10:15 am

SPX has made a new all-time high at 4197.04and appears to be testing round number resistance at 4200.00.  The possibility of a breakout is high, with possible targets at 4240.00-4260.00.  Just to give you the magnitude of this bubble, Primary Wave [5] is three times the size of Wave [1] at 4300.00.

Fear of missing out (FOMO) may be the primary driver of tis final probe higher.  However, watch out for a decline past 4175.00, which breaks the Ending Diagonal formation.

 

7:30 am

NDX missed the all time high yesterday by 2 ticks.  This morning NDX futures declined to 13907.25, nearing Short-term support at 13840.45.  The DJIA futures are also in decline, after failing to make a ne all-time high yesterday.  Both are left with tops on April 16, 12.9 months from the March 23, 2020 low.  The threat of a new all-time high still exists, but the weakness appears to be profound.  The promise of stock buybacks may not deliver the way investors expect.

ZeroHedge reports, “Judging by the just released Q1 blowout earnings from Google, the one thing that companies just can’t do without during the biggest government recession stimmy handout in history, is advertising.

Moments ago, Google parent Alphabet reported Q1 earnings (at the abc.xyz URL) that blew expectations out of the water powered by an increase in digital ad spending by businesses looking to expand during the pandemic reopening:”

 

SPX futures made a shallow low a 4175.88, testing the underlying trendline just beneath it.  The threat of a new all-time high remains, but may be cancelled by a decline beneath that trendline.  Short-term support is at 4137.37, which may confirm the reversal.

ZeroHedge reports, “For the third day in a row, US equity futures were broadly flat, with the emini trading virtually unchanged from where it was this time on Monday and Tuesday as traders hunkered down ahead of today’s main event: the FOMC announcement at 2pm where Fed Chair Jerome Powell is expected to reaffirm that easy monetary policy will remain in place for a prolonged period and dismiss any suggestions of tapering bond purchases.

S&P 500 e-mini stock futures rose 0.09%. or 5 points, while Dow Jones futures were down 31 points ot 0.09% and the Nasdaq was down 7.75 or -0.06% as investors digested a mixed bag of earnings from Tesla, 3M, Microsoft and Google overnight, with tech heavyweights Apple, Facebook and Amazon due to report in the next 48 hours.

“We expect the Fed’s tone on the economy to be more positive than at the March FOMC meeting, reflecting the ongoing pickup in the data, but we don’t expect any substantive new signal yet on tapering,” TD Securities analysts wrote. “While we do not expect much price action due to the Fed decision, Biden’s remarks could continue to suggest more incoming supply, bear steepening the (Treasury yield) curve.”

 

VIX futures remained muted, with an overnight low at 17.12.  The April 14 Master cycle low, although early, continues to point to the April 16 high in equities as the “official” top, despite the nominal new high in the SPX.  The Cycles Model shows increasing strength into the month of May, possibly as far as May 18.  Biden’s “tax and spend” plan may prove to be the final straw on the back of the bull market.

ZeroHedge reports, “President Biden will head to Capitol Hill Wednesday night for the first time since Inauguration Day (a casual visit by the president would risk spoiling the narrative that the Capitol remains a battle-scarred wreck since the Jan. 6 “uprising”) to unveil the second part of his “Build Back Better” plan, a $1.8 trillion proposal to expand the American “safety net” that will be financed by hefty tax increases on individuals and businesses, including a nearly 40% tax on short-term capital gains that spooked the market when it was first reported last week.

The scale of the plan, which has been named “the American Families Plan” and is intended to compliment Biden’s “American Jobs Plan” unveiled four weeks ago, has increased in scope since the first details of a preliminary version were leaked to the press earlier this month.”

 

TNX challenged Intermediate-term resistance at 16.36 this morning as it prepares to break above its prior high and the Cycle Top at 17.64.  The initial target appears to be the November 2019 high at 19.71, but it may not stop there.  The ensuing rally appears to be gathering strength through early June.  The next 10-year auction is on May 5.

ZeroHedge reports, “After two mediocre auctions on Monday, when both the 2Y and 5Y sales saw tepid market interest, some rates traders were worried that today’s 7Y auction would be ugly. Not February 2021 ugly, mind you, which we remind readers was the closest the US has had to a failed auction and sparked the furious dump across the curve which spilled over into stock, but still ugly.

Well, besides the smallest possible tail of 0.1bps, it actually was a pretty solid 7Y auction.

Yes, the high yield of 1.306% was the highest since January 2020, rising just above the 1.300% in March, and yes, it did tail the 1.305% When Issued (just barely), but the other indicators were relatively solid.”

 

USD futures made a new overnight high at 91.13, confirming Monday’s Master Cycle low.  While the USD Cycle is closely aligned with the 10-year rates Cycle, it may be given a boost by the liquidation of equities, as well.

ZeroHedge observes, “The Fed put a lot of effort after the March FOMC meeting into convincing bond investors that it was not thinking of changing its view of low inflation and low policy rates through 2023. There is increased optimism but not additional economic data since, so we think the Fed will try and keep the message as unchanged as possible. The lack of bond yield reaction to sharp data surprises has led investors to be cautious on the immediate upside to bond yields. Real yields are almost 20bps lower than at the March FOMC (Figure 1). There is no real appetite to fight the Fed now and the Fed has little incentive to rock this boat just yet.”

 

 

 

Posted in Published | Leave a comment