The Practical Investor

8:00 am    2 Chronicles 7:14 

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

NDX futures made a bottom at 18355.60 this weekend, just above the mid-Cycle support at 18304.55.  This morning its bounced to 18614.55 and may have resumed its decline.  The Wave structure is incomplete and allows multiple outcomes.  A minimal outcome is a further decline to the 200-day Moving Average at 18130.13.  Another possible target may be the trendline just above round number support at 18000.00.  A third possible target may be a potential Head & Shoulders neckline at 17500.00.  The last target would proclaim the death knell for the bull market in tech an AI.

Today’s options chain shows Max Pain at 18530.00.  Long gamma is possible at 18600.00.  However, short gamma begins with a put stronghold at 18500.00 and another stronghold at 18300.00.

SPX futures bounced to 5455.00 this weekend after Friday’s futures low at 5397.10.  The bounce may reach resistance at the Intermediate level at 5479.52.  The 100-day Moving Average lies at 5378.80, but is unlikely to provide support.  Instead, the trendline at 5300.00 may be a minimum target with an alternate being the 1987 trendline and 200-day Moving Average at 5147.63.  The Wave structure, while it appears capable of supporting a substantial bounce, it is also prone to a more complex  structure, especially because of short gamma in the options market that may come alive at the open

Today’s op-ex shows Max Pain at 5420.00-5425.00.  Long gamma may begin at 5580.00.  Short gamma bursts on the scene at 5400.00.

ZeroHedge reports, “Futures are higher in a modest relief rally following the worst weekly loss of the year, triggered by cooling US jobs data that left economists and traders at odds as to how aggressively the Federal Reserve will cut interest rates.  As of 8:00am ET S&P futures are 0.7% higher  while Nasdaq futurs gained 0.8% after the underlying index ended last week with its steepest decline since November: both Mag7 and Semis higher in the premarket along with new index additions. Bond reversed some of their recent gains, with the 10-year Treasury yield jumping four basis points, the first increase in five days, aiding gains in the USD. Commodities are mixed with Energy higher and Ags/Metals lower but with soft patches of strength in base/softs. As JPM’s market intel desk writes, we enter a week with several major questions to answer and additional macro data points: near-term or deadcat bounce? 25 or 50bps? Who leads the election? Is AI dead?”

VIX futures bottomed at 19.45 on Sunday, but has bounced back toward its Cycle Top at 21.00 this morning.  The Cycles Model suggests the VIX may have a very strong showing today/tomorrow.

Wednesday’s options expiration shows Max Pain at 18.00-19.00.  Short gamma is strong at 15.00-17.00.  (Hope springs eternal.)  Long gamma may start at 20.00, but is sparse.  There seems to be little hedging at this point.

TNX has risen above its Cycle Bottom at 36.32 after making its Master Cycle low on Friday, day 254.  Subsequently, TNX may test that support to see if it holds.  Should that be the case, this gives TNX its buy signal.

TheEpochTimes comments, “Ever since I started writing about fishy government economic statistics, I’ve been flooded with a fun series of letters from current and retired bean counters. They are thrilled that I’ve taken up the topic and have added various insights. The most compelling point I’ve seen—one that had not occurred to me—comes down to the innumeracy of the employees themselves. They lack the basic intuition to see where their figures just don’t make sense.”

Crude oil futures declined beneath its Head & Shoulders neckline at 68.00 on Friday.  The futures bounced, challenging the neckline, but has pulled back beneath it.  Should it remain beneath the neckline, the sell signal is reinforced, with the consequences listed on the chart.  Despite a potential bounce, Crude Oil is on a longer-term decline that may last until mid-October.

ZeroHedge notes, “Oil and gasoline futures moved higher early Monday as the National Hurricane Center tracked a potential tropical system that threatened parts of the US Gulf Coast later this week. The storm could slam into the upper Texas and Louisiana coasts, accounting for about 60% of US refining capacity.

Potential Tropical Cyclone Six, or Invest 91L, churns in the southwestern Gulf of Mexico early Monday and is forecasted to become a hurricane before it reaches the northwestern US Gulf Coast late Wednesday. The storm emerges right on time, at the peak of the Atlantic hurricane season. It is interesting to note that this hurricane season has been very quiet.”

USD futures are consolidating after breaking above it Cycle Bottom at 101.09 last week.  It is on a buy signal with the potential of rising to its 50-day Moving Average at 103.80.  Analysts are still dismissing the USD as weak.

TheEpochTimes tells us, “Social Security is facing $63 trillion in long-term unfunded liabilities, according to the 2024 Old-Age, Survivors, Disability Insurance (OASDI) trustees report.

9:50 am

BKX declined beneath the Cycle Top support/resistance at 114.86 and beneath its Master Cycle high at 116.05 made on August 30.  BKX may owe its rally until the end of August to hedge funds that were buying, while Berkshire Hathaway was selling.  Buffett sure knows how to pick a top.

1:42 pm

BKX declined through Intermediate support at 111.06 and has challenged the 50-day Moving Average at 109.75.  The Sell signal is confirmed today.  

ZeroHedge remarks, “94-year-old Warren Buffett’s Berkshire Hathaway continued offloading Bank of America shares this week. Since Buffett started dumping BofA stock in mid-July, total sales have now topped nearly $7 billion.

Bloomberg explains:

In the latest round of transactions, disclosed in a regulatory filing Thursday, his Berkshire Hathaway Inc. liquidated $760 million of the stock since Tuesday. Still, Berkshire remains Bank of America’s top shareholder, with a roughly 11% stake valued at $34.7 billion, based on the latest closing price.

If Berkshire keeps selling, its stake in the second-largest US bank could soon slide below the 10% regulatory threshold that requires his conglomerate to disclose transactions within a few days. Once he controls less than that, Buffett may wait weeks to reveal transactions — typically offering snapshots after every quarter.

Berkshire Hathaway remains BofA’s number one shareholder, with an 11% stake valued at $34.7 billion. ”

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 have declined beneath yesterday’s low to 18673.80 in anticipation of the nonfarm payrolls report due at 8:30 am.  The consensus is a rise in the employment numbers to 165,000 from July’s print at 114,000.  A number below the consensus gives rise to a possible .5% rate cut on September 18.  The Biden DOL may be sorely tempted to “goose” that number higher as it seeks to paint a pretty face on the “facts.”  Another number that is due to rise after the 818,000 “adjustment” made in the statistics last month.   focal point is the unemployment rate at 4.3% in July.   Traders are hoping that the NDX may be oversold enough to bounce today.   The Wave structure does not indicate a bounce.

Today’s options chain shows Max Pain at 19025.00.  Long gamma may start at 19100.00 while short gamma begins strongly at 19000.00.

SPX futures declined to a morning low at 5457.10 before a small bounce.  More to come after the DOL release of nonfarm payrolls.

9:00 am

SPX futures bounced back above 5500.00 on the employment news, which was not too far from the consensus, ruling out a .5% rate cut.  What was noteworthy was the decline in the unemployment rate which moved beneath the Sahm”s Rule trigger announcing a recession.  We may see a probe to 5550.00, which is Max Pain in the options.  The probability of holding it there is slim.

Today’s op-ex shows an evenly matched strike at 5550.00.  Long gamma makes an appearance at 5600.00 while short gamma gains ascendancy at 5515.00.  It will take a payroll report of under 165,000 to move above short gamma.

ZeroHedge reports, “Futures are set to end a dismal first week of September lower, with tech again under pressure ahead of a very important jobs report. As of 8:00am, S&P futures are down 0.6% set for a 4th straight day of declines following a sudden dump around the European open; Nasdaq futures slide 1% as NVDA slides more than 2% pre-market while Broadcom also weighed on tech stocks after falling 9% after delivering a disappointing sales forecast. Bond yields are also lower, with the 10Y at 3.70%, the lowest since June 2023 as 2-, 5-, 10- yr yields are 3bp, 3bp, 3bp lower. The Bloomberg dollar index was lower for third day while the yen continues to surge on expectations today’s NFP will come in below expectations and greenlight a 50bps rate cut. Commodities are mixed with base metals higher and oil flat. Today, all eyes on the NFP print at 8.30am ET. Consensus expects 165k jobs being added, with unemployment dropping to 4.2% (our full preview is here). Fed’s Williams and Waller will speak this afternoon before the blackout period begins.”

VIX futures remain beneath the Cycle Top resistance at 20.86 in the overnight session.  As mentioned earlier, this week’s rally in the VIX was more dealer short covering than investor concern about their portfolios.  Today’s consolidation illustrates the confusion about the Employment Survey where employment increased by 142,000 (below consensus) but unemployment declined to 4.2%. from 4.3%.  A 50% retracement may be found at 18.57.

The September 11 options chain shows Max Pain at 18.00.  Short gamma resides between 15.00 and 17.00. while long gamma may begin at 20.00-21.00.

TNX may have extended its new Master Cycle low to today, day 254.  There is a shrinking prospect of the Master Cycle lasting to early next week.  A rise back above the Cycle Bottom resistance at 37.30 may negate that possibility.

ZeroHedge observes, “There was some good news and some bad news in today’s jobs report – first the bad news: the August payrolls number came in at 142K, a small miss to estimates of a 165K print, if a big jump from the downward revised July print of 89K. The good news, however, is that while the payrolls print missed, the unemployment rate actually dipped from that critical “Sahm’s Rule trigger” level of 4.3%, to 4.2%, in line with expectations. So bottom line: the number could be better, but it is certainly not bad enough to trigger a 50bps rate cut in two weeks.

Here are the details.

As noted above, in August, the US added 142K jobs…

… which was slightly below estimates of a 165K print, but hardly some crazy outlier as in previous months.”

USD futures declined to the trendline above the Master Cycle low at 100.40 to 100.52 before reversing above its Cycle Bottom at 101.05.  Should it remain above 101.05, USD will be on a buy signal, confounding the “experts.”

10:30 am

XDN broke out above its retracement high and may threaten the Cycle Top resistance at 70.86.  The carry trade is being threatened by this rise in the Yen and may force a significant unwind of leveraged positions in the market held by hedge funds.  In addition, this may shake the banking index, which has benefited from a declining yen.  Credit card companies that have been offering “zero interest” incentives will have to shut them down or suffer losses.

10:09 am

SPX is making a final test of resistance at 5560.00, which happens to be the 38.2% Fibonacci retracement level.  An alternate level may be the 50% retracement at 5580.00.  Afterwards, the decline may begin in earnest.

ZeroHedge observes, “After the disaster that was the Manufacturing surveys earlier in the week, the Services surveys are the ‘soft landing’-narrative-believers last great hope ahead of tomorrow’s all-important payrolls print to save the day.

• S&P Global’s Services PMI jumped from its flash print of 55.2 to a final August print of 55.7 (up from the 55.0 in July) – that is the highest since March 2022.
• ISM Services rose from 51.4 to 51.5 (barely beating the 51.4 expectations)

And all that ‘soft’ data improving as ‘hard’ data languishes…

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 consolidated overnight at the 100-day Moving Average at 18940.47 but may have lost that support in this morning’s action.  The next levels of support are the mid-Cycle line at 18277.28 and the 200-day Moving Average at 18101.72.  A decline to that level may wipe out all gains since early June.  The Cycles Model calls for rising volatility over the next week, suggesting that not all is well.

Today’s options chain shows Max Pain at 19075.00.  Long gamma may start at 19200.00 while short gamma begins at 19010.00.

ZeroHedge remarks, “The dumpster fire at Intel under the direction of CEO Pat Gelsinger, who is doing his best to replace Marissa Mayer as most overpaid and useless ‘turnaround’ CEO in tech history, looks like it could finally wind up being put out as a result of the company assessing strategic alternatives.

But the damage has surely been done. Intel stock has fallen about -56% this year so far while competitor Nvidia has soared more than 141% over the same period. Over a 5 year period, it gets even uglier: Intel has plunged -53.4% while Nvidia is up an astounding 2,750%.

However, past performance is not indicative of future results, and CEO Gelsinger is looking to finally try and claw some value back into Intel shares by proposing a number of strategic transactions to the board later this month, Reuters reported last week. ”

SPX futures declined to a morning low of 5503.80, challenging the 50-day Moving Average at 5504.02.  A potential gap down may be developing, creating a firestorm of selling in anticipation of a dismal non-farms payroll report.  CTA selling thresholds begin below 5500.00 and redouble beneath 5350.00.  The next support may be the 100-day Moving Average at 5371.59.  After that is a toss-up between the rising trendline originating last October near 5300.00 or the 1987 trendline near 5150.00.  The ISM and PMI data being released today may give us a handle on just how bad the recession risk has become.

Today’s op-ex shows Maximum Pain at 5550.00.  Long gamma may begin at 5600.00 while short gamma appears in strength at 5515.00.

ZeroHedge reports, “After several days of rollercoaster volatility and uniform pain across global equity markets for bulls, US equity futures are flat as the global sell-off stabilizes into the most important macro data releases. As of 8:00am ET S&P futures are up 0.1% and Nasdaq futs are flat, with NVDA +40bps premarket, TSLA rising 2.3% while the balance of Mag7 is weaker and Semis under pressure, too. Europe’s Stoxx 600 index dropped 0.3%, with China-facing luxury stocks such as LVMH again among the biggest losers. Asian equities erased most gains after declines in Hong Kong and Japan. Bond yields are 1bps higher, but the USD is weaker as the yen gained overnight following unexpectedly strong – if transitory – Japanese wage data. Commodities are stronger led by Energy and precious metals while iron ore slumped to its lowest level since 2022 and traded near $90 a ton as China’s main steel industry group advised mills to be cautious in boosting output too quickly to avoid snuffing out a post-summer recovery.  Looking at the coming FOMC decision, 50bps bets are increasing, rising as high as 50% after yesterday’s dismal JOLTS report, as the growth component of the Goldilocks narrative is challenged. ISM-Services today and NFP tomorrow are key facets of the narrative and we should leave for the weekend with a stronger sense of 25bps or 50bps.”

VIX futures challenged the Cycle Top support/resistance at 20.77 before moving higher.  The Cycles Model shows the VIX rising with a potential burst of momentum early next week.  The speed that investors re-shorted the VIX since August 5 has been remarkable.  However, the jump in the VIX on Tuesday was mainly from dealer and market-maker short-covering and not re-hedging.  The sentiment  is not yet consistent with an economic downturn but may change over the next two days as a clearer picture of the economy develops.

The September op-ex shows Max Pain at 18.00 with short gamma between 15.00 and 17.00.  Long gamma hasn’t yet appeared with any conviction.

TNX has declined to its trendline at 37.25.  That may have accomplished its Master Cycle low on day 253.  If correct, yields may start rising again.  The Cycles Model suggests the implied rally may last to mid-October.

ZeroHedge remarks, “Initial jobless claims continues to ignore the ‘other crappy data’, printing 227k (in line with 230k exp) and basically unchanged at two-month lows…

Source: Bloomberg

On a non-seasonally-adjusted basis, initial claims are at their lowest in 10 months!! Of course! Why not.

Continuing claims also dropped (to three month lows)…”

Crude oil futures tested the Head & Shoulders neckline near 68.00 yesterday and may be consolidating today.  Should it go beneath the neckline, a firestorm of selling may take place.  The Cycles Model suggests that crude oil may continue its decline through mid-October.  Warning, there is a larger Head & Shoulders formation that may take crude down to the end of December.

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 sank to a new low at 18780.90 this morning after crossing the 100-day Moving Average at 18934.34.  The next support appears to be the mid-Cycle at 18261.61 and 200-day at 18086.20.  The tenor of the market has changed.  As more sellers offer their shares, buyers retreat, creating gaps in the price action that may not be filled.  Add margin calls to the mix and utter chaos may reign by the end of the day.

Today’s options chain sows Maximum Investor Pain at 19200.00.  NDX options are in short gamma  beneath 19020.00 with short concentration beneath 18950.00.

ZeroHedge observes, “That’s gross

Looking at leverage for “all hedge fund categories” we can see that gross is close to maximum (and nets a little high too). A lot of de-grossing potential if this volatility continues.”

Source: JPM PI

SPX futures declined to a morning low at 5494.30, increasing the likelihood of a probable gap down at the open.   While the SPX would normally bounce at the 50-day (5503.00), it appears that the bounce was muted.  Once the SPX declines beneath the 50-day Moving Average, selling may redouble as recognition of no support is realized.

Today’s options chain shows Max Pain at 5560.00 with short gamma beginning at 5550.00.  Short gamma explodes at 5490.00 (this morning’s low) leaving no hope for sellers to find buyers beneath that level.

ZeroHedge reports, “US stock-index futures fell, pointing toward a continued selloff on Wall Street after a slump Tuesday, when dire manufacturing PMI and ISM data led to renewed concern that a recession may be looming. Futures on the S&P 500 dropped 0.4% while contracts on the Nasdaq 100 Index declined 0.8% at 8.00 am ET, as NVDA extended its record losses which saw a historic $280 billion in market cap wiped out in Tuesday’s session, after a Bloomberg report hit just after the close that Kamala’s DOJ sent subpoenas to the chipmaker. NVDA sparked Nasdaq’s 3.2% Tuesday rout: the stock has been falling since the company’s earnings last week failed to live up to the highest expectations. Losses in Europe and Asia were deeper, with traders still rattled by the speed and severity of the US retreat while the VIX climbed above 22. Treasury yields dropped 2bps to 3.82% while the dollar weakened for the first time in six as the yen extended gains and the USDJPY traded at 145. On the macro front, we have mortgage applications (1.6% vs 0.5% last week), trade balance, JOLTS job openings, as well as the final July factory orders and durable goods reports.”

VIX futures vaulted to a morning high at 23.28, exceeding yesterday’s high at 21.99.  The Cycles Model suggests the rally may accelerate through the weekend.  There may be a repeat of yesterday’s 7-vol spike that prompted margin calls for the shorts and dealers.  If so, VIX may exceed 30.00 today, beginning to make the August 5 volmageddon look like child’s play.

Today’s options chain shows long gamma beginning at 20.00.  Fortunately, the options chain isn’t very populated, considering today is the weekly op-ex.  However, many 0-dte speculators may be testing which way the wind is blowing, ready to  propel the VIX even further.

TNX futures made a new low at 38.03 but recovered before the open.  The Cycles Model suggests higher volatility through the rest of the week, with the outcome being a possible low at the Cycle bottom at 37.49 later this week or early next.  However, the rise in yields may resume next week, prior to the FOMC meeting.

Japanese Yen futures rose to 69.20 this morning, coming out of its Master Cycle low on August 19.  I am currently neutral on the Yen, but that may soon change.  A breakout above the high at 69.51 may lead to a sharp acceleration higher, crushing the Yen carry trade once and for all.   AI and tech stocks have benefitted from the carry trade, so a resumption of the rally in the yen may bring down the whole tech complex.

3:07 pm

SPX has crossed beneath its prior lows at 3060.95 and short-term support at 5572.24.  This places it on an aggressive sell signal.  An aggressive sell indicates it may no longer be profitable to own the SPX, but a short position may be subject to an occasional blow-back.  The Cycles Model had indicated that the decline was due to begin last week.   However, the powers that be obviously wanted August to end on a high note.  Cycles are not mechanical, so they may be temporarily overridden by extraneous circumstances.  At the same time, the double (quadruple by some measures) top indicated that the SPX was simply unable to go higher.  Unfortunately, most investors were unable to recognize the stone-cold resistance to the SPX just beneath the July 16 high and many were caught today on the wrong side of the market.  It appears that the next support is the 50-day Moving Average at 5507.00, where a bounce may be generated.

12:58 pm

‘

NDX has fallen beneath its Intermediate support at 19152.00 and last week’s low of 19221.40  this afternoon.  This may change the signal to a confirmed sell signal.  By the  way, the consensus on Wall Street is that NVDA ia a “strong buy.”

10:24

BKX, our liquidity proxy may have made an on0time Master Cycle high on Friday at 116.05, hitting the trading channel trendline.    It has already declined beneath the Cycle Top support (now resistance) at 114.64, giving a possible aggressive sell signal.  That signal becomes confirmed beneath Intermediate support at 111.17.  Hedge funds have been the main source of liquidity as they rotated out of tech into financials.  The potential advantages may only be short-term.

7:45 am   2 Chronicles 7:14 

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

Good Morning!

NDX futures drifted down to 19397080 this morning, with selling pressure edging out buyers.   The 50-day Moving Average is at  19486.71, so the NDX is straddling this important level.  This action is rather directionless and the Cycles Model is unclear for the next two weeks.  Based on that information, a possible sell signal may be made should the NDX decline beneath last week’s low at 19221.40.  Otherwise, the chances of the rally resuming for the next two weeks are growing.  The Cycles Model tells us that the current Master Cycle ends on the week of September 16.  Should the NDX break above its  August 22 high at 19938.89 it may approach it Cycle Top at 20426.32.

I find it difficult to imagine the NDX remaining stationary for the next two weeks.  Hedge funds have reduced their exposure to tech, but retail and corporate buybacks remain exceptionally high.  Corporations may end buybacks as early as next week, but still gives enough time and buying power to spark a final surge higher.

The NDX options chain has finally turned positive above 19440.00.  Options investors appear to be ponying up for another rise in prices.

SPX futures have declined to 5613.20 this morning in what appears to be another consolidation.  There may be an aggressive sell signal beneath 5560.00.  Otherwise, the outlook appears to be sideways or higher.  While SPX may have peaked on Monday, August 26, it has not made a clear break in the rising pattern.  Should it go higher, the next target may be the Cycle Top at 5737.86.  However, should the market break out, sentiment may push the results as high at 5770.00-5800.00.

Today’s options chain shows Max Pain at 5625.00.  Long gamma may take over above 5650.00 while short gamma may begin at 56.15.00.

ZeroHedge reports, “US equity futures are trading near session lows, tracking Monday’s slide in global markets which sent Chinese stocks to 7 month lows, after US markets were closed for Labor day yesterday. As of 8:00am, S&P futures are lower by 0.5% trading around 5630 and unchanged since mid-August even as they nearly hit a new all time high on Friday, while Nasdaq futs lag, down 0.6% with both Mag7 and Semis are under pressure (NVDA -2.4%). Bond yields are ~2bps higher with the USD trading near session highs. Commodities are weaker with all 3 complexes coming for sale; gold and natgas are relative bright spots. Today’s macro data focus is on ISM-Mfg and construction spending as we have a heavy data week capped with Friday’s NFP which is likely the determinant for the Fed cutting 25bps or 50bps. Friday also has the last 2 Fedspeakers before the Fed’s blackout window.”

VIX futures show today’s action challenging the 50-day Moving Average at 16.40.  Today is day 265 in the Cycles Model, leaving a very short window for a possible  new low.  However, the gap between historical norms and current circumstances is very wide.

TNX challenged the declining trendline at 39.00, but dropped back beneath it.  The Cycles Model suggests rates may pull back for yet another week before surging higher.  This may be equities-friendly as we await the FOMC announcement  on September 18.  The money supply is being eased globally which brings rates down temporarily.

USD futures appear to be consolidating after the breakout above the Cycle Bottom resistance.  It may now test that level (101.14) for support seeking reassurance for the next upturn.  This may be accomplished in the next week or so.

Crude oil sank to a morning low of 79.45 as the new Master Cycle takes hold.  Crud is on a sell signal which may be reinforced beneath the Cycle Bottom at 69.76.  Be forewarned that there is a Head & Shoulders formation beneath it and the Cycle Model suggest the decline may continue to mid-October.

ZeroHedge observes, “Brent crude has extended its recnt losses (sparked last week by the Reuters trial balloon that OPEC+ would boost output due to the Libyan oil production snafu) and tumbled sharply below $75, because the same Libyan oil snafu that allegedly was about to prompt OPEC+ to pump more is about to be resolved (doesn’t matter if it is all circular, as long as oil is sliding ahead of the election: algos will try to make sense of the lack of logic later).

Brent slumped below $75, erasing all YTD gains…”

2:45 pm  This will be my last entry until September 3.  Happy Labor Day!

SPX has just gone negative after a valiant, but failed attempt to better Monday’s Master Cycle high.  At the same time, the DJIA made yet another ATH, as predicted.  This may be considered an aggressive sell signal.  NDX has also failed its rally attempt after NVDA’s fizzle.  They say hope springs eternal.  However, NDX is on a confirmed sell signal beneath its 50-day Moving Average at 19493.00.  SPX may have an aggressive sell signal beneath 5560.00.  The SPX 50 DMA is at 5498.90, beneath which a sell signal may be confirmed.

8:45 am   2 Chronicles 7:14 

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

Good Morning!

SPX futures bounced after making a new overnight low at 5545.70 after the NVDA announcement.  However, it sprang back to 5600.00, which is where the dealers in the options market has maintained Max Pain since last Friday.  Critical support at 5560.00 has been broken and the bounce may attract weaker hands into the sell-off that follows.  The Master Cycle high was made on Monday and the Cycles Model suggests the market may weaken until the next FOMC meeting on September 17-18.  In the meantime, the situation has become more fragile.  The buyback bid may end in another week.

Today’s options chain shows Maximum Investor Pain at 5600.00.  Long gamma may begin at 5650.00 while short gamma may start at 5550.00.

ZeroHedge reports, “Tech stocks recovered from the knee-jerk selling of Nvidia, which plunged as much as 8% after the company’s Q3 guidance disappointed some even as Q2 results met or beat analysts’ estimates on nearly every measure and showed that revenue more than doubled in the quarter, reinforcing the earnings power of artificial intelligence. As of 7:50am ET, Nasdaq 100 futures added 0.1% after sliding as much 1.4% earlier as Nvidia, which had tumbled sharply in trading after the close of US exchanges, trimmed losses to just down only 2% in pre-market trading. Intel Corp., Apple Inc. and Microsoft Corp. all posted small gains; S&P 500 futs rose 0.2%, fully reversing an earlier drop as Germany’s DAX Index hit a new record. Treasury 10-year yields and the dollar was steady. West Texas Intermediate crude rose to $75 after sliding back under $74 yesterday.  On the macro calendar, we have the second 2Q GDP estimate, July trade balance and wholesale inventories and initial jobless claims (8:30am) and July pending home sales (10am).”

VIX futures appear to be consolidating near the 50-day Moving Average at 16.20.  The consolidation may not last, as trending strength returns this weekend.  Today is day 260 in the Master Cycle.  There is a slight chance of a lower low in the next day or so.

The September 4 options chain shows Max Pain at 16.00.  There is a solitary crowd of puts at 15.00, while long gamma may begin at 18.00, strengthening at 20.00.

TNX has probed higher this morning to 38.79 thus far.  The trendline is at 39.00, which may offer an aggressive buy signal.  Someone is selling treasuries in a significant amount to have this effect.  Perhaps the BLS???  This could be a matter of unexpected consequences.

ZeroHedge remarks, “Just two hours after (ultra) discount retailer Dollar General reported catastrophic earnings, moments ago the Biden Bureau of Economic analysis decided to pull a BLS, and reported in its first revision of Q2 GDP that the US actually grew much stronger than expected on the back of – drumroll – an unexpected surge in personal consumption.

According to the BEA, Q2 GDP was revised to 3.0% from the 2.8% advance estimate, and beat estimates of a 2.8% print.”

ZeroHedge observes, “After yesterday’s solid 2Y auction, moments ago the US Treasury sold $70BN in 5 year notes, in an auction which saw yields tumble 46.8bps, to 3.642% – the lowest since April 2024 – from 4.110%. However, unlike yesterday’s stopping through 2Y auction, today’s sale tailed the When Issued 3.642% by 0.3bps, which was the 4th tail in the past 5 auctions.”

11:55 am

We may legitimately put NDX on a sell signal, having made a lower low beneath the 50-day Moving Average.  SPX isn’t far behind.  It must decline beneath Thursday’s low at 5560.95 to earn a sell signal.  Finally, the DJIA has made its new all-time high and may have completed its rally on Monday.  Now we find out what effect NVDA has with its earnings announcement.

7:45 am   2 Chronicles 7:14 

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

Good Morning!

NDX futures dipped to a morning low of 19491.00.  Two announcements may have an impact on the markets today.  The first is the PCE, due to be announced at 8:30 am on Friday August 30.  The second is the earnings announcement for NVDA, due at 4:20 pm followed by a conference call at 5:00 pm.  The results may prompt a move in NVDA of ~9.5% in either direction, prompting potentially large index moves.  This has the appearance of a make or break move for the NDX.

Today’s options chain shows Maximum Investor Pain at 19630.00  Long gamma may start at 19670.00 while short gamma may begin at 19620.00.

SPX futures are consolidating within yesterday’s trading range after an overnight high at 5633.00.  The Master Cycle high may have been made on Monday, day 269.  This is a very stretched Master Cycle.  The Cycles Model identifies today as a high volatility/high strength day, a potentially lethal combination to the bull market.

Today’s options chain shows Max Pain at 5630.00.  Long gamma may start above 5650.00 while short gamma may begin beneath 5600.00.

ZeroHedge reports, “US futures flat ahead of a key earnings release from Nvidia, the $3 trillion stock at the forefront of the global artificial-intelligence frenzy and the culprit for most of the market’s upside in the past two years. Viewed a barometer for AI spending across much of the technology industry, Nvidia – viewed by many as this bubble’s CSCO – is expected to project revenue growth of more than 70% for the current quarter when it reports after market close on Wednesday (full preview here). Any disappointment is certain to roil markets, given the company’s heft in US indexes. As of 8:00am S&P futures are flat, trading largely unchanged for the past week; Nasdaq 100 futs are barely in the red as NVDA erases an earlier gain in the green pre-mkt with the balance of Mag7 performing similarly and Semis are also bid. Bond yields are lower, tracking another sharp drop in oil. The USD is extending on yesterday’s gains while commodities are lower, led by Energy though Base Metals are continuing their recent bull run. The macro data focus will be on Fedspeak, bond auctions, and mortgage applications which gained 0.5% after last week’s double digit plunge (-10.1%).”

VIX futures have risen overnight to 15.85, as investors become more aware of risk.  VIX has been testing the 50-day Moving Average at 16.21.  A confirmed buy signal resides above it.  However, there is a possibility of a probe lower than the August 19 low.

Today’s op-ex shows Max Pain at 17.00  Short gamma resides at 15.00 while long gamma may begin above 20.00.

TNX futures probed down to 38.08 while the cash market made a low (so far) at 38.22.  The Master Cycle low may have been made on August 21 (day 258).  If so, TNX may be due for a resumption of the uptrend.

ZeroHedge reports, “After a sharp reversal in yields, which in August tumbled to a fresh 2024 low, some traders were eyeing today’s 2Y auction nervously to see if the move higher in yields would lead to some indigestion. In the end, it turned out there was no reason to be worried because moments ago the Treasury sold $69BN in paper to stellar market demand.

The auction stopped at a high yield of 3.874%, the lowest since August 2022 and down sharply from the 4.434% last month, a 56bps drop which was the biggest since the December recession scare (when we saw a 57bps drop), which in turn was the biggest since the March 2023 bank crisis. In short: any time you have a 50bps+ drop in sequential 2Y bond yields, you get a powerful recession scare. And yet, aside from March 2020 when the entire world shut down, the past two such recession scares ended up being a false start. We’ll see if this latest one is the same.”

ZeroHedge cautions, “Reading the excellent article by Brian Meehan of Bloomberg Intelligence, “Basis Trade Growth Is Massive”, I was reminded just how stupid clearinghouses really are. If you ever meet a head of a clearinghouse, I can assure it was not brains that got them to this key position in global finance.

As the article points out, there is now a $1.1 trillion notional short position in US treasury futures. You should not read this as the market being bearish on treasuries. It is a levered trade to make a “risk free” return on the difference in price between off the run treasuries and treasury future positions. For every short position in the treasury futures, there should be a long position in the physical market.”

Gold futures are in decline from the Master Cycle high made last Tuesday, August 20, after losing its best momentum in March.  This morning’s low was 2528.25.  The Cycles Model suggests that gold may show trending strength on the downside this week.  This is a good time to lighten one’s exposure to gold.  A sell signal may be issued beneath Intermediate support at 2467.21.

Crude oil futures crossed beneath its Triangle trendline near 76.00 this morning to a morning low at 73.86.  It may have made its Master Cycle high on Monday, day 257 of the Master Cycle The next support may be found at the Cycle Bottom at 69.69.  The likelihood of oil prices dropping beneath that level is very high, as the new Cycle may last until late October.

USD futures have rallied off their Master Cycle low made on Tuesday.  A buy signal may be obtained above the Cycle Bottom resistance at 101.22.

10:00 am

BKX, our liquidity proxy, has retreated from its Master Cycle high and trendline at 114.50. Today it has declined beneath its Cycle Top support at 114.15.  This may create an aggressive sell signal on day 256 of the Master Cycle.  The reason for the strong recovery in August is that hedge funds rotated out of AI into financials.  That may be regrettable as a strong decline may be imminent.

8:45 am  2 Chronicles 7:14 

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

Good Morning!

SPX futures consolidated under yesterday’s correction high at 5651.62, declining to 5604.40 this morning.  Today is day 267 of the Master Cycle, being stretched by Powell’s pivot and the potential NVDA earnings  The Cycles Model suggests a high volatility day today and tomorrow.  Considering the lateness of the pivot, the volatility may be actuated in either direction.  Traders estimate that NVDA may have a potential 10% move in either direction at the earnings announcement.  SPX, which came within 20 points of its all-time-high, has the potential of rising above its July high, whereas, NDX may not have that capability.

Today’s options chan shows Maximum Ivestor Pain at 5610.00.  Long gamma may begin at 5625.00 and strengthens at 5650.00.  Short gamma may start at 5600.00.

ZeroHedge reports, “Ahead of tomorrow’s Nvidia earnings fireworks, it’s another quiet session with most asset classes close to unchanged and US equity futures flat in a muted overnight session. As of 8:00am, S&P futures were unchanged after trading in a narrow range, and erasing modest earlier gains, while Nasdaq futures rose 0.1% with tech leading as NVDA/TSLA edge higher after lagging the Mag7 yesterday. Bond yields continued to rise amid a steeper curve, pushing the 10Y 3bps higher to 3.85%, while the USD is weaker and commodities are lower ex-base metals and natgas. Today’s macro data focus is on Consumer Confidence, Housing Price updates, and regional activity indicators. There is a 2Y bond auction.”

The DJIA futures fell to 41109.10 after making its new A-T-H yesterday.  The so-called rotation out of tech stocks to blue chips may be over.  There is a potential aggressive sell signal beneath the Cycle Top support at 40961.27.

VIX futures are rising again above the 50-day Moving Average at 16.10, placing it on a potential confirmed  buy signal.  Traders are repeating the same mistakes made before the August 5 sell-off, making the vol landscape more dangerous than ever.  Only 3 of 11 hedge fund strategies are short the market.  The rapid recovery may lead to short memories of the risk embedded in the market.

Tomorrow’s op-ex show Max Pain at 17.00.  Short gamma resides between 14.00 and 16.00.  Long gamma may begin at 20.00 and strengthens at 23.00.  Unfortunately, NVDA earnings are reported after the Market close on Wednesday.

TNX futures rose to 38.70 this morning after finding support at the Cycle Bottom at 37.73.  This action implies at least an aggressive buy signal after the August 21 Master Cycle low.  The next hurdle is the trendline near 39.00.

ZeroHedge explains, “According to some commentators, to counter inflation interest rates in the US must increase to a level that effectively restrains the economy. It is held that this increase in interest rates does not have to cause a recession if Fed’s policy makers could orchestrate a “soft landing.” The economy is portrayed as a spaceship that occasionally deviates from a path of “stable” economic growth and “stable” prices. All that is required to fix the problem is for the central bank to give a suitable “push” to the economy (i.e., the spaceship) to bring it back to the right growth path.”

USD futures may be consolidating after its strong reversal from it Master Cycle low at the trendline.   The Cycles Model shows a surge in strength may be imminent.  Dollar bears have had their heyday.  What happens next may be a universal surprise to investors who have been counting on a cheaper USD.

2:12 pm

NDX has exited its rising trading channel and sank beneath the 50-day Moving Average at 19500.00.  While investors are waiting until Wednesday for the NVDA earnings report, the loss of traction is hard to ignore.  The subsequent lower high since last Thursday may seal the deal.  It’s time to exit longs in the NDX.  The probability of a higher high is fast disappearing.  There may be a back-test of the trendline at 19750.00 before the decline.

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 rose to 19769.00 this morning, short of Thursday’s Key Reversal high.  Friday’s attempt to make a new high failed miserably.  It is noteworthy that while retail customers have been buyers of tech, hedge funds have been net sellers.  In addition, this is the last week of corporate buybacks, leaving an already thin liquidity even thinner.  The 50-day Moving Average at 19495.68may offer a line in the sand on the direction of the market.

Today’s options chain shows Maximum Investor Pain at 19800.00.  Long gamma may start at 20000.00 while short gamma may begin beneath 19770.00.

SPX futures rose to a weekend high at 5645.10, edging out the Thursday high and potentially nullifying Thursday’s Key Reversal.  Should stocks go higher, the next resistance is the Cycle Top at 5723.19.  Fractal analysis puts the potential high at 5770.00-5800.00.  Today is day 269 of the Master Cycle, stretching it thin.  The Cycles Model suggests a strong reaction in the market Tuesday and Wednesday.

Today’s op-ex shows Max Pain at 5630.00.  Long gamma may begin at 5660.00 while short gamma may start at 5600.00.

ZeroHedge reports, “US futures edged fractionally higher to start the week with small-caps outperforming as last week’s rally, when euphoric investors bought stocks after Fed Chair Jerome Powell’s dovish tilt at Jackson Hole, fizzled. As of 8:00am ET, S&P 500 futures gained 0.1% while and Nasdaq 100 futures turned red after both indexes notched gains of more than 1% on Friday when Powell’s J-Hole speech cemented the case for an interest-rate cut next month; the debate has now shifted to the size of the cut and what that would say about the state of the economy. Pre-market, NVDA which reports earnings this week, was up about 1% leading both Mag7 and Semis higher. Bond yields reversed losses and rose 3 bps tracking the nearly 3% spike in oil after Israel launched a pre-emptive strike involving 100 warplanes on Hezbollah in Lebanon and declared a 48-hour state of emergency while Libya’s Eastern government said on Monday morning it will stop all oil production and export. The yen erased all gains after earlier rising to its strongest level since January as it took reacted to the rise in US yields; the dollar edged up while gold held near a record high. Bitcoin touched $65,000 for the first time in about three weeks. The macro data focus is on Durable/Cap Goods but NVDA earnings on Weds is the key event. Powell’s dovish Jackson Hole speech should give a tailwind to risk assets this week.

VIX futures have been testing the 50-day Moving Average at 16.01 this morning, on day 257 of its Master Cycle.  The 50-day offers a line in the sand confirming long or short positions.  Thus far, the Master Cycle low may have occurred on August 19 (day 250).

Wednesday’s op-ex shows potential Max Pain at 17.00.  Short gamma reigns between 14.00 and 16.00.  Long gamma may begin at 20.00.  The September 18 op-ex appears loaded for bear.

 TNX appears to be testing its Cycle Bottom support at 37.77 this morning.  It has the capability of making a new low beneath Wednesday’s 37.63 (day 258).  Today is day 263, so there is time to stretch the Master Cycle to the trendline.

3:33 pm

SPX has been unable to rise above yesterday’s high.  In addition, yesterday’s action qualifies as a key reversal on on day 265 of the Master Cycle it would be fair to say that the Cyclical highs may have been made.   Take appropriate action.  This rally can no longer be trusted.

8:00 am     2 Chronicles 7:14 

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

Good Morning!

SPX futures are back over 5600.00  this morning after closing near its low at 5560.95.  This may be the last hurrah of the bull market, as fractal analysis suggests its target may be in the range of 5770.00 to 5800.00 over the next few days.  The much-anticipated Powell speech at 10:00 am may provide the fuel for the exuberance to come.  The rally after August 5 caught many investors off guard, leading to low participation.  Yesterday’s setback may provide the incentive to go all-in for investors who missed the early part of the rally.  As always, they will be late to the party.

Analysis of the options chain shows Maximum Investor Pain at 5565.00.  Long gamma may start at 5575.00 while short gamma may begin at 5550.00.

ZeroHedge reports, “Futures are solidly in the green on the last day of the week ahead of Powell’s Jackson Hole speech, with Tech leading. As of 7:45am S&P futures were up 0.5% while Nasdaq futures gained 0.8% with top MegaCap tech stocks TSLA (+1.5%), NVDA (+1.2%), and AMZN (+69bp). Bond yields are roughly unchanged: the 10Y yield is down 1bp to 3.84% as the USD resumes its slide ahead of what many expect to be another dovish speech by Powell cementing a 25bps Sept rate cut. Commodities are mixed with Oil and Precious Metals higher, while Base Metals are lower. Today, the main focus will be Powell’s speech at Jackson Hole at 10am ET.”

Meanwhile, VIX futures slid back to 16.84 this morning, well above the 50-day Moving Average at 15.99.  The phenomenon of rising VIX coupled with a potential panic upside in the SPX may create a very unstable condition as everyone chases the upside with no protection on the downside.   The speed at which the VIX has fallen in August may lay the groundwork for further turbulence ahead. This may be the last opportunity to buy downside protection while it is affordable.

The August 28 op-ex shows Max Pain at 16.00.  Short gamma resides at 15.00 with little conviction below.  Long gamma may begin at 18.00 with pockets of calls up to 30.00.  There seems to be no fear of a repeat of the August 5 episode.

TNX has eased back, but still above the Cycle Bottom support at 37.85.  Today is day 260 of the Master Cycle.  I have marked Wednesday as the MC low, but there is time for a further extension lower.  The trendline near 37.00 may be an appropriate target should that event occur.

USD futures declined to 101.15 this morning after being repelled at the Cycle Bottom resistance at 101.41.    The Cycles Model offers a volatile outlook for today, with a potential for retesting the trendline at 101.78.  Should the Master Cycle extend, this may be the last probe at the low as today would be day 268 of the current MC.

Gold futures are on the rise again at 2538.00 this morning.  Today may also offer gold investors their last hurrah as gold may seek to target 2700.00 on day 260 of its Master Cycle.  There are absolutely no guarantees, but the fractal structure appears incomplete.

Crude oil futures may be testing the Triangle trendline near 75.70 with a bounce to 74.52 this morning.  Today is day 254 in the Master Cycle.  A bounce to the trendline (or higher) may set off a possible two-month decline in crude.  Note the Head & Shoulders neckline.  It has two possible outcomes.  The target listed may be the smaller of the two.

Zerohedge remarks, “Oil prices have dipped, with Brent crude hovering around $77 per barrel, leading some market analysts to spot potential short-term buying opportunities. Citi Research, in a note dated August 21, and seen by Investing.com, sees this price pressure as a likely precursor to a rebound despite recent easing in geopolitical tensions.”