The Practical Investor

2:40 pm

Today’s SPX high is two points beneath yesterday’s high.  The NDX high is 34 ticks beneath its prior high and is receding.  Should today’s SPX/NDX not go any higher, equities may begin to sink like a rock.  Although the BOJ backed off from its rate hike, the TNX (10-year treasury notes) is back above 40.00.  In addition, the NYSE Hi-Lo Index shows only 1 new 52-week high out of 3300 listed companies.  That is not healthy.  The 100-day Moving Average is at 5310.00.  Beneath that level may be a confirmed sell signal.

ZeroHedge remarks, “Back in 2000, when technology stocks hit the wall, one of Gavekal’s first clients told us: “It’s OK. Bear markets serve an important purpose: they return capital to its rightful owners.”

Behind this cynicism lies an inherent truth.

Bear markets do tend to shake out “weak hands,” clean out retail investors, and punish those who operate with too much leverage. Another key function of bear markets is to transfer leadership from one country or sector or asset class to another.”

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!  The Website has been recovered and working normally.  Thank you for your patience.

SPX futures remained flat overnight, leaving investors on a knife’s edge of decision.  Should the SPX remain above the 1987 trendline at 5119.27, equities may begin to rally again to new all-time-highs.  The crux of the matter is that the Cycle low may have come early.  Should the former Master Cycle extend another two weeks to its normal pivot date, we may see a totally different outcome.  Perpetually bullish dealers have raised their odds of a bear market from 15% to 15%.

Today’s options chain shows Maximum Investor Pain at 5225.00.  Long gamma is scarce, but short gamma starts at 5200.00.

ZeroHedge reports, “After three rollercoaster days of wild, brutal swings, futures are flat ahead of the Thursday open, erasing overnight losses if still below the all-important CTA threshold level of 5255 which trigger billions in sales by systematic funds. Asian and European stocks declined, prolonging the soaring volatility that has gripped global markets for days after the BOJ effectively steamrolled the carry trade last week when it unexpectedly hiked rates, only to U-turn just days later when the Nikkei suffered its biggest one day crash since Black Monday. As of 7:4am S&P futures were unchanged at 5,228 while Nasdaq futures were fractionally in the green, with Mag7 and semis providing support despite the continued selling by Supermicro. Treasuries yields are lower ahead of US jobless claims data, with US 10-year yields falling 2bps to 3.93% as European bonds also gain. Keep an eye on bonds as yesterday’s 10Y auction was weak but that could have been negatively impacted by elevated Credit issuance; today is the 30Y auction. The USD is weaker and commodities are lower across all 3 complexes as WTI dips below $75, but precious metals catch a bid. Today’s macro data focus is on jobless claims; a spike there preceded a weaker NFP that coincided with the carry unwind so the market may have heightened sensitivity to the print. Elsewhere, both Goldman and JPMorgan raised their recession odds, from 10% to 25% and from 25% to 35%, respectively.”

VIX futures have also remained relatively flat.  While the VIX appears more “normal” near 25.00, the VVIX (VIX Volatility Index) remains stubbornly high near 150.00..  This indicates the VIX may move higher.  You may recall, I had mentioned that the probable target for this rally is the 2020 high at 85.47.  The Cycles Model suggests that the VIX has another two weeks of rally.  Should the VIX Cycle prevail over the SPX Cycle, the SPX may see a surprising “dip” beneath the 1987 trendline in the next two weeks.

The August 14 options expiration shows a weak short gamma between 13.00 and 22.00.  Long gamma appears to be weaker still, suggesting no conviction of a VIX blowout.  However, the situation is ripe for exactly that.

ZeroHedge observes, “Did VIX Really Hit 65 on Monday?

Without a doubt, the official VIX calculation reported a level of 65.73 on Monday at 8:34 am EST. That level was posted and is now being used by many people to justify long positions in equities. The theory seems to be that we had an “epic” spike in volatility indicating panic, and that panic has since receded – hence creating a buying opportunity. Notice, that we chose to use the word volatility here, partly because many seem to use VIX and Vol interchangeably – which is not accurate.”

TNX has pulled back fro the trendline at 39.20 after a brief challenge this morning.  It is likely to pull ack to the Cycle bottom at 38.47, or possibly the 50% retracement level at 38.00.

ZeroHedge reports, “Amid all the chaos in markets over the past few days, it is perhaps no surprise that ‘demand’ for bonds would be somewhat weaker. However, today’s 10Y auction was very ugly.

10:00 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!  I have been having difficulty with the website.  Postings may be limited.

SPX futures have crossed above the 100-day Moving Average, creating a potential buy signal. I had mentioned previously that the 1987 trendline was a very critical support.  It held.  Although the Master Cycle may have come early, it arrived at an acceptable time, day 248.  If correct, the Cycles Model suggests a rally to the week of September 16.  A move back beneath 5300 may reactivate short gamma and cause a further decline.

Today’s options chain shows Long gamma starting at 5300.00.  Short gamma lies directly beneath it, so SPX is at a crucial testing point in the options market.

ZeroHedge reports, “And just like that, the great carry trade freak out – which started exactly one week ago when the BOJ hiked rates by a huge 0.15% – is over, because as we had expected, the BOJ got cold feet and capitulated on its rate hiking cycle on Wednesday morning when BOJ deputy governor Shinichi Uchida sent dovish U-turn signal in the wake of historic financial market volatility by pledging to refrain from hiking interest rates when the markets are unstable. In kneejerk reaction to his comments – which were the first public remarks by a BOJ board member since the bank raised rates on July 31 – the yen, which had strengthened by a record amount in the past week as the carry trade careened sending deflationary shockwaves around the globe, weakened by more than 2%, bond yields rose and stocks soared. As of 7:30am ET, S&P 500 jumped by 1.2% with both Tech and small-caps outperforming as the BOJ capitulation relief rally continues;’ Nasdaq 100 futures gained more than 1.5% after the underlying indexes rebounded more than 1% on Tuesday following a wave of dip buying. The Stoxx Europe 600 index climbed more than 1%, with mixed earnings reports from some of the region’s biggest companies doing little to dampen the risk-on mood. Japanese stocks led a broad rally in Asia. Bond yields are higher by 4-5bps, and the USD is higher, looking to erase its weekly loss. Commodities have also caught a bid as the carry trade is reestablished with WTI, base metals, and Ags all seeing strength. Mtge Applications and 10Y bond auction are the major macro data pts. Is the panic unwind finished? Are detailed thoughts are below.”

2:50 pm

Understanding the current market situation leads us to the Japanese Yen and the “carry trade.”  The current market had been propelled by declining domestic interest rates until March 2020, when the 10-year rate started to rise from 0.0398% to October 23, 2023 when it reached 49.98%.

What propelled the market further as our domestic rates rose was that the Bank of Japan.  IT was still willing to lend unlimited sums at 0-.10%, which it had been doing since 1999.  What’s more, the Japanese Yen had peaked at 98.83 on March 9, 2020 and started to decline, meaning that a person could make money simply by borrowing at 0.00-0.01% and simply parking it.

Last week it all changed when the Bank of Japan decided to raise rates from 0.10% to 0.25%, sending the Yen skyrocketing.  All the currency gains of the past 10 months have suddenly disappeared while the equities market began to flounder.

Today may have been the end of the current Master Cycle, suggesting the Yen will come back down.  However, the damage has been done.

BBCNews reports, “Japan’s central bank has raised the cost of borrowing for only the second time in 17 years as it tries to normalise monetary policy in the world’s fourth largest economy.

2:26 pm

SPX may be testing a double resistance at 5303.00-5308.00, including the 100-day Moving Average.  As mentioned earlier, tomorrow may be a panic down day.  This may be a good opportunity to sell the bounce.  Many individuals and hedge funds have been “buying the dip.”  While a good practice while the market is going up, it may be deadly on the downside.  Patience is needed here.

11:01 am

BKX, our liquidity proxy, has found support at the trendline at 102.50.  Resistance may be at the 50-day Moving Average at 106.40.  A further decline beneath the trendline may introduce the next panic decline in the BKX.  The Banking Index may be considerably lower by the end of the week.  Panic days reappear during the week of August 19 and August 26.

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 bounced to 18319.70 this morning, above the 200-day Moving Average at 17657.00, but nowhere near a breakout of any significance.  A stumble back beneath the mid-Cycle support at 17898.00 tells us the decline has resumed.  There are no significant support levels until it reaches the Cycle Bottom at 15400.00.  The Cycles Model tags tomorrow as the next panic down day.  Buying the dip at this point may be like catching falling knives.

Today’s options chain shows short gamma beginning at 18000.00.  There may not be any long gamma to speak of.  Buyers of calls are becoming scarce.

ZeroHedge observes, “In March, Nvidia Corp. disclosed that CEO Jensen Huang’s Rule 10b5-1 trading plan included selling 600,000 shares (or about 6 million shares accounting for the 10-for-1 stock split) by March 31, 2025. He has already sold millions of shares, effectively top-ticking the market. This news should have served as a clear warning sign to investors that the AI bubble was approaching a peak.

Data from Bloomberg shows Huang’s daily sale of 120,000 shares began on June 13. The selling was indiscriminate. Most of it was sold between $135 and $109 from June through July. The selling continued into the downward draft in recent days.”

SPX futures rose to 5276.00 this morning, unable to overcome yesterday’s opening gap down and short of the 100-day Moving Average at 5307.00.   The 1987 trendline lies just beneath it at 5119.00.  A decline beneath it may offer support at the 200-day Moving Average at 5011.72.  The Cycles Model offers two conflicting scenarios for this decline.  The first shows the bottom occurring during the week of August 12.  The second shows a possible further decline during the week of August 26.  We may consider taking downside profits in the first case, but delay any long until the last week of August.

Dealers may have attempted to raise the SPX out of short gamma, which starts at 5245.00.  That effort may have failed.

ZeroHedge reports, “After Monday’s historic selloff that capped a three-week, $6.4 trillion rout in global equities as a brutal unwind in the carry trade driven by last week’s BOJ rate hike hammered most consensus trades, a dead cat bounce arrived as some investors looked for bargains and markets saw a hint of calm return on Tuesday, but the rebound has been decidedly more tepid than the rout, and doesn’t prove the meltdown is over. Futures on the S&P 500 and Nasdaq are poised to regain only a fraction of yesterday’s loss, while stocks in the UK and Europe gave up earlier gains to head lower. There were stronger moves in Japan, where the two key share gauges both jumped more than 9% at the close after tumbling 12% the day before. US futures higher in a volatile, shaky session, with small caps lagging the Nasdaq, as USD finds support and Japanese Equities rally 10% overnight, erasing much of Monday’s loss. As of 7:45am, S&P futures were up 0.8%, off session highs, while Nasdaq futures rebounded 1.1% falling more than 7% over past three sessions. That said, much of the overnight gains were pared after JPM’s co-head of FX Strategy Arindam Sandilya said that we may only be 50% – 60% through this carry trade unwind. Bond yields are 5-6bps higher as treasuries retreated, with the 10-year yield heading for the first increase in almost two weeks as traders curbed bets that the Federal Reserve will step in to support markets with early interest rate cuts. Commodities are weaker, with WTI and gold modestly in the green. For the remainder of the week, the macro catalysts are bond auctions and Fedspeak.”

VIX futures are flat this morning after yesterday’s spike high at 65.73.  The Cycles Model shows a possible three more weeks of rally in the VIX.  It appears to be out of sync with the SPX Cycle and bears watching.  The target may still be the 2020 high at 85.47.

In tomorrow’s op-ex, the shorts are redoubling their positions so that short gamma now begins at 18.00, suggesting that options buyers are still treating yesterday’s move as a short opportunity.  Long gamma is practically nonexistent.  This behavior is extremely odd.

TNX may have made a Master Cycle low yesterday.  Proof of that event may be a rise above the Cycle Bottom at 38.51.  The activity of the last week appears to have been a throw-under beneath its trading channel.  Should that be the case, we may see TNX back in rally mode by the end of the month.  The trendline may be tested prior to a meaningful rally.

11:59 am

SPX went well beneath its Monday target mentioned last Friday.  The fact is, it may have bounced off the 1987 trendline which is in the vicinity of this morning’s low.  Unfortunately for the longs, SPX may not be able to bounce much further.  The next stop may be today’s circuit breaker at 4971.00.  Today may be a margin call day, especially for the NDX, which has declined over 14% from its July high this morning.  Margin calls may begin at 3:00 pm or sooner, depending on how leveraged an investment account may be.

ZeroHedge observes, “US retail traders are panicking this AM after likely receiving push notifications on their smartphones about market turmoil in Asia and Europe, which has since spread to the US premarket. Now that the cash session is about 15 minutes underway, website monitor DownDector reports outages are emerging across several major US brokerage houses as everyone tries to log into their accounts and sell stocks.”

9:40 am

BKX has declined beneath its trading channel trendline at 102.50, confirming the sell signal.  The Cycles Model suggests the decline may continue to the end of August.  We may begin to see failures occur across the regional and smaller banks.

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 plunges to 17247.20 this morning before a bounce.  Welcome to the panic, which may last a few days.  A minimal decline would take NDX to 16500.00, but the Cycle Bottom at 15536.80 is not out of the question.  This week may offer critical information about the extent of the bear market.

The NDX is so deep in short gamma that there are no publicly available options listings.  That may change after the open.

ZeroHedge repors, “Nvidia shares plunged in early premarket trading in New York. The world’s most valuable chip maker is being battered by a global selloff, rising recession fears, AI bubble unwind (mid-July report: “Did The AI Bubble Just Burst, And What Happens Next”) , and reports of delays in its new AI chip production.

The Information reports that Nvidia has informed Microsoft and other cloud providers that its most advanced AI chip models in the Blackwell series (B200 AI chip) face three months of delays following the discovery of a design flaw “unusually late in the production process.”

SPX futures have tanked to 5150.00 thus far this morning, with no end in sight.  The decline appears to be headed for the 200-day Moving Average at 5007.66, beneath the 1987 trendline.  Buyers have stepped aside, for obvious reasons.  The trouble with this decline is that there has been very little hedging, which means there are few shorts that can take profits at this level.   Today may turn into a “limit-down” day.  The bad news for investors is that limit-down days often happen in a series of two or more.  The circuit breakers may be activated should the SPX reach 4971.00.

Today’s options chain is heavily populated with puts all the way to 4200.00.  This indicates that large players have been hedging possibly as late as Friday in anticipation of today’s panic.  .

ZeroHedge reports, “Good morning and welcome to a global market meltdown, sparked by last week’s catastrophic BOJ decision to hike rates by 0.15bps which in turn crushed the $20 trillion yen carry trade, sent the yen exploding higher and wiping out trillions in highly levered investments, leading to a cascade of selling and forced liquidations which has resulted a historic market crash in Japan and a rout everywhere else.

In the US, futures are sharply lower with tech plunging as the global AI/Semis trade – itself a byproduct of the carry trade – is sold and small-caps are re-shorted. The Nasdaq 100 is set for its biggest opening drop in more than four years, as investors bracing for days of volatility amid rising concerns over a slowing US economy and overheated gains in the tech sector. Nasdaq 100 futures fell as much as 6.5% before paring losses to about 4.5%. That puts the tech-heavy index on track for its worst open since the pandemic days of March 2020.”

VIX futures rocketed to a new high at 61.95 thus far, with no end in sight.  Those of you who though my prediction that VIX may rise to its 2020 high at 85.47 might be crazy may now reassess their thought process.  Pundits are now comparing today to the 2020 high.

Wednesday’s options chain shows VIX well above what few long calls there are.  The market has been caught totally off guard this time.

TNX bounced at 36.69 this morning, well beneath its daily Cycle Bottom.  At this (Primary) degree, the weekly chart may be more useful.  It shows its Cycle Bottom at 29.38, which may be the target for the current Master Cycle.  Fortunately, the MC is due to end   in about two weeks.  The decline in TNX is attributed to the notion that the Fed may be forced to do multiple rate cuts to prevent a further drawdown in equities.  The fact is, the Yen carry trade that has been extant since the 90’s is now over and with it, the “zero percent” financing of the leveraged market as well.  In addition, the fall in rates and rise in the 10-year Treasury Notes may be attributed to a knee-jerk reaction of investors seeking a “safe haven” from the declining equities.  The Cycles Model suggests this may come to an end in about two weeks.

1:00 am

SPX bounced at 5300.00 (round number support).  However, it may not hold.  The choices this afternoon are, (1) continue consolidation beneath the short-term Cycle Bottom at 5376.00, or (2) resume its decline to the next support level just beneath 5200.00.  The 1987 trendline is very near 5100.00.  The target appears to be 5200.00, either today or Monday.  That may not be the final bottom.  Monday and Wednesday are both panic days, which could allow the SPX to decline much further.

ZeroHedge Proclaims, “It didn’t take long after today’s dismal jobs report to spark what Wall Street hopes will be a Fed panic. Indeed, just moments after a catastrophic jobs report which “nobody’ could have possibly predicted, well some notable exceptions, some of the biggest Wall Street analysts are already tearing up the soft landing playbook they were all pitching just, well, 24 hours ago and are urging the Fed to not just cut but panic while it’s doing it.”

9:51 am

BKX has declined to test its 50-day Moving Average at 106.52.  The bounce may be short-lived.  Beneath that level is a confirmed sell signal.  Further confirmation lies at the trading channel trendline at 102.50.   The Cycles Model infers a potential month-long decline that may challenge the Head & shoulders neckline at 72.50.

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 to a new low at 18519.00 beneath the 100-day Moving Average at 18726.71.   Mid-Cycle support lies at 17867.07 and the 200-day Moving Average lies at 17627.00.  NDX is beginning its third Wave, which may take it beneath those supports.   The minimum decline for a third Wave may take NDX beneath 17500.00 over the next week.  NDX leads the other indices in the decline.  The damage may be so great that it may not be capable of a new all-time high.  Should the July payrolls be inadequate, a further sell-off may be in order.

Today’s options chain shows Maximum Investor Pain at 19200.00.  NDX is deep in short gamma, making it vulnerable to a further sell-off with pockets of puts every 100 points.  There may be some support at 18500.00, depending on the July Payrolls..

ZeroHedge observes, “Heading into Amazon’s Q1 earnings, we said earlier that the investment thesis will be driven by i) e-commerce share, margin expansion and the potential for AWS growth recovery through the year; ii) directional commentary around AWS growth/optimization; iii) signals of retail margin improvement as suggested by management commentary on “cost to serve”, iv) progress with fulfillment regionalization and broader cost containment efforts, v) directional commentary on fiscal year capex for ecommerce (up with business) and ongoing AWS investments, vI) commentary on adoption of Prime Video with ads and ad industry broadly, and last but not least, 6) positioning around GenAI investments. We also noted that the key bogeys for this extremely popular – among hedge funds – position were the following:

• Q2 Total Sales: $149-150 bn
• Q2 EBIT: $14 bn+
• Q2 AWS Growth: 18%
• Q3 Total Sales: guide high end of the Street at $158 bn
• Q3 EBIT: $15 bn+ (freight rate dynamic)”

SPX futures declined to 5344.70 after the announcement of the July Payrolls Report.   SPX has declined beneath the 50-day Moving Average at 5443.63, which may now be resistance on a potential bounce.  Whether a bounce occurs or not, the Cycles Model calls for a panic decline to develop over the weekend.  July mutual fund statements may be out as early as Monday, fueling bearish sentiments.  The Cycles Model calls for two more weeks of selling before a tradable bottom may be found.

Today’s op-ex shows Max Pain at 5485.00-5490.00.  Long gamma may begin at 5500.00.  Short gamma may start at 5475.00.  There are large pockets of puts at 50-point intervals starting beneath 5425.00.

ZeroHedge reports, “It is a global selling carnage this morning, as risk-off extends across worldwide equity markets but nowhere more so than Japan where the point (if not percentage point) drop in the Nikkei has surpassed Black Monday 1987.

8:35 am

VIX futures have risen to a morning high at 21.51, a 15.7% advance before the open.   It has surged above the April high and may challenge the October 2023 high.  In the process, it has broken through a 4-year declining trendline, putting it firmly into bullish territory.  I will show the weekly chart (with breakout) after the open.

The August 7 options chain shows Short gamma between 14.00 an 16.00.  Long gamma begins immediately at 17.00 and is strongest at 20.00.  Once it clears 20.00, we may see a surge in long options above it.  This morning appears to be a total surprise.

9:40 am

As promised, the weekly chart shows a breakout above the declining trendline originating in March 2020.  This opens the way to a panic rally to the 2020 high shown at the top of the chart.  No guarantees, but you may wish to buckle your seatbelts.

TNX futures plunged to 37.82 (cash at 37.90.00) before bouncing.  Support is at the December 27 low at 37.85.  This may be the Master Cycle bottom on day 282 of the Cycles Model.  Pundits interpret this move that the Fed now has to “catch up” with 4 rate reductions.  However, they may be reading too much into this as the sell-off in equities may have produced a “knee-jerk” flight to bonds.

On the contrary, the Cycles Model suggests that rates may now rise through the end of the year.  Wave [4] may have performed a “flat” correction by not declining beneath the December low.  There is a potential buy signal for TNX above the Cycle Bottom resistance at 38.68.

ZeroHedge exclaims, “Just as we warned earlier in the week, the macro playbook has shifted to “bad is bad and good is good” as ‘growth scare’ narratives now dominate the set-in-stone rate-cut scenarios.

This morning’s payrolls data was ‘bad news’ and so we see rate-cut expectations explode higher with over four full cuts now priced in for 2024…

Source: Bloomberg

This prompted a massive plunge in Treasury bond yields…”

The Jobs Report may have also caused the USD futures to decline to 103.15 this morning.  The Cycles Model suggests about two more weeks of decline with a probable target near the Cycle Bottom and trading channel trendline at 101.72.  An alternate view suggests a lower decline to the area of 95.00.

10:57 am

BKX fell from its Cycle Top at 114.99 this morning, through its trendline at 113.00.  It is on an aggressive sell signal.  Sell confirmation may arise beneath Intermediate support at 107.97.  The trading channel bottom lies at 102.50.  The sell signal has the capability of lasting through the end of August.

]10:49 am

SPX has made a key reversal and is declining rapidly.  It has crossed beneath Intermediate support at 5518.45 and round number support at 5500.00.  The 50-day Moving Average at 5447.68 is in sight.  Fear of an economic lslowdown takes precedence over hopes of a rate cut in September.

ZeroHedge remarks, “The start of the third quarter saw a deterioration in business conditions at US manufacturers as new orders declined for the first time in three months, according to S&P Global.

This makes sense as we have seen ‘hard’ US macro data serially disappoint for three months.

• S&P Global US Manufacturing PMI falls to 49.6 in July, dropping into contraction for the first time since Dec 2023.
• ISM Manufacturing PMI plunged to 46.8 (48.8 exp) – weakest since Nov 2023 (near post-COVID lockdown lows)”

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 reached an overnight high of 19572.60, a 45% retracement.  The 50% retracement is 19428.48.  Yesterday’s action was halted at the 50-day.  A close beneath the 50-day today would be bearish.

Today’s options chain shows Maximum Investor Pain at 19320.00.  Long gamma may begin at 19400.00 while short gamma may start at 19250.00.

ZeroHedge remarks, “It is difficult to tell how much of today’s rally was:

• AMD related which was up more than 10% and presumably helped rally almost 15% adding more than $300 billion of market cap
• MSFT, gaining traction from the immediate post earnings reaction as their conference call did a lot to soothe investors – a nice turnaround in a market that has been punishing “misses”
• The Fed.   Yields moved down across the curve, even though the Fed didn’t cut rates, and only signaled that September was a possibility, not a done deal.
• Relief rally from what has been a few tough weeks for stocks, buy the dippers being enticed back in, and some chatter about money on the sidelines moving in from money funds now that rate cuts are in sight.
• Not only are we getting buyback announcements, but as companies make it through their earnings, they are able to enter back into discretionary buybacks and may view recent dips as great buying opportunities.”

SPX futures rose to 5560.60 this morning, a 61.8% Fibonacci retracement.  A reversal back beneath the Intermediate support and Ending Diagonal trendline at 5510.00 would create a sell signal for the SPX.  The market did not get its wish for an announced rate cut in September, so the main support for bullish sentiment is getting ragged.

Today’s options chain shows Max Pain at 5555.00.  Long gamma starts at 5560.00 while short gamma begins at 5550.00.  The slightest nudge in either direction may produce a firestorm reaction in the options.

ZeroHedge reports, “Futures extend on yesterday’s post FOMC gains, but are off session highs, with tech outperforming and the Russell in the red, following the same trend seen late day yesterday. Futures have given up some of their earlier gains potentially on geopolitical headlines as fears of another imminent Iran-Israel conflict swirl, pushing oil to new highs. As of 8:00 am S&P futures are up 0.4% after the index recorded its biggest gain since February in the previous session; Nasdaq futures 0.5% higher led by META 7% higher following earnings with AAPL +60bps, AMZN +1.1% ahead of earnings after the close today. Semis are up small with NVDA +20bps. European stocks are mixed while in Asia, Japanese markets plunge as the yen surges following the inexplicably hawkish BOJ announcement even as Japan’s economy is once again sinking, setting up the endgame of that particular monetary experiment. Bond yields are higher by 2-3bps which is boosting the USD to its best day in 2 weeks. Commodities are bid with Energy and base metals leading. Today’s macro data focus is on ISM-Mfg, while the market is likely to ignore jobs data ahead of tomorrow’s NFP. AMZN/AAPL headline today’s earnings schedule.”

VIX futures remained flat overnight beneath the Cycle To resistance at 16.81, a mere 50% retracement.    This is noteworthy, despite seasonality which suggests elevated risk.  VIX is in a “role reversal” in which the retracement is “only 50%” while SPX retraces to 61.8%.  The opposite relationship is normal.  This tells us something is afoot.  Dealers appear to be less supportive of risk (bullish).

The August 7 options chain shows Max Pain at 16.00.  Short gamma is less consistent with holdouts at 13.00 and 14.00.  Long gamma may begin at 20.00, but not a lot of conviction above that.

TNX sinks lower this morning to 40.20 on day 282 of the Master Cycle.  This move is unusually long, indicating some powerful forces behind it.  The announcement of the quarterly treasury refunding just before Powell’s announcement may have set the stage for more bond complacency..

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 have risen to 19105.10 this morning after having completed 13 days of decline and bouncing from the 100-day Moving Average at 18707.34.  Commentators are hoping for a tradable low this week.  The Cycles May offer some temporary relief from the decline, but A panic Cycle may begin later this week/early next week.  The Cycles Model suggests that NDX may only be halfway through its destructive decline, with the worst yet to come.

Today’s options chain shows Maximum Investor Pain at 19050.00.  Long gamma shows somw life at 19080.00 while short gamma may begin at 19000.00.  This morning’s action is simply to remove NDX from the grasp of the shorts.

SPX futures have risen to 5492.20 thus far this morning.  However, it remains beneath Intermediate resistance and the Ending Diagonal trendline at 5506.23.  Unlike the NDX, SPX has had 6 days of decline, followed by 4+ market days of sideways consolidation/correction.  The Wave structure favors a “flat” correction ending just above 5500.00.  The Cycles Model also anticipates a possible 13-day decline from today’s high.

Today’s op-ex shows Max Pain at 5485.00.  Long gamma may begin at 5500.00 while short gamma may stat at 5450.00.

ZeroHedge reports, “Despite disappointing earnings from world’s second biggest company and Mag 7 titan, Microsoft, global stocks rallied on Wednesday, with Nasdaq 100 index futures jumping, as a flurry of bullish news powered a rebound in technology stocks ahead of today’s Fed meeting. US equity futures are higher with Tech leading and Semis outperforming: NVDA +5% pre-mkt following AMD’s earnings (+9.3%) and a positive read-thru from MSFT earnings even though Microsoft itself is down 3% (cutting losses from as much as 7% and is the only member of Mag7 in the red). As of 7:45am ET S&P futures were up 0.9% with Nasdaq futures surging more than 1.5% as the AI trade appears to remain intact despite yesterday’s latest tech rout. Bond yields are flat and USD is weaker ahead of today’s FOMC decision where Jerome Powell is expected to signal a potential rate cut for the US in September later today (see our preview here) as the yen soars after the BOJ surprises with a hawkish hike even as its economy careens of a cliff assuring this will be the shortest hiking cycle in recent history. Commodities higher led by energy following yesterday’s supply drawdown and relief rally as WTI has seen ~8% drawdown this month; oil extended gains after Hamas said Israel killed its political leader, stoking tensions in a region that produces around a third of the world’s crude. Today, we receive ADP (which has not been predictive of NFP) and the Fed decision. Mag7 earnings continues with META.”

VIX futures are hovering inside yesterday’s trading range.  The correction may target between 15.00-15.50 as a final low before moving considerably higher.  The Cycles Model introduces a potential panic rally beginning this weekend.  Commentators suggest there may be too much AI fear.  Recency bias may not allow them to see the Cycles at work.

Today’s op-ex shows Max Pain at 17.00. with short gamma inhabiting 13.50-16.00.  Long gamma begins at 20.00.

TNX futures declined to a morning low at 41.07 while the cash market made a low of 41.12 in a throw-under the trendline.  This may be the Master Cycle low, despite being 281 days long.  There are multiple reasons, including a persistent market sentiment favoring a rate cut in September, despite multiple denials from the Fed to date.  Should the FOMC not grant their wish, the reaction may be violent.

ZeroHedge announces, “Earlier this week, in our Quarterly Refunding preview we said that “the August refunding package will be identical to the one in May, with $125bn in gross issuance across 3y, 10y and 30y auctions. In addition, expect unchanged 5y TIPS new issue and 30y TIPS reopening (at $23bn and $8bn, respectively), and a $1bn increase to the 10y TIPS reopening (to $17bn) to commensurate with the increase in the 10y TIPS new issue auctioned this month.”

USD futures declined to 103.67, beneath the mid-Cycle support at 103.93 and the the 200-day Moving Average at 104.14.  A Master Cycle low is due in mid-August.  A possible target may be the Cycle Bottom and trendline at 101.72.

BKX may be due for a reversal today, on day 279 of its stretched Master Cycle.  Its current Cycle structure has interesting similarities to the UST.  Banks have been relying on lower rates to keep their wheels from falling off.  That is about to end.

8:00 am     2 Chronicles 7:14

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

Good Morning!

NDX futures are consolidating beneath its correction high at 19224.59.  Despite a 5% decline from the high, investors still believe that NDX is still positive.  CTAs (formula buyers and sellers) are selling, but stock buybacks have returned.  Billions of purchases are scheduled daily, so what could go wrong?  For one thing, the FOMC meeting is scheduled for today and tomorrow.  The Cycles Modelinfers better-than-even odds that the decline may continue.  In the meantime, the markets are in neutral, pending the outcome of the announcements.

Today’s options chain shows Maximum Investor Pain at 19090.00.  Long gamma may begin at 19100.00 while short gamma may start at 19080.00.

ZeroHedge observes, “Billionaire investor Warren Buffett’s Berkshire Hathaway has disclosed in multiple filings this month, the latest on Monday, that it is continuing to reduce its stake in Bank of America, locking in sizeable gains. This comes as Berkshire’s cash pile surged to a record in the first quarter, as Buffett has recently complained about the lack of meaningful deals.”

SPX futures are also consolidating beneath their corrective high at 5491.59.  Overhead resistance remains at Intermediate resistance and the Ending Diagonal (red) trendline at 5504.01.  The Cycles Model suggests the correction may be complete.  It also infers another three weeks of potential decline.

Today’s options chain shows Max Pain at 5465.00.  Long gamma may start at 5475.00, but only gathers strength above 5500.00.  Short gamma may begin at 5450.00.

ZeroHedge reports, “After yesterday’s market reversal, US equity futures are higher but lacking the strength seen in EU markets. As of 7:50am, S&P and Nasdaq futures are 0.2% higher, with Mag7 stocks mixed and Semis are higher despite NVDA down -63bps and MSFT flat with closely watched earnings after the close.  The yield curve is twisting steeper and 10Y yield is 1bps. The dollar is flat and commodities are lower across all 3 complexes. The macro data focus is on JOLTS and Consumer Confidence in what shapes up to be a quiet session ahead of a central bank bonanza that features the BOJ and the Fed tomorrow: both could impact the yield curve though no large moves are expected. The bond market is pricing no moves tomorrow for the Fed but is not pricing a small probability of a 50bps cut in Sept.”

VIX futures remain flat this morning, just beneath its Cycle Top resistance at 16.77.  The breakout has already occurred, so this may be a final time to accumulate shares of VIX futures and ETFs.  The Cycles Model projects the current uptrend to last until the end of August.

Tomorrow’s options expiration shows Max Pain at 17.00.  Short gamma resided between 13.50 and 16.00.  Long gamma may begin at 20.00.  The longs are gaining confidence.

ZeroHedge comments, “The rollercoaster ride is about to get “fun,” as in unpredictable, volatile and unnerving for those normalized to extreme distortions “fixing” all things financial.

Humans have a knack for normalizing extremes. We quickly habituate to conditions that would have been intolerable before the extremes were normalized by habituation and recency bias. In no time at all, we’ve persuaded ourselves that living on reds, vitamin C and cocaine is not only normal, it’s healthy.”

TNX sits at its 4-year trendline in consolidation.  Yesterday’s low at 41.50 appears to be the Master Cycle bottom, on a very late day 279.  It is clear that attempts are being made, either directly or indirectly, to keep the TNX down.  It will fail miserably.

USD futures rose to challenge the 50-day Moving Average at 104.68.  The Cycles Model may show trending strength today as it clears the last hurdle to making a new high.  The current Master Cycle may go to mid-August, so there is room to rally.

9:55 am

BKX reversed beneath its Cycle Top support at 114.80 and may be now on an aggressive sell signal.  The sell signal may be confirmed beneath the 50-day Moving Average at 105.86 and again at the trendline at 102.50.  The  sell signal may last through the end of August.  The likely target may be the Head & Shoulders neckline at 72.50.

7:30 am    2 Chronicles 7:14

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

Good Morning!

NDX futures made a weekend high at 19181.80, short of Thursday’s retracement high at 19227.20, a 43% retracement of last week’s decline.  Should it go higher it may attempt to probe near the 50% retracement value just beneath the 50-day Moving Average at 19388.10.  The current retracement appears to be irregular and due for a final probe higher later today.  What follows may be the strongest decline yet.  The Cycles Model identifies the ingredients for a panic starting the week of August 5.  High hopes have been put on a rate cut in September.  It may not happen.

Today’s options chain shows Maximum Investor Pain at 19075.00  Long gamma may begin at 19100.00 while short gamma may start at 19060.00.

ZeroHedge observes , “Baby Pool Closed for “Maintenance”

Anyone who ever got that notice from a town or community pool knows exactly what happened. It feels like some of that has gone on in our markets of late, ensuring that this is an “adult swim.” For those who have had their vacations disrupted or are about to experience that as market volatility continues, we feel your pain!

The Nasdaq 100 has had some wild swings, and the S&P 500 broke a long string of trading days without dropping 2%. Stocks ended the week strong on Friday and we got to continue to examine de-grossing, rotations, and de-risking. Last weekend we delved into these subjects in Know When to Fold ‘Em and we refined our views on Thursday morning in A Lot Going On.”

SPX futures rose to a weekend high at 5491.91 before easing back.  As of this morning, it has made a 52.3% retracement.  Intermediate resistance and the Ending Diagonal trendline lie at 5500.58, a 56% retracement.   A cookie cutter retracement would stop very near 5500.00.  What follows may be the 3rd of 5 possible declines in this Cycle that become steeper as they progress.   The minimum decline this week may end at the 100-day Moving Average at 5290.95.

Today’s op-ex shows Max pain at 5460.00.  Long gamma may begin at 5500.00 while short gamma may start at 5430.00.  Sentiment appears on the short side.

ZeroHedge reports, “Starting what is the most important week for the market this summer – where 40% of the S&P reports earnings, the Fed reveals the September rate cut, along with decisions by the BOJ and BOE, and wel also get the July jobs report with countless other macro events on deck – stocks are solidly in the green as the carry trade destruction and tech rout that marked the past two weeks appears to have finally ended (as hedge funds buy the dip), and US equity futures as well as Asian and European markets are well in the green signaling rising optimism ahead of major central bank decisions and big tech earnings due this week. As of 7:45am ET, S&P 500 futures are up 0.4% while Nasdaq 100 futures gain 0.6%, with both set to extend their rebound for a second day after last week’s tech-fueled slump. Europe’s benchmark stock gauge rose 0.5% while Asian stocks gained more than 1%. Treasury yields declined four basis points to 4.16%, while the dollar edged higher against a basket of currencies. Bitcoin soared, rising just shy of $70,000 after Donald Trump said to “never sell your bitcoin.” It’s a quiet start to the extremely busy week, with just the Dallas Fed Manufacturing index on deck today.”

VIX futures are consolidating inside Friday’s trading range.  It may continue its retracement to a possible low near 15.00.  However, there may be a show of trending strength beginning today.  VIX performance may have broken away from the SPX/NYSE and may run parallel to the TNX for the balance of August.

Wednesday’s op-ex reveals Max Pain at 17.00.  Short gamma appears to be growing between 13.50 and 16.00.  However, long gamma appears to be growing faster between 20.00 and 30.00.

TNX has made a retracement low to the trendline at 41.59.  The trendline may offer a platform for a strong reversal, as the Cycles Model shows trending strength developing today.  A breakout above the mid-Cycle resistance and the prior high at 42.92 may be a signal to go long the TNX/short the UST.  Many prognosticators are bullish bonds.

ZeroHedge remarks, “The rates reset

The US 10 year yield has come down substantially, and is trading right on the huge trend line that has been in place since April last year. We are trading way below the 200 day (now negatively sloping). Also worth pointing out is the death cross, where the 50 day is crossing the 200 day.”

USD futures ripped higher this morning, as it has risen above the 200-day Moving Average at 104.45.  This creates a buy signal for the dollar.  This may be the beginning of new trending strength as the USD surges higher through mid-August.

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 rose to 19073.10 this morning in a corrective bounce.  The most likely scenario today may be an attempt to retest the 50-day Moving Average at 19371.51.  However, there is considerable resistance at  19227.20, yesterday’s high and round number resistance at 19300.00.  Investors should not take heart at this bounce, since a bounce to maximum resistance (the 50-day) only constitutes a 55% retracement of the decline from 19904.60.  In fact, today may be a day to sell the bounce, as next week may involve a panic decline.  Tech stress is elevated.

Today’s options chain shows Maximum Investor Pain at 19175.00.  Long gamma may begin at 19200.00 while short gamma resides beneath 19150.00.

ZeroHedge summarizes, “KC Fed survey joined yesterday’s Regional Fed surveys in the doldrums (as did today’s plunge in durable goods orders) but of course, all eyes were sternly focused on Q2 GDP’s beat.

That ‘good news’ sparked a hawkish shift lower in rate-cut expectations…

Source: Bloomberg

The Nasdaq lagged..again.. with Small Caps ripping higher. The S&P ended red again with The Dow clinging to gains…

Nasdaq has underperformed Russell 2000 for 11 of the last 12 days, erasing YTD outperformance for the big-tech index”

SPX futures rose to 5449.90 thus far this morning.  It may be attempting a corrective bounce to retest Intermediate resistance and the trendline at 5497.46.  Should that feat be accomplished, it would constitute a 57% retracement of this week’s decline.  Otherwise resistance may lie at 5453.16.  The bounce appears to be a Trading Cycle high, suggesting the decline may resume imminently.  SPX may be entering the most forceful portion of the decline, so buckle up!

Today’s options chain shows Max Pain at 5475.00, a highly contested strike for both calls and puts.  Long gamma may begin at 5480.00, but becomes more serious above 5500.00.  Short gamma starts at 5450.00 and is well populated beneath that level.  Dealers may be struggling to maintain above short gamma thus far.

ZeroHedge reports, “One day after closing at the lowest level in more than a month, US equity futures have rebounded led by small-caps with tech names also in the green (NVDA +2.4%, META +2.0%, AMZN +1.2%, AAPL +97bp, GOOG/L +72bp). As of 8am ET, S&P futures are 0.8% higher while Nasdaq futs gain 1.1%, suggesting the underlying indexes will pare their weekly slump. Europe’s Stoxx 600 benchmark rose 0.5%. Treasuries and the dollar were little changed..  Bond yields are unchanged ahead of today’s core PCE print which is expected to show further easing in inflation. The USD is flat. Commodities are mixed: oil is lower while base metals/gold are higher. Today the key macro focus will be July’s core PCE which consensus sees dipping to 2.5% YoY vs. 2.6% prior.”

VIX futures appear to be consolidating beneath yesterday’s high.  Cycle Top support lies at 16.93.  A further correction may depend on the success of the equities bounce.

The July 31 options expiration shows Max Pain at 17.00.  Short gamma extends from 14.00 to 16.00.  Long gamma may begin at 20.00. and is showing new strength at 30.00.

TNX is consolidating beneath Intermediate resistance at 42.79 and above the trendline just beneath 42.00.  The Cycles Model suggests a breakout may endue over the weekend.  The uptrend has been maintained and the trendline may provide the launch pad for the next lift-off.

ZeroHedge reports, “The broadly weak trend of US macro data was jolted yesterday by a hotter than expected GDP print – which prompted a hawkish shift in rate-cut expectations. This morning, the doves get another chance for some ‘bad news’ (disinflation) to support their ‘we must cut’ narrative (that Dudley et al. have exposed).

The Fed’s favorite inflation indicator – Core PCE – instead came in slightly hotter than expected, rising 2.6% YoY (vs +2.5% YoY exp). The headline PCE dipped to +2.5%...”

BKX got a second shot at a throw-over above its trading channel.  However, a new high has eluded it.  As mentioned earlier this week, bad news is often saved until after the close on Fridays.  The hope is that the weekend activities may erase the concern of how tenuous the situation really is.  Confidence must be kept high, as there are 63 troubled banks that may blow up at any time.

ZeroHedge observes, “Commercial real estate (CRE) issues have been getting more attention this year, causing significant headaches for the banking sector and raising questions about the severity of the situation. Rising vacancy rates, the short maturity of loans, and the loans made during low-interest periods have all contributed to escalating the current predicament. We have written about this several times, and now we aim to explore the problem through the lens of bank balance sheets to determine which ones really suffer under this issue.”

Gold futures bounced to challenge the 50-day Moving Average at 2371.83.  However, the breakdown beneath the 50-day Has confirmed the sell signal.  Should it fail to close above it, the decline may resume with force.  The Cycles Model suggests renewed trending strength may emerge over the weekend and redouble next week.  The Cycles Model infers that the decline may resume and extend through mid-September.

ZeroHedge comments, “A growing number of African countries are turning to gold to hedge geopolitical risk and protect against currency losses.

Nigeria, Uganda, Zimbabwe, Madagascar, and several other African nations have made moves to increase gold reserves, bring their gold home, and even back their currencies with the yellow metal.”