The Practical Investor

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 made a feeble attempt to retrace to the 50-day Moving Average at 19357.72.  Instead, it rose to 19140.70 before resuming its decline.  As mentioned yesterday, there simply are no buyers.  In addition, short gamma, and 0-DTE investors dominate the daytime activity.   Tis morning’s low was 18902.70 and the 100-day Moving Average at 18674.69 awaits testing.  Pundits are meekly considering the possibility of a bear market, with more declines ahead.  No one seems to have a particular target for the decline.

Today’s options chain shows short gamma beginning at 19100.00.  Long gamma is practically nonexistent.

SPX futures declined to 4410.00, beneath the 50-day Moving Average in the overnight market.  It is currently testing the 50-day Moving Average at 5427.13.  Should it fail the test, the next level of support may be obtained at the 100-day Moving Average at 5285.04.  A successful bounce above the 50-day may be met with resistance at Intermediate resistance at 5496.00.

Today’s options chain shows Max Pain at 5500.00.  Long gamma may start above 5515.00 while short gamma rules beneath 5475.00.  Short gamma is in plentiful supply down to 5350.00.  Dealers may try a retracement to 5500.00.

ZeroHedge reports, “US equity futures are lower but well off their worst levels, after a rout in Japan sent the Nikkei tumbling, hammered gold and crypto as the yen carry trade unwound – if only until next week when the BOJ inevitably disappoints yet again. As of 7:50am, S&P futures were 0.1% lower, while Nasdaq futs dropped 0.2%, with tech giants are mixed pre-market trading: AAPL -43bp, NVDA -20bp, AMZN +23bp, GOOG/L +27bp. Wednesday’s session was a bloodbath: the index finally broke a 356 day streak without a down 2% (or greater) move – the longest streak since 2007, when it went 943 days without a down >2% move – as the S&P fell -2.3% (worst day since Dec ’22), NDX fell -3.7% (worst session since Oct ’22), Mag Seven -6% (worst session since Nov ’22), AI winners down -5% to -10%, and Index vol spike (VIX > 18 for first time since April). Bond yields are 5-8bp led by the front end. Commodities are weaker: WTI fell -1.8%; base metals are mostly lower. The USD is lower but also well off its worst levels. Today, the macro data focus will be 2Q data release: Consensus expects GDP to print 2.0% QoQ saar vs. 1.4% prior, driven by a rebound in personal consumption to 2.0% vs 1.5% in Q1.”

VIX futures rose to a new high at 19.04 this morning.  Those hoping the VIX might settle back down, the Cycles Model suggests a possible redoubling of trending strength over the weekend.  Pundits claim that the rally in VIX may be overdone.  Chasing VIX “appears” to be a late short-term trade.  On the contrary, with several weeks to go, the current target may be the March 2020 high.

The July 31 options chain shows Max Pain at 16 with a large population of shorts between 1`3.50 and 15.00.  Long gamma may begin at 20.00 and long sentiment is growing.

TNX futures may have tested  the rising trendline at 41.90 this morning before resuming its ascent.  Thus far, it has been repelled by Intermediate resistance at 42.94.  Should it rise above that level, TNX may be on a buy signal (UST sell).  The Cycles Model suggest a rally may ensue to the week of August 19.  Today’s Treasury Auction schedule show $44 billion 7-year notes on the block.  Buyers, anyone?

ZeroHedge comments, “One day after a stellar, record-breaking 2Y auction, moments ago the Treasury dumped a clunker in the form of $70 billion in 5Y bonds which tailed badly and which saw a drop in foreign demand. Here are the details.

The high yield of 4.121% was below last month’s 4.335% but tailed the 4.110% When Issued by 1.1bps. In fact, it was the 4th consecutive tailing 5Y auction and 6 of the past 7.

The Bid to Cover was 2.40, up from 2.35 and above the six-auction average of 2.36.”

BKX failed to correct above the Cycle Top at 114.73 and closed at the upper trendline.  An aggressive sell signal may be had beneath that trendline at 112.85.  The Cycles Model suggests a potential decline through the month of August lies ahead.

12:33 pm

NDX has run out of buyers.  It has virtually ignored the 50-day Moving Average at 19358.99 and is headed for the 2-hour Cycle Bottom at 18957.43, where it may bounce.   Absent a bounce there, it may seek the 100-day Moving Average at 18675.97. What was support is now resistance, so future bounces may test the 50-day, but seldom exceed it during the decline.  The saying goes, “The market takes the escalator up, but the elevator down.”

11:01 am

SPX gapped down beneath the trendline at 5540.00 and Intermediate support at 5501.75.  The likely target may be the 50-day Moving Average at 5423.57.  The trouble is, short gamma runs to 5350.00, if not lower.  CTAs are turning bearish today.  That’s not a good sign.

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 have declined to a low of 19515.70 thus far this morning after failing to rise above the Ending Diagonal trendline at 19900.00 and closing beneath Intermediate support at 19772.50.  It made a 35% retracement.  It may threaten the 50-day Moving Average at 19339.50 later today.  There are two possible outcomes.  The first is a decline through the 50-day which prolongs the decline and may result in a panic.  The second is a bounce at the 50-day which may provide some temporary relief from the decline.    The Cycles Model indicates a continued decline until mid-August.  The ride may not be fun for the unprepared.

Today’s options chain shows Maximum Investor Pain at 19830.00.  Long gamma starts at 19900.00.  Short gamma may begin at 19820.00, suggesting a gamma-induced decline may be forthcoming.

ZeroHedge observes, “Alphabet reported better than expected top- and bottom-lines for the second quarter after the bell tonight.

• Revenue $84.74 billion, estimate $84.37 billion
• Revenue ex-TAC $71.36 billion, estimate $70.7 billion
• EPS $1.89, estimate $1.84″

SPX futures declined to 5508.90 thus far this morning, just above the Ending Diagonal trendline and Intermediate support at 5492.14.  It accomplished a 50% retracement.  While the NDX bounce was weak, the SPX bounce may have been appropriate.  SPX is close to critical support and may decline beneath it later today.  Should that be the case, the next support may be the 50-day, then the 100-day Moving Averages.  The Cycles Model does not show trending strength until early August, but the SPX may grind steadily downward until then.

Today’s options chain shows Max Pain at 5565.00.  Long gamma may begin at 5585.00 while short gamma lies beneath 5530.00.  Should SPX remain beneath that level, there remains a heightened risk of a gamma-induced decline.

ZeroHedge reports, “Stock futures and global markets slumped, with tech dragging the indices lower, after disappointing results from Tesla and Alphabet were followed by lackluster reports from LVMH and Deutsche Bank in Europe. The first Mag7 earnings results were – as we warned in “Now Comes The Hard Part: AI Stocks Face Brutal Q2 Earnings Day Of Reckoning” – a flashing red  warning with TSLA tumbling 7%, GOOG down -3%, and the rest of the Mag7 all lower. The yield curve is steepening with 2Y seeing follow-thru buying following yesterday’s strong auction. USD is stronger and commodities are weaker excluding energy. Today’s macro data focus is on Flash PMIs, New Home Sales/mortgage applications, and Inventories. ”

VIX futures climbed to 15.63 this morning after testing the mid-Cycle support at 13.66 yesterday.  VIX is due for a surge in trending strength over the weekend, but in the meantime, may grind higher as it explores its new trend.

Today’s op-ex shows Max Pain at 16.00.  Short gamma is well-populated beneath 15.00 while there is a dearth of long gamma.  Looking into the August expirations, there is little enthusiasm for hedging, other than day traders, which may be the mistake of the year.

USD futures are consolidating above mid-Cycle support at 104.03 this morning.  The Cycles Model calls for a higher USD until mid-August.

TNX continues to consolidate beneath important resistance at 42.82.  The Cycles Model suggest a breakout by early next week.

BKX rose to test its Cycle Top in a retracement.  A decline beneath the trendline at 112.85 may induce a strong decline.  We may need patience, since bad news may not become public until after Friday’s close.

ZeroHedge comments, “The economy is slowing and that will hit the zoomers first and the hardest, especially renters…

Shaky Ground

The idea for this post comes from the Wall Street Journal article American Borrowers Are on Shakier Ground.

Years of higher inflation and interest rates have left consumers mired in debt, even as overall economy hums.

I dispute the Journal’s statement the “overall economy hums”.

If the economy was humming we would not see charts like I am about to present.”

2:36 pm

SPX has corrected to the 50% retracement at 5585.00 and has resumed its decline.  I stand corrected on this morning’s analysis.  I mentioned the 50% retracement was at 5592.00.  For those wishing certainty, the trendline is near 5525.00.  A decline beneath it confirms the new sell signal.

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 rose to 19831.20 thus far this morning.  It may test the trendline near 19850.00 this morning.  Should it go further, the 50% retracement value is at 20075.00.  Time is running out for this correction.  It may peak later this morning.  The strategy this morning is to sell the bounce.

Thus far the NDX has seen nearly a 6% pullback.  Most pundits suggest that this may be an average pullback with a nominal decline of ~10%.  The message is to buy the dips.   A 10% pullback may put the NDX near the 100-day Moving Average at 18646.00.  Would that it be so.  However, critical support lies near the 200-day moving average at 17403.00, nearly a 16% pullback.  Furthermore, the 1987 trendline which has given support to this uptrend since November 2008 lies near the Cycle Bottom at 14827.00, a 28% decline.  While the 200-day Moving Average defines the intermediate trend (months), a break of the Cycle Bottom may indicate a change of trend lasting years.

Today’s options chain shows Max Pain at 20000.00.  Long gamma may appear above 2000.00 while short gamma arises beneath 19970.00.  Dealers would likely make an effort to rise above that level.

SPX futures rose to 5573.70 thus far this morning.  The next resistance is the 50% retracement value at 5592, followed by round number resistance at 5600.00.    The bounce may be over this morning.  Bears may be selling the bounce.  A decline beneath Intermediate support and the Ending Diagonal trendline at 5484.13 offers investors a confirmed sell signal.  Should the trendline be broken, the next support may be the 1987 trendline just under 5100.00.  A decline to the ’87 trendline offers a 10% decline.  However, a break of the trendline may offer the Cycle Bottom at 4295.13 as a target for this decline, a 25% loss.

Today’s op-ex shows Max Pain near 5565.00.  Long gamma may begin at 5590.00 while short gamma may start under 5535.00.

ZeroHedge reports, “US equity futures reversed earlier losses and were modestly in the green with small-caps leading and Tech lagging, following the partial retracement from yesterday and weaker Semis earnings last night. As of 7:30am, S&P futures are up 0.1%, while Nasdaq futs are 0.1% in the red with Mag7 stocks mostly flat/up ex-NVDA which is -80bps, lower with most other Semis names after disappointing earnings from NXP Semi which dropped 9% in premarket after giving a third-quarter revenue forecast that was weaker than expected. Reports after the close from GOOG/TSLA/TXN are important for the Tech trade. Bond yields are lower, USD is flat, and commodities are weaker though WTI is higher. Macro data is primarily regional activity indicators ahead of tomorrow’s Flash PMIs. There is a 2Y bond auction today; rates traders are looking for a modest concession.”

VIX futures made a nominally lower correction to 14.86 this morning.  Currently it is in the green.  Last Friday’s anomalous low may be keeping the 0-DTE investors plugged into their puts while smart money is beginning to hedge long in the VIX.  Trending strength may resume over the weekend.

Tomorrow’s options chain shows Max Pain at 16.00 with short gamma starting beneath 15.00 .  Long gamma is nowhere to be found, suggesting the 0-DTE still holds the majority of shares.

TNX is pulling back after testing Intermediate term resistance at 42.85.  TNX emerged from its Master Cycle in strength and may continue to exhibit strength, especially over the weekend.  The Cycles Model suggests rising rates through the week of August 19.  A breakout above the trend channel may occur above 44.00.  The Treasury auction schedule shows $70 billion 5-year notes going on the block tomorrow.  There may not be fireworks, but a steady rise in rates may be problematic for equities.

BKX, our liquidity proxy, has made an aggressive sell signal beneath its upper trendline at 113.00.  Critical support lies at 106.22, where confirmation of the sell signal may be made, while the lower trading channel trendline lies at 102.50.  The Cycles Model suggests the decline may continue through the week of August 26.  If so, the intended target for this decline may be at the Head & Shoulders neckline at 72.50.  Banks, especially regional banks,  are still experiencing outflows.  Combined with rising rates, we may see the façade start to crumble.  We usually don’t see the bank reports until after the Friday close.

Last Friday, Zero Hedge reported, “After last week’s plunge, total US bank deposits (SA) rose a modest $9BN…

Source: Bloomberg

But, as we have grown accustomed to, on an NSA basis banks saw $27.6BN in outflows from deposits last week…

Source: Bloomberg

Which meant that, excluding foreign deposits, The Fed’s magic turned a $23BN deposit outflow (NSA) into a $34.5BN deposit inflow (SA)…”

Gold futures consolidated inside yesterday’s trading range.  Critical support lies at 2368.30, beneath which gold may obtain a sell signal.  Declining beneath it offer no support until it reaches mid-Cycle support at 2182.20.  Final support may lie at the Cycle Bottom at 1858.82.  The triple top structure suggests that gold may have run out of buyers for the time being.  The price may have to fall to become attractive to investors again.  Liquidity may play an important factor in this equation.

8:00 am   2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my 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 19721.80 this morning, just above Intermediate resistance at 19700.00 but under the trendline near 19750.00.  Should it go higher, short-term resistance is at 20000.00.   The 50% retracement level is near 20075.00.  The bounce may last a day or so, correcting last week’s drubbing.

Today’s options chain shows Maximum Investor Pain at 19725.00.  Long gamma may begin at 19750.00 while short gamma may start at at 19710.00.  Sentiment in the options chain appears to be more bullish than bearish.

ZeroHedge remarks, “Most common plain bull market

S&P500 and “developed markets equities” at pole positions in terms of Sharpe YTD. The non-exotic risk-adjusted bull….”

SPX futures rose to a morning high at 5542.80.  Overhead resistance lies at5565.44, then 5600.00, the 61.8% Fibonacci retracement level.   The Cycles Model suggests the correction may last a little more than a day.

Today’s options chain shows Max Pain near 5520.00.  Long gamma may begin near 5540.00 while short gamma strengthens ar 5500.00.

ZeroHedge reports, “Global markets are relatively muted after a second consecutive historic weekend for US politics, one where Joe Biden ended his reelection campaign and (reluctantly) endorsed Vice President Kamala Harris. As of 7:45am, S&P futures are up 0.5%, led by tech with small caps also positive but lagging as the rotation takes a break; Nasdaq 100 futures gained 0.9%, reversing some of last week’s painful 4% slump. European stocks rose more than 1%, snapping a five-day losing streak and their worst week this year as the Trump Trade looks a bit shaky this morning (his odds on Predictit are down from 70% to 60% in the past week): the dollar is sliding slightly, havens like the Swiss franc and Treasuries edge higher as the yield curve twists flatter. Commodities are mixed with Ags higher and Energy/Metals lower. The biggest news this weekend is Biden dropping out of the Presidential race and VP Harris is now the presumptive nominee, though others may enter the race. As JPM’s Market Intel desk writes this morning, we have seen “some unwinds of the Trump Trade, it is possible that unwinds further as the market looks to Trump with a split Congress.” Elsewhere, it is a light macro day as we enter the second busiest week of earnings season with ~20% of the SPX reporting.”

VIX futures are down to a morning low at 16.14. The correction may be steep, down to the 50-day Moving Average at 12.87, offering a buying opportunity for investors looking for cheap hedges.  Friday’s momentary decline to 10.52 was an anomaly.  Recall tha I mentioned last week that institutions were overwhelmingly short the VIX.  The anomaly may be explained by either a fat finger or a favor  may have been called to reverse a bad trade.

Wednesday’s options chain shows Max pain at 16.00  Short gamma lies beneath 15.00 while long gamma may begin at 18.00.  Sentiment in the VIX is still overwhelmingly bearish.

TNX may be consolidating near its Friday high.  The Master Cycle low was made on Wednesday.  However, overhead resistance lies at 42.82, above which a clear buy signal may be had.  There is little reaction to Biden stepping out of the race.

.

7:30 am   2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my 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 dropped to 19573.00 in the early morning hours, but bounced back to the red Ending Diagonal trendline near 19750.00.  While the bounce may go higher, the larger picture shows the NDX may still be on its way to test the 50-day Moving Average at 19242.89, where there is a likelihood of more corrective behavior.

Today’s options chain shows maximum investor pain at 19700.00.  Long gamma may start at 19750.00 while short gamma may begin at 19650.00.

ZeroHedge reports, “Early Friday, a global IT outage caused by an issue with cybersecurity firm CrowdStrike disrupted flights, banks, retailers, stock exchanges, 911 call centers, and media outlets. Experts say this could be one of the largest IT outages in modern history.

Bloomberg reported that CrowdStrike warned customers that its Falcon Sensor threat-monitoring product was the source of the chaos, causing Microsoft’s Windows operating system to crash. There was no mention of what triggered the issue, and there were reports of disruptions in Microsoft’s Azure cloud and 365 Office software. ”

SPX futures declined to 5524.70 in early morning hours, then at the bounce hesitated at 5560.00.  SPX is on an aggressive sell signal with confirmation beneath Intermediate support and the Ending Diagonal trendline at 5467.76.  While a further bounce may be imminent, the bigger picture shows a probable bounce at the 50-day Moving Average at 5393.01.  Most critical support lies at the 1987 trendline at 5080.00.

Today’s options chain shows Max Pain at 5525.00.  However, Long  gamma has a huge presence at 5550.00 (32,825 contracts reflecting over 180 million in morning trades alone.).  Dealers may prefer short gamma instead, with a much more manageable presence down to 5500.00.

ZeroHedge reports, “Global stocks, already hammered by several days of relentless selling in mega-cap tech shares, struggled on Friday as an unprecedented, worldwide computer systems outage hit travel, trading and support services, threatening to exacerbate a pullback in technology stocks. As of 7:00am ET, S&P futures were flat, paring earlier losses, while Nasdaq futures dropped -0.1%. Global markets are also mostly in the red: FTSE -45bps, CAC -55bps, DAX -65bps, Nikkei -16bps, Hang Seng -2.03%, Shanghai +17bps. Cybersecurity firm Crowdstrike plunged as much as 21% in US premarket trading after warning its software was causing computer systems to crash. Its chief executive later said the issue was being fixed. Microsoft shares dropped 2%, though it said it had resolved the cloud-services outage that was blamed for disrupting flights and banks globally. Even the Russell is red this morning as the rotation takes a break. US Treasury yields were unchanged, with the 10Y trading at ~4.21% while the Bloomberg dollar index modestly higher as the yen reverses shallow overnight gains. There is nothing on today’s economic calendar so attention will focus on the fallout from the global IT outage and Trump’s RNC speech.”

VIX futures rose to 16.70 this morning, on a relentless path higher.  The Cycles Model shows VIX rising through mid-August.  Sentiment on the VIX is so poor that recognition of its presence may not register with investors until it breaks out above the April high at 21.36.  Currently, half of all VIX positions are 0-DTE, where the index measures the average 30-day positioning.

The July 24 options expiry shows short gamma at 13.00, with long gamma stronger above 14.00.  However, there is little hedging going on, which shows the decline in equities has not generated much in the way of put buying.  Options are still cheap until the dealers start changing positions.

TNX has risen from its trendline and Master Cycle low at 41.44.  TNX may be on an aggressive buy signal (UST sell).  Confirmation may be obtained above the Intermediate resistance at 43.12.  Meanwhile Powell remarks that a “soft landing” may be in the cards.  (See below)

.ZeroHedge remarks, “The Federal Reserve’s Federal Open Market Committee (FOMC) left the target policy interest rate (the federal funds rate) unchanged at 5.5 percent last week. The target rate has now been flat at 5.5 percent since July of 2023—as the Fed waits and hopes that everything will turn out fine. In his prepared remarks at Wednesday’s FOMC press conference, Powell continued with the soothing message he has generally employed at these press conferences over the past year. The general message has been one of moderate but sustained growth, and  an economy marked by “strong” employment trends and moderating inflation.”

USD futures are consolidating above the July low.  The current Master Cycle may allow the USD to trend higher for the next month.

BKX made a Key Reversal yesterday, on day 267 of its Master Cycle.  It has given a Cycle sell signal which may be considered aggressive.  However, critical support is at 104.71.  Quite a distance from its extended top.  The channel trendline is near 102.50 for a potential confirmed sell signal.  I would consider this a difficult but potentially very profitable short position.

The Ag Index may have reached its Master Cycle low at 348.52 yesterday, on day 261 of its Cycle.  While a decline beneath a 3.5-year trendline may be considered bearish, it has already retraced 73% of its 3-year rally ending in early 2022.  In addition, the structure indicates the finality of this decline in a Cyclical 2.15 years.  This indicates that food prices may have started a long-term, multi-year rally.

7:45 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my 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 bounced modestly (beneath 1919973.00) after approaching its Ending Diagonal trendline and Intermediate support at 19643.62.  A further decline beneath that level confirms the sell signal.  The mantra may change from “buy the dip” to “sell the bounce.”  Last Thursday’s all-time high remains the top of the Spring rally.  Now we have the hot days of Summer ahead of us.  Available cash is near an all-time low in mutual funds, indicating buyers are out of ammo.

Today’s options chain shows NDX firmly in short gamma beneath 19850.00.  This is a dangerous place to be, as it could snowball into an avalanche of selling.

ZeroHedge remarks, “What is happening…?

Here are a couple of short/medium term catalysts to explain the weakness (outside the most important one – the MoMo carnage – dealt with in previous email).

1. Rotation rampage……Several days of Big Tech underperformance, as investors expanded their exposures, adding more pro-cyclical exposure and lean into small-cap stocks, instead of concentrating positions in growth and momentum names

2. One weak earnings datapoint …..ASML’s weaker than expected 3Q results

3. Show me the AI money…..Increasing focus on AI, tech earnings, and whether there is too much optimism already priced into the stocks

4. Trading a lowered bar ahead of next week……Consensus expects all five of the mega-cap AI-related tech stocks will report a slowdown in sales growth and four will also have a contraction in net margins”

SPX futures have bounced to challenge the upper Ending Diagonal trendline near 5600.00.  It may be o a Cyclical aggressive sell signal.  The Sell signal may be confirmed beneath the lower (red) trendline and Intermediate support at 6459.59.

Today’s options chain shows Max Pain at 5600.00.  Long gamma may begin at 5620.00 while short gamma prevails beneath 5560.00.

ZeroHdge reports, “Futures are higher, rebounding from Wednesday’s tech-fueled rout. At 7:40am, S&P futures are up 0.1% and off session highs, while Nasdaq futures rise 0.4% after concerns over tight US restrictions on chip sales to China drove its worst day since 2022; Semi stocks see some relief after Taiwan chip giant TSMC’s earnings beat expectations: NVDA +2.7%, AMD +2.1%, AVGO +1.3%. Mag7 names are higher, too, with VRT +1.7% pointing to potential gains in second derivative AI plays. Major The Stoxx 600 index added 0.3% as most European markets trade higher ahead of the ECB at 8.15am ET, where the expectation is for rates to be held steady ahead of a potential Sept cut. China-exposed stocks are leading alongside macro recovery while AI/Semis remain under pressure despite positive TSMC earnings. Bond yields are higher 2-3bps with the belly underperforming; European bond yields are higher as many curves bear flatten. After tumbling to a 2-month low thanks to a surge in the yen driven by a reversal in the carry trade, the dollar was slightly higher as President Joe Biden faced intensified calls to bow out of the 2024 race. Commodity weakness continues with pockets of strength in precious metals and natgas (WTI is flat). Today’s macro data is focused on jobless claims and 3x Fed speakers.”

VIX futures are consolidating beneath yesterday’s high and above mid-Cycle support at 13.97.  It is now in the upper half of its 8.6-month trading range. The Cycles Model suggests the VIX may continue to rally through late August.  It affords a cheap hedge against a calamity i the market.

The July 24 options chain shows calls outnumbering puts at all levels above 13.00.  However, there does not seem to be much conviction in the options market.

USD futures may have reversed near the halfway point of its Trading Cycle, indicating a potential rally may ensue through mid-August.  Cash may be king for th enext month as both stocks and bonds go into a tailspin.

TNX rose from yesterday’s Master Cycle low at 41.44 to begin a new trek higher.  Serious overhead resistance lies at 53.16.  Should that be broken, the next resistance is at 68.23.  This is a very serious juncture in the Cycles.

Gold futures consolidated beneath yesterday’s potential Master Cycle high at 2488.40 on day 264 of the aging Cycle.  The triple top shows how liquidity has been waning since April.

ZeroHedge observes, “At the beginning of the year, I not only laid out 24 stocks that I would be watching for the year based on what I thought the macro environment would do, but I also detailed gold and miners as what I would buy if I had to narrow things down to one trade only.”

7:45 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my 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 hit a new low at 20062.60 this morning.  It has declined through Cycle Top support at 20462.56 and is approaching a two-month trendline at 20000.00.  A Cyclical sell signal is in place and may be confirmed beneath the trendline.  Why the sudden change in trend?  The song of the soft landing has put investors asleep.  They have been suddenly awakened by rhe reality of earnings.

The options chain shows NDX deep into short gamma which intensifies beneath 20150.00.

RealInvestmentAdvice remarks, “On December 5, 1996, Chairman of the Fed Alan Greenspan offered that stock prices may be too high, thus risking a correction that could result in an economic fallout. He wondered out loud if the market had reached a state of “irrational exuberance.”

Over the past few months, we have seen the same term, irrational exuberance, used to describe the current state of the stock market. To gain perspective on the future, let’s compare the market environment that prompted Greenspan’s comments to today. ”

SPX futures have declined to 5605.20 thus far, possibly bouncing at round number support at 5600.00.  However, Intermediate and trendline support lies at 5461.25.  A sell signal may be confirmed beneath that level.  Today  is day 264 in the aging Master Cycle.

Today’s options chain shows short gamma starting beneath 5640.00.  Long gamma starts at 5650.00.  The battle between the longs and shorts is on.

ZeroHedge reports, “US equity futures slide with tech dragging down S&P and Nasdaq futures as both Semis and Mag7 are being sold pre-mkt with ASML -6% on a Bloomberg report the Biden administration is considering using the most severe restrictions available on companies like Tokyo Electron and European chip giant ASML (which tumbled to the lowest since early June), if companies continue to give China access to advanced semiconductor technology. As of 7:45am ET, S&P futures are down 1% and Nasdaq 100 futs tumble 1.4% with tech giants such as AAPL, NVDA, TSLA, AMD, MU, AVGO, MSFT, AMAT all down 1.4% – 4%. Meanwhile, the great rotation continues for another day with Russell futs positive. The yield curve is twisting flatter as 10-year Treasury yields rose while the dollar weakened and the yen jumps, sending the USDJPY lower as much as 200 pips to just above 156. Commodities are lower with Energy/Metals in the red though Ags are strong and WTI is flat. Today’s macro data focus is on Housing data, Industrial Production, and the Fed’s Beige Book. There are two Fed speakers and the 20Y bond auction which JPM rates strategist believe will require a concession.”

VIX futures rose to a morning high at 14.07 and remain elevated.  This is a buy signal confirmation, as the VIX isalready above the 50-day Moving Average.  The mid-Cycle resistance which is being challenged this morning, elevates the VIX into positive ground.  Look for further confirmation above the May 30 high at 14.88.  The Cycles Model calls for a rising VIX through mid-August.

USD futures declined to 103.36 this morning, surpassing the June low at 103.48.  It appears that the Cycles Model may allow the USD to decline to its rising trendline and Cycle Bottom at 101.67 bu mid-August.  A weakening USD may be an indication of a serious liquidity problem.  In addition, the Japanese Yen has been rising since its reversal from its July 3 low.  The Euro put in its low on June 26. Foreign investors ma be repatriating their investments.

TNX may have made its Master Cycle low yesterday. on day 266 of the aging Master Cycle.  It also touched its rising trendline, suggesting a further rally to new highs.    Rising yields may have a direct effect on the outcome of the election.  Rate cuts are still a commonplace discussion, but the Cycles Model infers just the opposite.

ZeroHedge remarks, “Housing Start s and Building Permits rose more than expected in June (+3.0% MoM and +3.4% MoM respectively) and May’s disappointments were revised modestly higher too (-4.6% MoM and -2.8% MoM respectively)…”

The modest rebound in permits – forward-looking – appears to have been triggered by a renaissance in Fed rate-cut hopes…”

BKX may have finally made its Master Cycle high by testing its Cycle Top resistance at 114.46 on Day 265.  There is a slight possibility of an even higher high today, but keep in mind that the Cycle is aging.  It has thrown over its trading channel near 112.50.  A decline beneath that trendline may produce an aggressive sell signal.  Other critical support lies at 104.10.  As in other indices, the larger institutions have added some exuberance to this index.

ZeroHedge observes, “Trump Trump Trump

“Trump trades” have of course been the key focus in the market over the recent past. Most of it on bonds & the dollar. Here are three “other” Trump-trade observations.

1 – M&A bankers love Trump

Expectations for a more business-friendly regulatory regime are the boon private markets have been waiting for. As a proxy for future M&A activity, shares of investment banks Evercore (+7.7%) and Lazard (+9.3%) have soared WTD.”

7:50 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my 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 beneath their new all-time high at 20672.10 made on Thursday, the 258th day of the Master Cycle.  It was announced by a Key Reversal on that day, which hasn’t been surpassed.  The Cycle Top support lies at 20431.00 and has been broken through, creating an aggressive Cyclical sell signal.  Institutional fund managers remain net long while hedge funds and individual investors are becoming increasingly short.

Today’s options chain shows Maximum Investor Pain at 20430.00.  Long gamma may arise at 20450.00 while short gamma may begin at 20420.00.

SPX futures are consolidating beneath yesterday’s all-time high at 5666.94, on day 262 of the Master Cycle.  The INDU also made it’s all-time high yesterday at 40351.10.  Both indices are in the reversal zone.  The Cycles Model calls for a decline into mid-August that may take many by surprise.  The probable target for the ensuing decline maybe near 5100.00.  The Dow may be due for another all-time high in September while the SPX and NDX may not go higher.  You may recall that the previous all-time high was made on November 22, 2021 in the NDX while the Dow and SPX made their previous highs on January 3, 2022.  A similar situation may develop here, as well.  The upper trendline of the Ending Diagonal (red) may be found near 5600.00 while the lower trendline of the Ending Diagonal may be found near 5550.00 for a possible sell signal.

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

ZeroHedge reports, “US equity futures are modestly higher, rebounding from session lows, and led by Russell futures as the rotation looks poised to continue as bond yields are lower with the curve bull flattening. As of 7:45am, S&P futures are 0.1% higher with Nasdaq futures rising 0.2%. Premarket, Mag7 is mixed with TSLA +1.7% the standout with Semis flattish. European stocks were red across the board, as China also traded lower after Trump’s selection of JD Vance – who said China represents the biggest threat to the US – as his VP, triggered further trade and geopolitical concerns in the region. FTSE -20bp/DAX -35bps/CAC -70bps/Shanghai +8bps/Hang Seng -1.6%/Nikkei +20bps/Kospi +18bps. Treasuries rose, pushing yields to their lowest since March, as expectations for a September rate cut rose: 10-year rates fell to as low as 4.17% while 2Y yields was at 4.41%. At the same time, the US Dollar is seeing some support, but the story is the BOJ and potential JPY intervention, though JPY is weaker. Commodities are weaker across all 3 complex with precious metals, natgas, and softs providing some support. Today’s macro data focus is on Retail Sales where the headline number likely is negative based upon lower gasoline prices but the Control Group is likely higher as the consumer spent on everything else.”

VIX futures rose to 13.47 this morning and remains in positive territory.  Institutions remain net short the VIX, limiting its potential to rally.  The Cycles Model suggests the VIX ay rise through mid-August and possibly to the end of ?August.   VIX shorts currently remain the most overbought/oversold asset, next to AI.  There is a potential for a violent turn higher that may leave the shorts scrambling to cover.

TNX futures made a new low, while the cash market did not.  Since the charts are using the cash market, Thursday’s low remains the Cycle low.  A buy signal may be obtained above the mid-Cycle resistance at 43.24. The Cycles Model suggests that yields may rally into the third week of August.

ZeroHedge remarks, “If you don’t think the Fed has become an abject handmaid of the Wall Street gamblers, take a gander at the chart below. Owing to the slight down-tick in this week’s monthly CPI report, the outcry for rate cuts is reaching a deafening roar down in the trading pits.”

ZeroHedge further remarks, “After Powell, fully expectedly, refused to drop any hints today at the timing of The Fed’s next action, he did mention that the last three inflation reading had “added to confidence.”

Speculation on the when not the if is building.

“The FOMC has an undeniable (if never acknowledged) incentive to avoid initiating cuts in the last two months of a presidential election campaign. This doesn’t mean the committee couldn’t cut in September, but it does mean that July would be preferable,” concludes Goldman Sachs chief economist Jan Hatzius in a brief note this morning.”

7:45 am    2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my 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 Industrials made a new all-time high on Friday, modifying the Cycles landscape to allow a new all-time high in September.  The Cycles Model suggests a steep decline into mid-August.  The intended target may be as low as the mid-Cycle support at 34731.25.  Should the INDU stay above that support, a new all-time high may be made in September, approaching 45000.00.

Master Cycles may end either at a low or a high.  The ensuing Master Cycle may then take the opposite track.   In this case Friday’s Master Cycle high allows the August Master Cycle to end at a low.  You may recall that I have called the Friday Master Cycle an inversion, since it has created a triple top in the INDU.  While it is now due for a correction, this may not be an outright crash.  While the weekend futures rose to 40278.00, the INDU is now pulling back from that high.  Friday was day 259 in the Master Cycle.

ZeroHedge remarks, “Breadth and liquidity go hand in hand. In this report, we revisit Thursday, what led up to it, and what it might mean going forward. However, first we are compelled to share this really interesting fact about Thursday. According to @bespokeinvest, there was only one other day since 1979 where the Russell 2000 rose 3%+ while the S&P 500 was down, and that was in October 2008.”

SPX futures remained beneath Friday’s all-time high, reaching 5642.90 while Friday’s high was 5655.56.  While the Wave structure appears complete, the key may be the 1987 trendline, just above 5050.00.  Should SPX remain above that level in the ensuing decline, the probability of a higher high in September remains.  Otherwise, declining liquidity may be only strong enough to propel the Industrials higher at the expense of the other indices.  Prepare for a correction starting this week.

ZeroHedge reports, “US equity futures are stronger with the Russell/small caps again outperforming as the market rotation was supercharged over the weekend after Trump’s assassination attempt, sending both yields and the dollar higher, and is pushing a broadening that is extending July’s gains. Futures on the S&P 500 rose 0.4% at 6:35ET am in New York, while Nasdaq 100 contracts traded 0.5% higher. Pre-mkt, Mag7 and Semis are stronger with TSLA +4.9%, AAPL +2.1% standing out. Bank earnings continue this morning. The yield curve is twisting steeper and the USD rises, as soaring odds of Trump winning the US election spurred a climb in Treasury yields, led by the long end, and revived risk appetite as US equity futures climbed, outperforming European peers. In commodities there is general weakness but some strength in base with crude leading the Energy complex. As the market shifts its focus toward earnings to search for fundamental support for the nascent broadening, the macro keys this week are Retail Sales, Housing Starts, and at least ten Fed speakers including Jerome Powell today.”

VIX futures rose to 14.05 over the weekend and remain elevated this morning.  While VIX closed beneath the 50-day Moving Average at 12.82 on Friday, it is now elevated to a buy signal this morning.  A rise above the mid-Cycle resistance at 14.06 may suggest a definite change of trend.

TNX futures rose to 42.57 over the weekend, suggesting the Master Cycle low on Thursday is confirmed and the cash market may go higher.  The Cycles Model infers rising rates into mid-August.  Thursday was day 261 in the Master Cycle, an appropriate date for a turn.

ZeroHedge observes, “June’s year-over-year Consumer Price Index is still running 3 percent, which is now considered more-or-less on target. Five years ago, that would have been seen as intolerably high. The month-over-month decline of 0.1 percent, the best in a year, was driven by gas and used cars, which are reported as down 10 percent year over year (but still up 30 percent over four years).”

BKX may have made its high on Thursday, July 11, which was day 260 of the Master Cycle.  The new Master cycle may extend to late August with the target being the neckline of a massive Head & Shoulders formation at 72.50.  This does not bode well for small cap and AI stocks, which are interest sensitive.  The reversal may be confirmed with a decline beneath the 50-day Moving Average at 103.63.

 9:00 am 2 Chronicles 7:14

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

ZeroHedge reports,   “It appears that Biden’s apparatchiks refuse to give up on the myth of a “strong labor market” just yet even as they admit to anyone who reads between the lines just how ugly things are getting.

Moments ago the BLS reported that in June the US added 206K jobs, above the 190K expected.

SPX futures remain flat after the Bureau of Labor Statistics Employment Situation Survey.  Today is day 252 of the current Master Cycle.  The Master Cycle is nearing its end and a critical pivot may occur at any time.  The Cycles Model also suggests a day of strength, which may be revealed in either or both directions.   Today is likely to be a low volume day which may magnify any moves, as well.

ZeroHedge reports, “S equity futures are unchanged for two days in a row – having gone nowhere during the July 4th holiday – erasing an earlier attempt to break out to all time highs. At 8:00am ET, S&P futures were flat while Nasdaq futures rose 0.1% as global stocks traded at all-time highs before crucial US jobs data that’s expected to show some moderation in hiring. The US dollar dropped for fourth day to its lowest level in three weeks while the pound notched its longest winning streak in four years as Labour swept to power in the UK’s general election. Bond yields are modestly lower ahead of NFP. Commodities are mixed: oil and base metals are lower; precious metals are higher. Today, the key focus today will be NFP release and any further updates on the US election (our full NFP preview is here). Consensus sees 190k jobs being added, with Goldman calling for a street low 140K; unemployment is expected to hold at 4.0% while average hourly earnings are expected to rise 0.3%, down from last month’s 0.4%.”

VIX futures have risen to 12.52 from its Master Cycle low at 11.84  on Wednesday, day 253 in the VIX Master Cycle.  The 50-day Moving Average lies at 13.15, above which is a buy signal.  Most analysts may not recognize the buy signal until it exceeds the 200-day Moving Average at 14.19.

Next week’s options chain shows only moderate activity.  However, the July 17 options chain is chock full of speculation.  Max Pain is at 14.00.  Short gamma exists between 12.50 and 13.50.  Long gamma is heavily populated from 15.00 up to 65.00.  As SPX begins its decline, hedging may expand even higher.

TNX futures have declined to 42.73 while the cash market has made a low of 42.84 this morning.  Today is day 255 of the current Master Cycle.  This allows a couple more market days to achieve its target which may be near 41.00.  Next Tuesday is a day of strength and an ideal day for a reversal, as well.

Note:  I will be on a family vacation next week, so this blog may take a back seat during that time.  I plan on being back at the blog on Monday, July 15.