The Practical Investor

2:00 pm

SPX has risen to a new all-time-high at 5480.00 thus far.  There are two limitations to the rally.  The first resistance is at 5500.00, also known as round number resistance.  The second resistance is a structural one which, assuming this to be the final probe, limits the rally at 5522.00.  There is no assurance that the SPX may reach either of these numbers.

ZeroHedge notes, “Nvidia (NVDA) accounts for 34% of the 14% SPX year-to-date gain, and five stocks have accounted for 60% of the S&P 500 total YTD return; MSFThttps://www.zerohedge.com/markets/5-stocks-account-60-sps-return-charting-sp-5-vs-sp-495, NVDA, GOOGL, AMZN, and META have collectively surged by 45% and now comprise 25% of the S&P 500 equity cap.”

8:15 am

Good Morning!  Hove you prayed for our country?

SPX futures continue to consolidate in a narrow range.  Often a consolidation may be a pause that refreshes, building up strength for the next move higher.  However, it may also mean indecision.  Support for the uptrend has gone missing as stock buybacks enter their blackout period until July 19.

Today’s options chain shows 5420.00 giving Max Pain.  Long gamma may start at 5450.00 while short gamma becomes strong beneath 5400.00.

ZeroHedge reports, “Futures are flat to start the holiday-shortened week (markets are closed Wednesday for Juneteenth). As of 8:00am, S&P futures are unchanged just above 5500, while Nasdaq futures rose 0.2%; France’s CAC 40 benchmark erased most of its opening 1% advance and global stocks ceded most of their early gains sparked by French far-right leader Marine le Pen’s pledge to respect political institutions if she wins the upcoming snap parliamentary election. Bond yields are slightly higher amid a bear steepening: JPM’s rates strategist sees yields range-bound for the summer with the 10Y being fairly valued at current levels. Euro-area bond yields edged higher, with France’s yield premium over Germany staying near the widest in years. The Bloomberg Dollar Spot Index is up 0.1%, while the euro was modestly firmer against the dollar, after shedding almost 1% last week. Commodities are mixed with energy higher ex-natgas but Ags and metals are coming for sale; metals potentially dragged by weaker than expected data from China overnight. Today’s macro data focus is on Empire Manufacturing but tomorrow’s Retail Sales is the key release this week with additional focus on Friday’s Flash PMIs.”

VIX futures are also consolidating beneath Friday’s high at 13.45.    The Cycles Model suggests that trending strength may break out today.  Hedging should be considered, as the strength of volatility may continue to grow through mid-July.

The monthly VIX op-ex (Tuesday) shows Max Pain at 14.00.  Short gamma lies between 12.00 and 13.50.  Long gamma begins at 15.00 and extends to 47.50.

TNX rose to a weekend high of 42.75 in a clear reversal from last week’s low.  The reversal occurred in a burst of trending strength which may have started over the weekend.  The Cycles Model suggest the rally may extend to the second week of July.

ZeroHedge remarks, “The Federal Reserve’s Federal Open Market Committee (FOMC) last week left the target policy interest rate (the federal funds rate) unchanged at 5.5 percent. 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.”

9:43 am

BKX, our liquidity proxy, is losing its grip on the retracement after retesting Intermediate resistance at 102.83.  The next support appears at the mid-Cycle line at 92.94.  The current Master Cycle has another 3-4 weeks to go and is on a sell signal.  It is quite possible that the target for this decline lies near the neckline of the Head & Shoulders formation at 72.55.

ZeroHedge remarks, ” If the economy is fine, why are so many signs of trouble erupting all around us?  Those that keep insisting that the U.S. economy is heading in the right direction conveniently ignore the very troubling facts and figures that I regularly share with my readers.  When you take an honest look at the cold, hard numbers that the economy keeps producing, there is only one logical conclusion.  Our entire system is crumbling, and it appears that conditions will soon get significantly worse.

Just look at what is happening to our banks.”

8:00 am

Good Morning!  Are you praying for our country?

NDX futures reached a morning low at 19481.60 before a bounce eased it away from the brink.  This is the first day of the reversal.  The rally has been so steep that there are few supports from which we may monitor its decline.  The nearest support (Intermediate) is at 18479.58 where a sell signal may be made, nearly 6% from the ATH.  Aggressive short positions may be taken at 19400.00 and at 19000.00.  It would not be wise to remain long here.  Strategists are neutral the Magnificent 7.  There seems to be no fear, despite declining breadth..

Today’s options chain shows Maximum Investor Pain at 19490.00  Long gamma may begin at 19500.00.  Short gamma may start at 19475.00.

SPX futures made their morning low at 5393.50 before a small recovery.  An open beneath 5400.00 leaves an island reversal, a possible aggressive sell signal.  Otherwise, another aggressive signal may be made at short-term support at 5320.00 while the trendline for this final rally lies at 5300, where confidence in the decline may rise substantially.  It would not be wise to remain long at this point.  The mainstay of the rally until yesterday was buybacks which provided liquidity for corporate insiders to make their exit.  That has now stopped.

Today’s options chain shows Max Pain at 5420.00.  Long gamma may begin at 5450.00 while short gamma resides beneath 5400.00.

ZeroHedge reports, “After stocks hit a 4th consecutive record and a 30th All Time High on Thursday on absolutely atrocious breadth (more than two thirds of the S&P closed red), futures traded lower as the rally finally fizzled. At 8:00am ET, S&P futures were down 0.5%, but off session lows, while Nasdaq futures outperformed, down 0.2% after closing at a fresh all time high despite more than 70% of names in the index trading lower on the session! The strong US performance – this morning notwithstanding –  which delivered a 1.6% advance since last Friday, stands in contrast to a sharp decline in European stocks, which are headed for their worst week since January on growing concerns about political turmoil in France, and culminated with French public development bank SFIL SA pulling the sale of a green bond after a week that saw the country’s government debt tumble ahead of upcoming elections. Bond yields tumbled some 5bps lower, pushing the 10Y yield to 4.20%, amid an almost panicked flight to safety out of Europe, which also helped push the USD higher and EUR lower. Commodities are reversing recent losses with both oil and gold/silver are higher. Overnight, the biggest focus was BOJ’s decision, which again came in more dovish than expected: BOJ said the reduction in government bond purchases would begin after the bank’s next meeting, and sent the yen plunging initially before cross-asset flows pushed it back to unchanged. Today, the macro focus will be the Michigan sentiment and inflation expectation data at 10am. ”

VIX futures are on the rise again making a morning high at 13.45 testing the June 11 high at 13.47.    While the VIX appears to be calm, the European V2X is in a panic, closing at the October 2023 high.  Will the panic spill over to the US?

The June 18 op-ex shows Max Pain at 14.50 with short gamma below 14.00 to 11.50.  Long gamma appears at 16.00 and may extend to 45.00.

TNX made a Trading Cycle low this morning at 41.88 and may have made a reversal.   TNX ix still in an uptrend.  The dip in yields may have been a reaction to outright panic in Europe.   There is still some semblance of normalcy here.

USD futures continue to rise as the demand increases.  The US still has the cleanest laundry on the clothesline.

ZeroHedge exclaims, “Sacre bleu!!

The implications of French President Macron’s shock announcement of snap legislative elections after sustaining a hammering from the far-right Rassemblement National in European elections are starting to show up in some much more worrying systemic signals for the EU overall.

The OATS Spread (the gap between the yields of 10-year bonds issued by France, known as OATS for obligations assimilables du Trésor, and German bunds) is back at the center of discussion …”

8:00 am  Are you praying for our country?

Good Morning!

NDX futures continue their climb to a morning high of 19642.00.  That ios very near the Cycle Top resistance at 19684.00, where trends often end.  Ths may very easily be the last day of the rally, since today is when stock buybacks end.  Buybacks are also at an all-time high.  Not because their equities are a bargain, but to provide liquidity to bail out insiders.  Smaart money has been leaving the market due to the fact that only seven stocks are carrying the weight of the advances.  At the end of May only 37.4% of the NYSE stocks were above their 50-day Moving Average.  The recent rally has brought the number up a bit, but it is still beneath 50%.  Internally, stocks have been fading since early May.  The Cycles Model is overdue for a reversal, but the combination of FOMO and buybacks have prolonged the Cycle to its longest in memory.

Today’s options chain shows Maximum Investor Pain at 19460.00.  Calls have the upper hand starting at 19400.00.  Long gamma is hard to determine.

ZeroHedge observes, “Not your bull break out candle

SPY gapping up, but with a doji like candle. This is indecision at highs. Pay close attention….”

SPX futures rose to 5445.70 thus far this morning, short of yesterday’s intraday high at 5447.25.  The Wave structure appears complete, but leaves open the possibility of a new high.  Should it do so, a possible target may be near 5531.00.  However, the main driver of this market is stock buybacks.  Today is the last day to exercise buybacks , as the blackout period begins tomorrow.  The sudden loss of this input may cause a dramatic reversal.

Today’s options chain shows Max Pain at 5425.00.  Long gamma may begin at 5430.00.  Short gamma may begin at 5395.00.

ZeroHedge reports, “Futures are higher, again, with Tech leading, again, and small-caps lagging, the same trend that we saw after the Powell press conference despite small-caps leading the way most of the session. As of 8:00am, S&P futures were up 0.1% and set for the 29th all time high print this year, while Nasdaq futures outperform, rising 0.6% and set to gain for a fourth straight session after another record close on Wednesday as Mag7 and Semi stocks push higher, with AVGO +13.6%, TSLA +6.3%, and NVDA +2.4% all notably higher. Many of the other Mag7 names are lower pre-mkt, but elements of the AI ecosystem are up pre-mkt, e.g., VRT +1.9%. Bond yields are ranging from -1bps to +1bps, the 10Y TSY yield last trading around 4.31%, while the dollar rebounded from the post-CPI drop to rise ahead of US data on producer prices, supported by the view that the Fed may deliver just one interest rate cut this year. Commodities are mostly higher despite crude and precious metals lower. Today’s macro data focus is on PPI, Jobless Claims; investors will also look to an event featuring New York Fed President John Williams and Treasury Secretary Janet Yellen later in the day.”

VIX futures are consolidating near their lows this morning.  The Structure may be complete, or very nearly so.  The VIX Cycle is in sync with the SPX Cycle, suggesting a month of rally may ensue once buybacks have ceased.  While the market path thus far has been bullish, the risk of earnings revisions in the second half are high.  Hedge funds have been cautious for the past month.

USD futures may be consolidating between the mid-Cycle support at 104.24 and the 50-day Moving Average at 104.97 this morning.  Wednesday’s low at 104.24 may have completed a new Master Cycle on day 253.  However, I am erring on the side of caution for a day or two.

TNX made a new low at 42.40this morning in an extremely extended Master Cycle.  The reversal may bebrutal, as the pent-up energy is to the upside.

3:32 pm

SPX has made a reversal after making a marginal new high near 3:00 pm.  While there is no discernible sell signal, but it would not be wise to stay long.  A reversal has appeared that may develop legs.

11:55am

SPX has reached 5446.26, where Fractal Analysis shows Wave (5) is 1.5 times the length of Wave (1).  The usual relationship is 1 to 1.  That means Wave (5) is extending.  It is possible that this may be the ATH, but a friendly report from the FOMC  could extend the SPX even further, to as much as 5531.00 (where the Wave relationship is 2 t Remember, the Fed does not control rates.  They can only make policy decisions.  There is an extraneous force at work to keep the market elevated…for another day.  It has quite possibly the driving force in pushing the market higher over the past two weeks.  That is, stock buybacks.  Tomorrow is the last day before the blackout period begins.  The dynamic is that corporations are not buying stocks because they are a bargain.  Instead, they are buying back stocks to provide liquidity for insiders to exit their shares.

  ZeroHedge comments, “As we expected in our preview calling for “optimism for a low print“, today’s CPI delivered the kind of downside surprise that bond bulls and the Fed have been waiting for, as both headline and core came in a tenth lower than expected, largely driven by a 3.6% drop in gasoline prices – the biggest reason why the headline CPI was flat on the month – and as Bloomberg adds, “the miss looks legit, given the shortfall in the actual indices relative to forecast.” Indeed, at 0.16% the rise in core nearly rose just 0.1% when rounded. Meanwhile, in what may have been the biggest surprise, supercore services ex housing fell by 0.04%, the first negative reading since September 2021!”

8:00 am  Have you prayed for our country?

Good Morning!

NDX futures have risen to 19248.80 thus far this morning.  A possible all-time high target may be near 19458.00.  Today is day 285 of the Master Cycle.  It is being stretched due to a larger Annual Cycle consisting of 4.3 years.  The exact landing date of that Cycle was Saturday, June 9, so Monday would have been an appropriate ending, had it been timely.  As usual, Cycles may be affected by extraneous items, such as political and economic announcements that may influence investor sentiment.  Today is an example with a morning announcement of the CPI and an afternoon release of the FOMC outlook.  While investors have increasingly held the view that the markets are at a permanent plateau, their high expectations may easily be shattered.

Today’s options Chain shows Maximum Investor Pain at 19190.00.  Long gamma may begin at 19225.00 while short gamma may start at 19170.00.

ZeroHedge muses, “Coming just hours after the May CPI print, tomorrow’s – and the month’s – main event is the FOMC decision due at 2pm ET, when the Fed is widely expected to leave rates on hold at 5.25-5.50%, and the statement will likely also largely be reiterated after slight tweaks in the May statement. Attention will fall on the Summary of Economic projections, and more specifically, the Dot Plot, where the number of projected rate cuts in 2024 will be trimmed from 3 to 2. After a string of hot inflation reports in Q1, the Fed has been stressing that the luxury of a strong economy gives the Fed time to be patient before acting, and the hot NFP released (assuming of course that a drop of 625,000 full-time jobs is viewed as “strong”), last week only gives the Fed more time. Therefore, it is likely the 2024 median FFR will be revised up from the 4.6% – or equivalent to 3 rate cuts over the remainder of 2024 – pencilled in at the March meeting.”

SPX futures have risen to 5385.30 thus far.  Should the CPI come in favorably, we may see the SPX reach 5440.00 today.    However, this is the end of the line.

UPDATE: Here is the CPI News Release.

Today’s op-ex shows Max Pain at 5350.00.  Long gamma begins at 5375.00 while short gamma starts at 5340.00.

ZeroHedge reports, “Futures are up modestly after another record close on Wall Street heading into today’s double whammy of CPI, and FOMC Dot Plot update, with Nasdaq leading and small-caps lagging. As of 8:00am, S&P futures are up 0.1% to 5,390 and set to extend the stretch of record highs as traders position for the potential disruption from US inflation data landing just hours ahead of Federal Reserve’s interest rate decision on Wednesday; Nasdaq futures rose 0.2%. Bond yields are flat to down 1bp after a stellar 10Y auction yesterday; the Bloomberg Dollar index rose again after four days of gains. Commodities are higher, led by Energy, despite with metals lagging. Today’s focus will be on the doubleheader of CPI and the Fed (our previews can be found here and here).”

VIX futures dipped to 12,22 before a slight recovery.  Investors see no risk here.  What could possibly go wrong?

Today’s options expiration shows Max Pain at 12.00.  While short gamma is practically nonexistent, long gamma may begin at 13.00 to 15.00.

TNX declined to 42.73 this morning following the CPI report.  In doing so, it may have completed its correction and brought the Master Cycle to a close.  If so, TNX is capable of a sharp reversal.  Those looking to the European Central Bank’s rate cut as a model should be advised that it was a purely political, not economical, move.

ZeroHedge observes, “The headline consumer price index was unchanged MoM in May – the smallest change since July 2022 – just less than the +0.1% MoM expected. On a YoY basis, headline CPI rose 3.3% (less than the 3.4% exp) – but very much stuck in a range well above the 2% target for over year now…”

Source: Bloomberg

USD futures are pulling back to test the mid-Cycle support at 104.24 this morning.  I am neutral the USD since it is only days away fro another Master Cycle Pivot/reversal.

GKX (the food index) is nearing completion of its Wave 2 correction and its master Cycle low.  Ag prices are up nearly 6% since March and are due to rocket higher, possibly near 900.00 in the next year.

ZeroHedge observes, “Our world is witnessing apocalyptic events so frequently that many of us are starting to become numb to it all.  Major wars are raging all over the globe, children in Africa are literally dropping dead from starvation as hunger spreads like wildfire, and “billion dollar disasters” are hitting us more frequently than we have ever seen before.  But as long as these tragedies are not affecting us directly, most people don’t really care too much.  As the level of worldwide suffering rises, it seems as though hearts are getting colder at the same time. ”

ZeroHedge further states, “The Food and Agriculture Organization of the United Nations (FAO) reported that global food prices increased for the third consecutive month in May. This rise was driven by higher prices for cereals and dairy products, which outweighed declines in sugar and vegetable oil prices. The re-acceleration of food price growth should be a cause for concern among policymakers.”

1:55 pm

BKX is testing round number support at 100.00.  The Cycles Model doesn’t show any fireworks until the end of June, when quarterly reports may be available.  However, the decline has begun and BKX is definitely on a sell signal.  Expect to see small bank failures begin soon.  Larger bank failures may await their quarterly statements.

8:00 am  Are you praying for our country?

SPX futures have declined to 4341.40 thus far.  Supports lie at 5302.31,  a short-term support that signals an aggressive sell.  Intermediate support lies at 5223.73 where the sell signal may be confirmed.  The 100-day Moving Average and Diagonal trendline lie at 5119.76, releasing the SPX from its uptrend.  Longs are very complacent.

Today’s options chain shows Maximum Investor Pain at 5355.00.  Long gamma may begin at 5375.00 while short gamma starts at 5340.00.  The dealers do their utmost to keep SPX range-bound.  That is, until the range is broken.

ZeroHedge reports, “US equity futures are lower with small-caps lagging, while Treasuries and the dollar rose as traders braced for a landmark day tomorrow that sees the release of both CPI data in the morning and then the Fed’s latest decision at 2pm ET. The crowded schedule sets up a crucial 36 hours for risk assets, including Bitcoin, which is currently getting hammered despite billions in ETF purchases in recent weeks, and is moving in the opposite direction to Treasury yields to an unusual degree. As of 7:50am, S&P futures were down 0.3%, near session lows while Nasdaq futures dropped 0.4%; both underlying indexes closed at record highs on Monday.”

VIX futures remain range-bound as the FOMC begins its June consultation.  A summary of economic projections may be on the table this month. Friday’s jump in the TNX may have a dampening effect on rate cut projections.

USD futures continue their consolidation.  Friday’s surge out of the Master Cycle low signaled that easing may be over.  The Cycles Model suggests another week of strong gains before the USD takes a breather.  A lot can happen in that time.

TNX pulled back to 44.30 this morning.  There is the possibility of a corrective move to the mid-Cycle support at 43.68 in the very near term.  However, it is noteworthy that the $39 billion 10-year note auction is being held today in addition to $106 billion in T-bills.

Zerohedge observes, “In a week where all attention will be on the CPI and Fed, clearly how bonds trade will be extremely important, so the reaction to today’s 3Y auction was closely watched. And it was not pretty.

When the Treasury sold $58 billion in 3Y paper for sale, the market reaction was not pretty and for good reason: the demand sucked. Stopping at a high yield of 4.659%, up from 4.605% in May and the highest since November’s 4.701%, the auction tailed the When Issued 4.648% by 1.1bps, the first tail since April.

The bid to cover slumped to 2.433 from 2.632, the lowest since December ’23, and well below the six-auction average of 2.567.”

Gold futures rose to 2337.15 this morning, possibly to test the 50-day Moving Average at 2348.31.  The Cycles Model suggests a continuation of the decline once the test is completed.  The decline may last to mid-July.  The nest clear support is the mid-Cycle support line at 2113.27.  While gold may be a store of value, it is also subject to variations in liquidity, which may take precedence.

ZeroHedge opines, “There is much legitimate (as well as dramatic) talk about the failing US, its debased currency and its identity-fractured/inflation-taxed middle-class which has been increasingly described more aptly as the working poor.

The End, or Just Change?

But is America coming to an end? Will the USD lose its world reserve currency status? Will the greenback disappear? Will gold or BTC save us from all that is breaking before our media-clouded eyes and increasingly centralized state?

Nope.

America is slipping, but not ending.

The USD is being repriced not replaced.”

Crude oil futures rose to a morning high at 78.17 before easing back.  Intermediate resistance is at 78.71, while the mid-Cycle resistance is at 79.24.  Today is day 257 in the Master Cycle, giving a couple of days to resolve whether (whichever) resistance may be met.  Once complete, WTIC may resume its decline to the end of July.  The Head & Shoulders formation warns us that it could be a steep decline.

OilPrice.com reports, “Russia’s budget revenues from oil and gas soared by 73.5% in January-May of 2024 compared to the first five months of 2023, according to data from Russia’s finance ministry released on Monday.

Between January and May 2024, the revenues for the Russian federal budget from oil and gas hit $55.7 billion (4.95 trillion Russian rubles), per the data reported by Russian news agency TASS.

“In line with parameters of the socioeconomic outlook, a steady surplus of oil and gas revenues above their base level is also expected in months to come,” TASS quoted a statement from the ministry as saying.”

9:35 am

BKX, our liquidity proxy, clearly dropped beneath its trendline on Friday and is continuing its decline this morning.  It is on a confirmed sell signal.  The Cycles Model suggests a continuous decline to the week of July 8.

On Friday, ZeroHedge reported, “Money-market inflows continued for the seventh straight week getting close to $6.1 trillion…

Source: Bloomberg

As total seasonally-adjusted US bank deposits fell $41.5 BN…”

Zerohedge notes, “When the Federal Reserve started raising rates, it precipitated a financial crisis. The central bank managed to paper over the problem with a bailout program, but the crisis continues to bubble and percolate under the surface.

According to the latest data from the FDIC, the U.S. banking system is sitting on $517 billion in unrealized losses due to deteriorating bond portfolios.

Unrealized losses triggered the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank in 2023.”

8:00 am

Good Morning!  Have you been praying for our country yet?

SPX futures declined to 5328.80 this morning before a muted bounce.  The Friday high may be the Cycle Top, as well.  It is exactly 4.3 years from the February 2020 high that led to the decline in March 2020.  An aggressive sell signal lies beneath 5300.00, while the Ending Diagonal trendline lies at 5250.00, where the sell signal may be confirmed.

Today’s options chain shows Maximum Investor Pain at 5340.00.  Long gamma may begin at 5350.00.  Short gamma may start at 5325.00.

ZeroHedge reports, “US equities were poised for modest losses to start the week after underlying indexes hit a new all time high on Friday, as focus shifted to Wednesday’s CPI data and Thursday’s Fed meeting. As of 8:10am, both S&P 500 and Nasdaq futures slid about 0.1%, rebounding from session lows hit shortly after Europe opened following a weekend trouncing of establishment parties in the European Parliament elections. The VIX Index rose, but remained well below its average over the past 12 months. The yield curve is twisting steeper, and the USD starts the week stronger. Cmdtys are mixed with strength in metals, weakness in Ags, and Energy flattish. AAPL and AMZN kick off today, with AAPL’s focused on AI. Today’s macro data focus is on NY Fed’s 1-year inflation expectations print; prior level was 3.26%.”

VIX futures rose to a morning high at 13.28, then eased a bit, remaining above 13.00  There seems to be little awareness that VIX may have ended its probe to new lows.

Wednesday’s options expiration shows no short gamma, while long gamma appears strong at 16.00.  This may help to “pull” VIX above the mid-Cycle resistance at 14.60.

TNX futures rose to 44.73 this morning, while the cash market registers a high at 44.67.  The 50-day Moving Average lies at 44.81.  The Cycles Model shows more trending strength may be at hand.  TNX is on a buy signal since Friday.  Rising above the 50-day Moving Aveage enhances/confirms the buy signal.  The Treasury Auction schedule shows $140 billion of 13-week and 26-week bills being auctioned today, along with $58 billion of 3-year notes.  Keep an eye on the notes as yields are trending higher.

Gold futures dropped to a weekend low of 2304.55.  It fell beneath the 50-day Moving Average at 2346.44 on Friday confirming its sell signal.  The Cycles Model indicates the decline may last up to a month, so buying the dip may be counterproductive.

Crude oil futures reached a weekend high at 76.04.  This may not be the time to buy the dip since the Master Cycle is coming to a close this week.  Should the Master Cycle end at a high in the next few days, the downtrend may resume.

8:15 am

Good Morning!  Are you praying for our country?

SPX futures are flat, awaiting the May jobs report.  The Cycles Model clearly calls for an end to the current bull market.  Dealers have pinned the SPX options market at 5350.00.  Whichever way the market turns may be violent.

Today’s options chain shows Max Pain at 5350.00.  Long gamma begins above 5360 and strengthens above 5375.00.  Short gamma starts at 5325.00.

ZeroHedge reports, “The global stock rally faltered as US equity futures were unchanged for the second day in a row this morning and trading right on top of the “gamma gravity” level of 5350, where as discussed yesterday there is a record $10 billion dealer long gamma pile up which has made the market “stuck” at the strike price.”

8:50 am

SPX futures have made a morning low at 5319.00 thus far, after the Jobs Report   claimed 272,000 new jobs in May.  This overly rosy report may have been intended to help the incumbency, but they have shot themselves in the foot.  This put the nail in the coffin for bullish expectations going forward.  Dealers are doing their utmost to keep the SPX out of short gamma.

ZeroHedge comments, “Ahead of the payrolls report, we commented that with both of the two largest banks – Goldman and JPMorgan – expecting a miss, it was only logical to expect a big beat…

… and sure enough moments ago the BLS reported that in May, the US added a whopping 272K jobs…”

VIX futures rose to a morning high of 13.08 before a pullback.  There is a lot of stored energy to the upside in the VIX.

The June 12 options expiration shows long gamma may exert a pull toward 16.00, its first large position.

ZeroHedge notes, “Size long gamma

Dealers are running the second biggest long gamma ever. Goldman’s trader Garrett writes: “with ~$9.5 billion of gamma to trade per 100bps; dealers have to sell 35,000 eminis on a 1% rally, and buy 35,000 eminis on a 1% sell off”. 5350 is basically a massive pin strike that will suppress moves around it. Options related risks change with time, so the increase in gamma, isn’t necessarily only driven by recent flow by end customers. One thing is sure, the delta flow from dealers is “real” flow that will be hedged in the market. For the 1 minute explanation on gamma, see here.”

TNX made a moon shot out of its Master Cycle low, as suggested in earlier posts.  The Cycles Model suggests Trending Strength may continue into next week.

7:45 am

Good Morning!  Have you been praying for our country?

SPX futures have been hovering near yesterday’s close after probing to an overnight high at 6360.70.  Yesterday’s after-hours commentary suggested a natural peak for this rally may be near 5362.00.  There is no guarantee that the rally will stop precisely at that number, but there are good reasons for suggesting that resistance lies in that zone.   Today is day 279 in the Master Cycle.  I have never seen the Cycles stretched as much as this.   That may be due to the fact that today marks exactly 4.3 years from the peak just before the decline in 2020.

Today’s option chain shows Maximum Investor Pain at 5335.00.  This is a tightly packed options array with long gamma starting at 5340.00 while short gamma begins at 5330.00.

ZeroHedge reports, “US equity futures were flat after the S&P 500 notched its 25th closing record on Wednesday, even as global tech shares plowed higher with expectations of more rate cuts adding to the ongoing frenzy around artificial intelligence; With the ECB set to cut rates for the first time since 2019, Nvidia advanced almost 2% in premarket trading, building on its $3 trillion market capitalization after it surpassed AAPL as the 2nd biggest company on Wednesday and may become the world’s biggest company if it adds another $150BN to overtake Microsoft – should be quite doable for a stock that has seen the world’s biggest gamma squeeze.”

NDX may have hit its Fractal Target precisely at 19035.00 at yesterday’s close.  The NDX futures went higher this morning, to 19076.00, then receded.  NDX is now in negative territory.  What many thought was unstoppable may have stopped…

VIX futures are hovering near yesterday’s low.  Talk is rising talk of a single-digit VIX coming soon, but the Cycles Model refutes that.  These conversations happen near the market tops.

The June 12 options expiration shows long gamma virtually overwhelming the shorts starting at 12.00.  The highest gamma ranges from 16.00 to 23.00.  In vestors have a very limited view of the VIX’s potential.

USD futures are consolidating near the master Cycle low that was made on Tuesday.  USD will be on a buy signal above the 50-day Moving Average at 104.92.

TNX futures declined to 42.73 this morning, then may have reversed, opening in the cash market at 43.01.  The mid-Cycle support/resistance is at 43.66.  Rising above that level re-establishes the uptrend.    The TNX Master Cycle is also very stretched, at 279.days.

After Hours

Some fractal analysis of the market structure reveals an interesting set of possibilities:

• First, there are two Triangle formations occurring in the same Wave, which is highly unusual and not allowed in an impulsive formation.  The solution is a Broadening Ending Diagonal, which is entirely made up of corrective A-B-C Waves that commonly show Triangles..
• Second, where Wave (3) is the largest Wave (330 points), Waves (1) and (5) tend toward equality.  Wave (1) is 170 points.  Wave (5) reaches 170 points at 5362.00.  It is at near equality at the close and does not need to equal or exceed its fractal match.
• Which leads us to the  next observation.  that is, Waves (1) and (5) are self-similar (not identical), suggesting completion, or near-completion may have been achieved.
• Finally, The Current Master Cycle has been stretched to 278 days, which appears to be the maximum length of time for this Cycle.

8:15 am

Good Morning!  Are you praying for our country?

SPX futures have risen to a morning high at 5309.90.  The correction may be called an expanded flat since the SPX reaches resistance above 5300.00.  Maximum resistance is near 5315.00.  Most investors “feel” the SPX going higher, but critical support to the upside is broken.  What we may be seeing is a combination of a positive Memorial Day seasonality and a “buy the dip” mentality among retail investors.  At the same time, hedge funds have been ramping up their selling as the underlying trend is weakening, with the giant tech stocks propping the market.

Today’s options chain shows Maximum Investor Pain at 5275.00.  Long gamma may start at 5300.00-5310.00.  Short gamma may begin beneath 5270.00.

ZeroHedge reports, “US equity futures edged higher and were again on pace to reclaim all time highs (which again is less than 1% away away) on expectations that a slew of labor-market readings this week may support the Federal Reserve’s policy easing. As of 7:40am ET, S&P futures rose 0.25% and were at session highs with tech outperforming and small-caps keeping pace; Nasdaq futs were up 0.4% as all the Mag7 names were higher with Semis outperforming. AMD, INTC, MU, and NVDA all up at least 1% premarket. The S&P had seen three straight days of sliding in overnight trading, to then drift higher post EU close and close unchanged or green; today we start in the green so it will be interesting if in a mirror image we close red. Treasury yields were steady after their largest two-day drop for 2024, erasing an earlier yield gain of 2bps, and potentially aiding USD strength. Commodities are finally rebounding with strength in Energy, Ags, and precious metals. Oil was little changed and Bitcoin topped $70,000. In corporate news, Intel agreed to sell a stake in a venture that controls a plant in Ireland to Apollo Global for $11 billion, while activist investor Elliott is pushing SoftBank to launch a $15 billion buyback. Today’s macro data focus is ISM-Services and ADP.”

VIX futures made a low of 12.85 this morning, a  Fibonacci 61.3% retracement of its reversal off the Master Cycle low.  VIX action does not support the rise in the SPX.  The common expectation is that the VIX will go to 10.00 while the SPX makes new all-time highs.  The Cycles Model disagrees.

TNX futures made a new “swing” low at 43.03 while the cash market bottomed at 43.12.  At day 278, I am reluctant to call it a Master Cycle low, but it fits a double Trading (lesser) Cycle low.  However, the long-term trend is “higher” despite the sudden downturn.  As the US labor market deteriorates, there may be pressure on the Fed to lower rates.  However, the drums of war, which are always inflationary, may take precedence.

WTIC futures appear to be consolidating after a week-long rout.  The Cycles Model suggests the decline may redouble over the next week before finding a low.  The probable target may be the Head & Shoulders neckline near 68.00.  A further decline beneath the neckline may trigger the bearish formation.

9:00 am

Yesterday BKX challenged the Ending Diagonal trendline and the 50-day Moving Average at 102.99, closing beneath the 50-day.  There is a strong likelihood that the BKX may open beneath both levels this morning on a confirmed sell signal.   Liquidity is on the wane, showing in the periphery.   Soon it may be mainstream.

7:30 am  Good Morning!  Hove you been praying for our country?

NDX futures have declined to 18465.70 this morning, on their way to testing the 50-day Moving Average at 18103.53.  The top 5 tech stocks now occupy 27% of the SPX valuation.  Comparisons are being made to the 2000 dot.com bubble.  Of ocurse, investors are used to seeing skyrocketing valuations and are not prepared for them to end.  Shorts are a dying breed.

Today’s options chain shows Maximum Investor Pain at 18650.00.  Long gamma ma  start at 18670.00 while short gamma begins at 18620.00.

ZeroHedge remarks, “The evaporated short

The SPX notional short is at its most subdued point since 2014…

Source: UBS

“Pro” longs

Funding spreads jumped big over the past week and are now at the highest levels since January 2018. Goldman’s Marshall: “…we see this as an indicator that professional investors are comfortable with their exposure. For the most part, this indicator is a leading or coincident indicator for equities.”

SPX futures have declined to a morning low at 5248.90.  The 50-day Moving Average is at 5183.81.  Yesterday I mentioned that the SPX has the capability of taking out the 50-day today.  While this decline is still in the minor Cycle phase, the declines may be much stronger than one would expect.

Today’s op-ex shows Max Investor Pain at 5250.00.  Long gamma may begin at 5285.00 while short gamma may start at 5240.00.

VIX futures made an overnight high at 14.08, approaching the 50-day Moving Average at 1440.  The Cyclical mean value of the VIX is at 14.63.  Once above that level, the VIX becomes positive and has larger reactions to the upside.  Most analysts still perceive the VIX as being positive above 25.00.

VIX futures become positive above 13.00 with long gamma beginning at 16.00.  There is no short gamma.

USD futures broke down beneath the May 16 Master Cycle low in the overnight session with nearly 2 more weeks of decline left in its path.  Given that parameter, we may see USD decline toward 102.75 as a likely target over the next couple of weeks.  The alternate view may be that the Master Cycle has arrived early.  Should USD rise above its 50-day Moving Average at 104.92, a new Master Cycle may emerge with this morning’s low.

TNX futures declined to a morning low at 43.58, challenging the mid-Cycle support and 200-day Moving Average at 43.65.  TNX opened at 43.61 and is now back to 43.65, suggesting a Trading Cycle low may have been put in.  Should that be the case, we may see TNX rise back above the 50-day Moving Average at 44.73 in due time.  Be aware that the trend in TNX is “up.”

Crude oil futures have plunged to a morning low at 72.48.  The Cycles Model suggests another week to 10 days of decline before a bottom may be found.  The next target may be the neckline of the Head & Shoulders formation near 68.00.  A dive beneath 68.00 may trigger the formation.

ZeroHedge remarks, “Wow oil

Oil at the most oversold levels since March 2023.

Source: Refinitiv

Never forget

There has been a short term connection between oil and the SPX. The gap is widening even further.

Gold futures have declined to 2345.40, threatening the 50-day Moving Average at 2331.88.  Should the 50-day be broken, the way is clear for a decline to the mid-Cycle support near 2100.00.  The Cycles Model suggests a possible decline through the second week of July.  While confidence in a rally may grow slowly, panics can suck the wind out of the market very quickly.