The Practical Investor

3:04pm

SPX is poised to take out the 50-day Moving Average in the next 24 hours.  This is the last chance to sell/short.  Good luck and good trading!

7:30 am

Good Morning!  Ae you praying for our country?

NDX futures rose to a weekend high of 18640.00 before pulling back.  That constitutes at 62% retracement of the decline beginning May 23, a Fibonacci level.  Despite stock buybacks and large pension contributions, hedge funds were net sellers while CTAs (commodity trading advisors) have fallen into their sell zone.  The Cycles Model calls for as many as six more weeks of selling.

Today’s options chain shows Maximum Investor Pain at 18570.00.. Long gamma starts at 18600.00 while short gamma begins at 18550.00.

ZeroHedge remarks, “The Nasdaq 100 dropped about 300 points on the week or about 1.5%. Not horrible, but late into the day on Tuesday and late into the day on Friday (which also happened to be month-end), the Nasdaq 100 gained about 470 points (about 2.5%). Now, maybe the “hockey stick” save into the close on Tuesday is explicable, but we saw those gains fade as the week progressed. However, Friday’s action seemed bizarre at best. Presumably, it was due to some sort of month-end rebalancing, but it was hardly something that a continued rally seems likely to be based on.”

SPX futures rose to 5299.10 before easing back down.  The retracement took back 72% of the decline since May 23.  The move was expected, closing near its resistance at 5276.00.   However, the futures ventured further, suggesting the retracement may linger yet this morning.  The Cycles MOdel suggests today may be a day of strength, but also primed for a reversal.

Today’s options chain shows Max Pain at 5260.00.  Long gamma may begin at 5275.00 while sot gamma becomes strong beneath 5255.00.

ZeroHedge reports, “After closing the month of May on the front-foot when a last minute rebalancing spike in the S&P reversed two days of losses, US stock futures are ticking higher to start the month of June following the lead of broad gains across European equity markets and a jump in Asia. As Bloomberg notes, “a degree of extra optimism about the prospect for interest-rate cuts by the Fed following last week’s PCE data, along with better manufacturing figures from China, filtered through markets.”

As of 7:50am, S&P futures traded 0.2% higher with both Tech and Small-Caps outperforming as bond yields start the day lower amid bull flattening, while Nasdaq futures gained 0.4% signaling a recovery after last week’s 1.4% selloff which was driven by investors pulling out of expensive tech leaders, as NVDA jumped 3% after CEO Jensen Huang announced at the Computex conference that the group plans to update its AI accelerators every year, underlining its bullish outlook on the demand for chips and announced a Blackwell Ultra chip for 2025, along with a next-generation platform in development called Rubin for 2026. 10Y Treasury yields dropped 4bps to 4.46% after closing at 4.50% on Friday; the Bloomberg dollar index jumped while oil was volatile after the OPEC+ group announced an extension of output cuts while setting out a plan to gradually restore some production as early as October. Commodities ex-energy are weaker with natgas the standout +5%. Today’s macro data focus is on ISM-Mfg, vehicle sales, and construction spending. This is an important macro data week with the narrative gradually moving to lower growth; NFP may help frame the Fed’s reaction function.

VIX futures are consolidating above Friday’s low at 12.84.  Friday’s action has sparked discussion that the VIX may hit 10.00.    One can hardly blame them after a year of bottom-hugging in the VIX.  However, the Master Cycle low is in and the Cycles Model suggests another possible 6 weeks of (nearly) continuous rally.

The June 5 options chain shows very little short gamma, while long gamma is crowded around the expirations 16.00 and 21.00.

TNX may be challenging its 50-day Moving Average at 44.72.  Should it go lower, the next support is the mid-Cycle support at 43.65.  However, the prevailing trend is “higher”, so the rally may be expected to resume shortly.

ZeroHedge comments, “The U.S. national debt is at 34.7 trillion dollars. If you laid that many dollar bills end-to-end, it would wrap around the Earth 134,599 times. That’s enough to travel to the sun and back 17 times. Suffice it to say, we’re in a pickle.

America is slowly approaching the precipice of debt default. This is no minor dilemma. A default could cause approximately 8 million jobs to be lost. In other words, the bill would come due.”

8:40 am

Good Morning!  Have you prayed this morning?

SPX futures dove to 5215.40, then bounced.  The most likely stopper is short term resistance at 5276.00 (not shown on the daily chart).    Should the decline be impulsive, it should then resume toward the 50-day Moving Average at 5178.00.  The structure of the decline does not appear complete.

Today’s options chain shows Maximum Investor Pain around 5250.00.  Long gamma may begin at 5275 while short gamma begins at 5225.00.

While waiting for PCE results, ZeroHedge reports, “Futs are slightly lower as bond yields rise after European inflation prints came in stronger than expected and PCE looms. As of 7:30am S&P futures are down -0.2%, off the worst levels of the session; Nasdaq futures slumped 0.5% as last night’s latest round of tech earnings disappointed: DELL plunged -14% as it failed to meet the high expectations on AI demand; MDB cratered 24% and is now down 55% below YTD highs. Indeed, most AI names (ex-NVDA) are mostly lower: AMD -1.0%, MU -78bp. Bond yields are 1-2bp higher in sympathy with the move wider in Bunds where the latest data showed European consumer prices rose more than expected; the Bloomberg dollar index dipped and commodities, energy and ags are mostly lower. Today’s macro data focus will be March PCE release; the street expects a headline and core PCE print of +0.3% MoM; on YoY basis, Core PCE is expected to rise 2.8%. Over the weekend, NVDA will host the CEO live keynote ahead of the Computex 2024 event on Sunday June 2 at 7am ET.”

VIX futures declined to  a morning low at 13.32 before a bounce.  This allows an oportunity to accumulate VIX shares/ETFs/ options for hedging or speculation.  Many commentators suggest the VIX may go lower, with a rebound closer to the election.  Unfortunately, they are not observant of international risks that may propel VIX higher.

The June 5 options chain shows little short gamma.  Long gamma may begin at 14.50.

TNX may be taking a breather that may not last.   Today happens to be a Trading (minor) Cycle low.  The Master Cycle has another 5 weeks to go.  The 5-week target may be the Cycle Top at 48.98.  Trending strength appears to be returning next week.  We may be experiencing stagnation, not deflation.

ZeroHedge observes, “After a somewhat weaker than expected CPI print two weeks ago, and with inflation data generally surprising modestly…

… the doves’ last chance for “sooner than later” rate-cuts is today’s Core PCE Deflator – often described as The Fed’s favorite inflation signal. And indeed, after last month saw a stronger than expected print in both the headline and core prints, moments ago the Biden Bureau of Economic Analysis confirmed that – just as we previewed – the core PCE dropped from 0.3% to 0.2%, the lowest monthly increase of 2024…

ZeroHedge further states,”After unexpectedly slumping last month to 37.9, the Chicago PMI index cratered even more unexpectedly in May, when it defied hopes of a rebound to 41.5, and instead tumbled even more, sliding to a cycle low of 35.4 which was not only below the lowest estimate, but was staggeringly low. To get a sense of just how low, the last two times it printed here was during the peak of the covid and global financial crises…

… which seems to suggest that at least according to Chicago-based purchasing managers, the economy is in a depression.”

10:42 am

The Ag Index is testing  its prior trend channel before launching another 2-3 week rally.  The pullback is offering buyers another opportunity to accumulate agricultural shares and ETFs.

10:29 am

BKX broke through the Diagonal trendline yesterday, only to ignore it today.  However, it is testing the 50-day Moving Average at 102.75.  Moving Averages and trendlines often occupy the same space, so they may act interchangeably during a testing period.  The Cycles Models argues that a burst of downside strength may arrive over the weekend.  That may argue the possibility of one or more bank failures being announced ove the weekend.

ZeroHedge notes, “US regional banks’ deposits recently made new highs, exceeding the level prior to SVB’s collapse. But that’s far from an all clear. Exposure to commercial real estate continues to rise and delinquencies on the underlying loans is mounting. Hold-to-maturity bank portfolios are losing more money as yields increase, while small banks’ shares are weakening, significantly underperforming those of larger banks. Those conditions also preceded SVB’s bankruptcy last March.”

8:00 am (note:  My keyboard failed around 8:30 am and I had to leave to purchase a new one.)

Good Morning!  Have you prayed yet today?

US Tech 100 futures have declined to 18600.00 this morning, still above Thursday’s Key Reversal low at 18554.89.  Investors are still ignoring the break of the Ending Diagonal trendline at 18800.00.  They are waiting for a break of a horizontal trendline across Thursday’s low.  Others are waiting for a break of the 50-day Moving Average at 18067.00.  So, the average investor is still buying the dip while smart money  (hedge funds) are selling.

Today’s options chain shows Maximum Investor Pain at 18775.00-18790.00.  Long gamma has a marginal lead starting at 18800.00.  Short gamma begins at 18770.00 and dominates the options beneath that level.

ZeroHedge comments, “Groupthink

Hedgies are all in on the semis long logic.

Source: GS

and the daily NVDA…

The one and only

Peter Callahan on NVDA: “2024 YTD return: +130%, 2023 +239%, 2022 -50%, 2021: +125%, 2020: +122% … along this path, NVDA has added nearly $2trn in market cap over the last 1 year … for context, it took names like AAPL or MSFT decades to achieve that feat.””

SPX futures have declined to a morning low of 5235.60, beneath the Thursday low and confirming the trendline sell signal.  This action may induce some investors to sell, as it is more noticeable.  The 50-day Moving Average lies at 5178.00, which may get a larger reaction from investors.   At the moment, there is some short-term support at 5250.00 which may give encouragement to the buy-the-dippers.  If so, there is also resistance at 5290.00 that may put a stop to buyers.

Today’s options chain shows Max Pain at 5270.00.  Long gamma may begin at 5270.00-5275.00.  Lon gamma may begin at 5290.00 while short gamma may start at 5265.00.

ZeroHedge reports, “US equity futures are weaker despite lower bond yields, breaking away from this week’s narrative of Equity/Yields negative correlation, after Salesforce plunged 15% due to disappointing guidance. Small-caps are poised to outperform but have failed to hold gains this week. As of 7:45am, S&P futures are down 0.4%, pointing to a second day of declines but off the session’s worst levels as Nasdaq futures drop 0.3% while Europe’s Stoxx 600 benchmark was led higher by telecom and banking stocks. Premarket, the Mag7 names are mostly lower, ex-AAPL, while NVDA is -0.8%, weighing on Semis, dragged lower by the read through from Salesforce. 10Y yields are down 2 basis points after jumping about 15 bps in the past two days. The US dollar is seeing its weakest start to the day for this week; commodities and bitcoin are weaker, too. Today’s macro data focus will be on Jobless Claims, Retail Inventories, Pending Home Sales, and revisions to the 24Q1 GDP print including the GDP Price Index and Core PCE Price Index. Tomorrow we receive the monthly PCE data which should be more market moving.”

VIX futures reached a morning high at 14.88 before declining back beneath the 50-day Moving Average.  The Buy signal has been confirmed with the pullback offering better pricing for buyers.  VIX watchers are still in denial, expecting a further low.

The June 5, 2024 options chain show virtually no short gamma.  Long gamma is ensconced between 16.00 and 21.00.  Still not a lot of conviction above that level.  Short-term speculators still dominate the VIX options.

TNX pulled back to test Intermediate support at 45.38 after yesterday’s spike high.  This is merely a consolidation with higher values to come.  The Cycles Model calls for another 5-6 weeks of higher yields before the market takes a rest.  Today the Treasury is auctioning $140 billion of 4-week and 8-week bills.  Are bills still safe?

9:48 am

BKX has declined beneath its Ending Diagonal trendline, thereby elevating the sell signal from aggressive to confirmed.  Today the downside strength begins and may continue for the next two weeks.  The next target may be the mid-Cycle support at 91.57, but may not stop there.  There is a massive Head & Shoulders formation that may be completed over the next 6-9 months.  Be prepared to see banks merge or close as their portfolios blow up due to rising rates.  What can possibly go wrong with zero percent down mortgages?

8:00 am

Good Morning!  Have your prayed this morning?

NDX futures have slipped beneath the Ending Diagonal trendline near 18830.00, making a morning low at 18731.80.  The NDX has been challenging its trendline since last Thursday’s reversal, but has been closing above the trendline, causing the casual observer to believe that the uptrend has been intact.  Today we see a clear break in that perception.  Today a $44 billion offering of the 7–year notes will go on auction.  What could possibly go wrong?

Today’s options chain shows Maximum Investor Pain at 18850.00.  Long gamma makes an appearance above 18900.00 while short gamma becomes relevant beneath 18800.00.

ZeroHedge remarks, “Little did we know

We wrote this weekend that it was a sure bet that Jensen Huang would surpass the $100bn mark in net worth. Little did we know that it would take only one trading day (plus the after-market) for him to reach in. Someone needs to buy the Hollywood rights for the NVDA story – this is for the movies and the history books. Let’s look at the latest insane data-points.

One stock to rule them all

Since May 22nd: NVDA +20%, SPX down.”

SPX futures have declined to 5271.40, not yet reaching Thursday’s reversal day low.  As reported earlier, today is a day of trending strength and the new trend is “down” since the Ending Diagonal trendline was broken.  Once the immediate support is broken, further supports may be found at the 50-day Moving Average at 5160.00, then the 100-day Moving Average at 5070.00.  The 1987 trendline lies at 5000.00, which may be challenged by the current decline over the next week.

Today’s op-ex shows Max Pain at 5300.00.  Long gamma gains ascendancy above 5310.00 while short gamma becomes strong at 5275.00.

ZeroHedge reports, “US futures are weaker with tech and small caps underperforming after the NDX made a new ATH yesterday on the back of the relentless Nvidia meltup. The weakness has been driven by surge in yields, a result of the latest batch of hawkish Fed remarks, two very weak bond auctions and stronger macro data (Consumer Sentiment; Housing Prices). Will we see more of the same today with the 7Y auction on deck? At 7:45am S&P futures are 0.6% lower while Nasdaq futures dipped 0.7% as Mag7 and Semi stocks (incl. NVDA) are all lower pre-mkt; Asian stocks fell, led by losses in Hong Kong, while Europe’s Stoxx 600 index also slipped 0.6%. Yields continued their rise, and after jumping 9 basis points on Tuesday, 10Y yields rose further to 4.57%, the highest level since May 3 when the huge payrolls miss sent yields sliding. The USD caught a bid, but commodities were a bright spot with both energy and base metals moving higher as another attack in the Red Sea added to heightened geopolitical tensions in the Middle East . It’s a light calendar: the only US eco data is the May Richmond Fed index (10am) and Dallas Fed services activity (10:30am); we also get speeches from the Fed’s Williams (1:45pm) and Bostic (7pm). Fed releases Beige book at 2pm”

VIX futures have risen to 14.17 this morning, fast approaching the 50-day Moving Average at 14.41.  It is finally moving out of its somnolent stage into a higher level of activity.  Rising above the 50-day moving Average may finally gain some attention from hedgers, who have ignored the opportunity until today.

Today’s options chain shows Max Pain at 12.50.  There is a solitary crowd of shorts at 12.00 while long gamma begins at 15.00 and is well populated to 20.00.

TNX has jumped above Intermediate resistance at 45.36 and may have clear sailing to its intended target at the Cycle Top at 48.93.  The Cycles Model allows up to 5 weeks for the current Master Cycle, so yields may climb higher.

ZeroHedge remarks, “Are the central bankers at the Federal Reserve just winging it? 

It sure seems that way if you step back and take a long view of their decision-making.

Fed officials project this aura of authority. You might imagine them as hyper-intelligent experts in the field of economics and finance making carefully calculated monetary policy decisions based on a thorough understanding of all the dynamics in the economy. After all, they must have risen to these important positions at the Fed based on their economic acumen, right?

Or maybe they are just politicians making stuff up as they go along.”

USD futures have risen to 104.76 thus far.  They have surpassed the 50-day Moving Average, thereby confirming a buy signal.  The Cycles Model suggests that USD may continue its rise through mid-June, leaving it free to challenge the Cycle Top at 107.00.

Gold futures have declined to 2335.20 this morning, consolidating in a corrective manner.  Once the correction is over, it may test the 50-day Moving Average at 2316.24 while moving much lower.  Once the 50-day is vanquished, there is unobstructed movement to the mid-Cycle support at 2093.19. The Cycles Model suggests this may occur sometime before mid-July.  In the meantime, gold bugs continue to push gold as the ultimate investment.

2:10 pm

The Treasury held an unscheduled 5-year Note auction today that didn’t go well, sending the 10-year yield (TNX) above Intermediate resistance at 45.36.  Tomorrow will offer a $44 billion 7-year note auction that may cause more consternation among the dealers, who must purchase the unsold securities, especially after today’s indigestion.

ZeroHedge reports, “It wasn’t quite as ugly the dismal 2Y auction earlier today but it was still ugly.

Moments ago the US Treasury sold $70BN in 5Yr paper, tying the record for biggest auction for this maturity set last month, in what was another subpar sale.

The high yield of 4.553% was below last month’s 4.659% but it still tailed the When Issue 4.540% by 1.3bps, the biggest tail since January.”

1:59 pm

The Ag Index has broken above its descending trend channel and is now challenging its Cycle Top resistance at 409.18.  There may be 2-3 weeks left in the current Master Cycle, soa breakout above the Cycle Top appears imminent.  GKX is on a buy signal and momentum favors the rally for the first half of June.

ZeroHedge notes, “During the Memorial Day holiday break, food inflation was certainly on the minds of those who had to purchase beef patties and other BBQ-related items for outdoor parties. The Biden administration has deflected rampant food inflation on ‘greedy’ corporations, but more likely due to supply constraints. Beef and egg prices are climbing, and staples like orange juice, cocoa beans, and coffee are skyrocketing. Now, the latest soft commodity that is pushing higher is wheat.

Bad weather across the world’s top growing regions, including the driest May in Ukrainian records, lack of rainfall in Western Australia, and unseasonably cold weather in Russia, has sent wheat futures in Chicago to a nine-month high.

7:45 am

Good Morning!  Have you prayed this morning?

NDX futures attempted a new high at 18911.00 over the weekend, but pulled back to the flat line.  Should the rally continue, today would be day 270, stretching the Master Cycle to its outer limits.  The trouble is that the reversal on Thursday has not been strong enough to convince anyone that it is to be taken seriously, so there is a possibility of a marginal new high.  The Cycles Model suggests that tomorrow may be a strong reversal day.

Today’s options chain shows a battle between the bulls and bears at 188255.00-18830.00.  Conviction runs high on both sides, leaving today as a pivotal battle.

ZeroHedge comments, “Nvidia’s massive rise in the AI era has been well-documented, but did you know that it’s currently the world’s third most valuable company?

To put the massive market cap of Nvidia into perspective, we’ve put it side by side with a collection of other major U.S. tech companies.”

SPX futures rose to 5321.90 over the weekend.  The Triangle structure limits the probability of going higher after Thursday’s reversal.  As a result, SPX may remain in place near 5300.00. for the day.

Today’s options chain shows the highest concentration of both bulls and bears at 5300.00.  Long gamma starts at 5310.00 while short gamma begins at 5290.00. This is a very tightly would market.

ZeroHedge reports, “Stocks traded in a narrow range as markets reopened in the US and Europe with investors putting (a stronger than expected) Q1 earnings season in the history books, and looking to Friday’s core PCE print prints and central bank speakers for hints on the timing of interest-rate cuts. As of 7:45am, S&P futures climbed 0.1%, while Nasdaq futs gained 0.2% helped by premarket gains for Apple which added 2.4% after China shipments rebounded. Europe’s Stoxx 600 dipped 0.2%, trimming its gain in May to 3.2%. The Bloomberg dollar index dropped while treasuries erased small gains, with 10Y yields trading at 4.46% before a slate of short-term auctions including offers of 2Y and 5Y notes on Tuesday. Brent crude rose as tensions in the Middle East ratcheted higher. On the calendar, today we get the release of house price and confidence data, before we get reports on GDP on Thursday. The centerpiece then comes on Friday, with the publication of the PCE price index, the Fed’s favorite inflation gauge. Economists expect that to show the smallest advance so far this year for the measure.”

VIX futures are consolidating after Thursday’s abrupt reversal.  This has been the lowest the VIX has seen since November 2019.  What followed a few months later was the largest rally since October 2008.  History does not repeat, but is certainly does rhyme.

Tomorrow’s options expration shows Max Pain a.  There is a very large short gamma deposit at 12.00 while long gamma may begin at 13.00 and may go as high as 20.00.  

TNX futures rose to 44.75 this morning, while the cash market has gone to 44.57 thus far.  It remains above the 50-day Moving Average at 44.53.  The Cycles Model shows potential trending strength arising today with a larger burst of strength in the first week of June.  While the fight for control over rates is perceived to be between the Fed and the Treasury, other factors that influence rates may prevail.

ZeroHedge observes, “In the fight against inflation, is it the Fed or the Treasury that calls the shots? The answer is, it’s both.

The Fed raises interest rates to make loans less attractive and bring inflation down, but The Treasury has its own set of magic tricks to artificially “stimulate” or “tighten” the economy as well.

One of them is a Treasury buyback program, something that was just reincarnated for the first time in about two decades. This is where the Treasury repurchases its own outstanding securities from the open market to increase liquidity, stoke, demand, and bring down yields.

If Treasury markets can’t be reigned in, the Fed expands its balance sheet by buying those Treasury securities to add liquidity and stability. These “open market operations” are usually the “money printing” that people are talking about happening at the Fed. “QE” refers more specifically to operations where the Fed is buying other assets beyond just Treasury securities, as occurred in the 2008 crisis and during COVID. But the Treasury buying back its own issued debt is, in essence, QE by another name.”

.

10:05 am

The breakout in the Ag Index that I warned you about last week has now come to pass in the GKX.  There can be no better buy signal than this.  In addition, the Cycles Model shows trending strength developing over the weekend and extending the next week.  The longer view shows that food prices may double in the next year or so.

9:55 am

BKX bounced off Intermediate support at 103.04 yesterday and may be offering a retracment to sell into.  The Master Cycle high was made early on May 15.  While the BKX may be on an aggressive sell signal, confirmation of the sell signal may come beneath the supports located at 102.50 to 103.00.  Volatility picks up hugely next week, suggesting it will not be a good time to remain long in this index.

8:00 am

Good Morning!  Have you prayed yet?

SPX futures have risen to 5285.10 this morning after making a Key Reversal yesterday.  Should it complete an impulsive fractal, it may yet decline to short-term support at 5245.46 before a more significant bounce back to 5300.00.  The Memorial Day weekend has traditionally bee a quiet one, so a move to 5300.00 may allay some fears over the holiday.  However, now that a reliable reversal has been made, we must interpret the possible path of the Market going forward.  The next obvious support beneath the 50-day Moving Average lies at the 1987 trendline, just beneath 5000.00.  However, the Cycles Model suggests the real target lied below it at the Cycle Bottom at 4945.10.A decline beneath the trendline would be a real blow to bullish thinking.

Today’s Options Chain shows Maximum Investor Pain at 5290.00, offering the least payout to options investors.  Long gamma begins at 5300.00 and remains strong to 5400.00.  Short gamma comes in strong at 5250.00.

ZeroHedge reports, “After Thursday’s rout, which saw the overbought  S&P first hit an all time high before traders suddenly dumped everything (following hotter than expected PMI and Initial claims reports has further delayed expectations for the Fed’s first rate hike ostensibly to December) to buy Nvidia, whose market cap soared by over $200 billion to a record $2.55 trillion, on Friday US equity futures and treasuries have staged a modest rebound. As of 7:30am, S&P 500 and Nasdaq 100 futures rose 0.3%, led by premarket gains at Micron, Microchip Technology and Advanced Micro Devices all of which continue to benefit from bullish sentiment around artificial intelligence following Nvidia’s blockbuster earnings. Europe’s Stoxx 600 index slipped 0.4%, playing catch-up with Wednesday’s Wall Street drop, which was the biggest this month. 10Y yields dropped 1bp to 4.47% after surging the previous session by as much as 8bps ahead of a half-day trading session for the US bond market; the Bloomberg Dollar Spot Index was headed for its first drop in five days, but still on track to post its best weekly gain since April 12. Oil continued its decline despite the signal from macro data that the economy is actually growing quite strong, in what appears to be accelerating CTA liquidations. Today’s macro events includes the April prelim Durable Goods report, the Kansas City Fed and the May final UMich report.”

VIX futures are consolidating after also making a Key Reversal.  After the Master Cycle was stretched by a record number of days, it is bound to snap back.  The Cycles Model agrees, with a possible volatile move anticipated over the weekend.   The move of the low doesn’t indicate a sufficient amount of fear…yet.

The May 29 options chain shows Max Pain at 12.50.  There is a single deposit of short gamma at 12.00, while long gamma erupts at 15.00, but only ventures to 20.00.

TNX futures rose to 45.05, while the cash market has stalled at 44.97 thus far.  While yields appear subdued, the Cycles Model seems to predict a regular eruption over the weekend.  We can only link a cause to the proposed effect in hindsight.

Gold futures declined to 2326.35 this morning before a small bunce.  It may test the underside of Intermediate resistance at 2361.00 before resuming its decline toward the 50-day Moving Average at2310.00.  Gold is on a confirmed sell signal after having made an early reversal from the May 20 high.  It may experience a bout of volatility over the weekend, according to the Cycles Model.  The new Master Cycle has about 6 weeks to go, giving gold time to change its trend into a decline.

Crude oil futures have declined beneath the May 20 low this morning, signaling a breakdown and continued sell signal.  The Cycles Model is not encouraging for the bulls, as new lows are indicated.  The Cycle Bottom and Head & Shoulders neckline at 68.68 loom large on the horizon.

RealInvestmentAdvice remarks, “As we discussed recently, Wall Street economists increasingly believe the risk of recession has fallen sharply. To wit:

“Economists don’t think the economy will get even close to a recession. In January, they, on average, forecast sub-1% growth in each of the first three quarters of this year. Now, they expect growth to bottom out this year at an inflation-adjusted 1.4% in the third quarter.” – WSJ

 1:19 am

SPX may be threatening to make a Key Reversal today.  A decline beneath 5286.00 may make it occur.  Should it happen, the top is in.  Forget about all the happy talk.  The party may be over.

ZeroHedge notes, “This is a RINO global equity market – “Recession in name only” – according to Goldman Sachs flow-of-funds guru Scott Rubner, as he sees global wall-street starting their great American BBQ party on a positive tone.

Here is Rubner’s quick rundown of the most important positioning dynamics in the marketplace right now.

As investors return from the Memorial Day long weekend, we think this FOMU, “fear of materially underperforming” behavior will start to kick off.”

8:00 am

Good Morning!  Have you been praying?

SPX futures have risen to 5350.00 thus far this morning.  The initial target may be near the 2-hour Cycle Top at 5353.80.  Unfortunately, that may only be a minimum.  The top may be as high as 5462.00, over a 100 points higher.  This may be due to a combination of factors.  The obvious one is that the crowd seems oblivious to risks being posed to the equities, which are very near a 4-year Cycle Top.  Sentiment is giddy, with FOMO being the primary driver.  Another factor is that liquidity is being pumped into equities by the powers that be.  Whether purposefully or inadvertently, a temporary liquidity surplus in the Treasury is being sopped up by equities, as there are few other alternatives that are attractive.

Technically, we can see a second Triangle formation, a most unusual occurrence, since triangles usually occur only once (then done).  Triangles usually forecast the final probe to the end of a Cycle.  Last week’s Triangle formation gave a high confidence signal that the final probe would end the rally Monday.  However, the second Triangle now proclaims yet another probe to the all-time high.  What you see is a fractal repetition at two different scales.  Fractals are organic.  In the case of stock formations, it is due to human behavior patterns.  The general rule in the markets is alternation, not repetition.  That is why two Triangles are so rare.

Today’s options chain shows Maximum Investor Pain at 5310.00-5320.00.  Long gamma may begin at 5325.00 while short gamma may not start until 5270.00. A very bullish setup, until the wheels fall off.

ZeroHedge reports, “Global markets rallied and US equity futures are sharply higher, poised to push the S&P to a new all time high, after blowout earnings from Nvidia reassured investors that the global artificial-intelligence juggernaut will keep powering equity markets. As of 7:30am, S&P futures were 0.6% higher and Nasdaq futs gained 1.0% entirely on the back of Nvidia’s stunning results which saw the company not only hike its Q2 revenue guidance to a consensus-busting $28BN but also announced a 10:1 forward stock split. Elsewhere, the Bloomberg’s dollar index retreated after touching a one-week high while US Treasuries inched higher after losses on Wednesday; European bond markets showed little reaction to the latest PMI  report that revealed private-sector business activity at its highest in a year in the euro area, suggesting an economic rebound is taking hold. Oil was flat; bitcoin traded around $70k while Ethereum looked poised to break above $4,000 on today’s SEC approval of an ETH ETF. It’s a busy day on the macro front with data from the Chicago Fed, jobless claims, Mfg and Service PMIs and New Home Sales on deck.”

NDX futures are at an all-time high of 18940.00 thus far.  The probability of reaching 19000.00 is very high.  In fact The Cycles Model suggests a top near 19300.00.  However, be warned that this is the final probe to the ATH.

Today’s options chain shows Max Pain at 18800.00.  Long gamma begins at 18850.00 and may run to 19200.00, while short gamma may begin at 18770.00.

ZeroHedge remarks, “As discussed in our preview, Nvidia has been called the mother of all earnings — the “single most important stock on the planet” according to Goldman – and for good reason: it accounts for 5% of the S&P. This morning, Mizuho’s desk analyst even said “they are the market in AI in many respects.”

So intense is the interest in today’s print that according to Bloomberg, some investors and onlookers I’ve heard from are making assessments of Jensen Huang’s body language when I spoke to him on Bloomberg Television in Las Vegas on Monday. They want any and all clues about whether this is going to go well. My conclusion from that conversation: Nvidia knows it needs to make sales beyond just cloud providers and is seeking fortune in enterprise and government markets (with help from Dell).”

VIX futures have made another low at 11.52 this morning, on day 280.  This low has not been seen since November 2019, 4 1/2 years ago.  The record all-time low (since 1990) was made in November 2017.  Dealers are massively short the VIX.  As the VIX is a small index, it is easier to front-run the market.  However, when the Cycle changes, the blow-back may be extreme.

The May 29 options expiration shows only long gamma from 12.00 to 20.00.  There seems to be no expectation of a blow-out reversal.

TNX appears to be consolidating around the 50-day Moving Average at 44.40.  The Master Cycle low was made on May 16.  The current consolidation may be a wind-up for a substantial move higher, as Trending Strength is on the rise and may come in strong over the Memorial Day holiday, leaving investors high and dry as rates rocket higher.  Most investors fail to realize that the uptrend started in late December.  A Wave (C) may offer a powerful surge to new heights.

9:35 am

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BKX, our liquidity proxy, shows the need for a final probe higher, possibly to 111.50.  Today is day 257 of the current Master Cycle.  The final probe may be complete by Friday.  The Fed rescue of the banking index in March 2023 and again in October 2023 tells us just how important this index really is.  The Head & Shoulders formation does not  overstate the risk of loss in the banking index.

8:15 am

Good Morning!  Have you prayed yet?

SPX futures have declined this morning and may go beneath 5300.000.  However, the structure of the rally has become more complex and may contain a bearish trap.  A rare second Triangle formation (I’ll show you later in the 2-hour chart) has emerged.  Wave E of the Triangle (A-B-C-D-E) tends to be a rogue Wave that may decline to 5283.00 or possibly lower, trapping any shorts.  Should the Triangle formation reach its final conclusion, a rally that may rise to a minimum of 5400.00 may complete the final Primary Wave [5], which may go as high as 200.00 points.  The Cycle Top at 5454.70 is a possible final target.

Today’s options chain shows Maximum Investor Pain at 5315.00 to 5320.00.  Long gamma extends from 5325 to 5390.00.  Short gamma begins at 5310.00.

ZeroHedge reports, “US futures are lower on Nvidia day; with the stock down 56bps in premarket trading, while Mag7 and semis are also all lower pre-mkt. As of 7:20am, S&P futures are down 0.1%, just off session lows amid signs of sticky inflation that dampened bets on early interest-rate cuts; Nasdaq futures drop 0.2% while Europe’s Stoxx 600 gauge slipped 0.3%, with energy shares among the big losers amid an earlier drop in crude prices.  Bond yields are higher by 2-3bps in sympathy with Gilts where yields jumped on much hotter than expected inflation, or rather less than expected disinflation. The USD is higher and commodities are mixed: energy is higher, reversing earlier losses, while precious metals are lower with Ags outperforming. Aside from NVDA, the latest Fed Minutes are also released today, which should align with recent Fedspeak (hikes unlikely in 2024 and need more data to support cuts), as well as some consumer-sector earnings (Target tumbled 8% after guidance disappointed) which, in total, show a still solid aggregate consumer but continued deterioration in the lower income consumers.”

NDX futures have risen to 18737.00 this morning.  While there  may not be a triangle formation, as in the SPX, the rally may be incomplete.  A surge to 19300.00 is not out of the question.

Today’s options chain shows Max Pain at 18670.00.  Long gamma starts at 18700.00 and runs to 19050.00.

ZeroHedge remarks, “Falling volumes, crushed volatilities and record highs, equity markets seem to price nothing but a rosy outlook. While much has gone right for investors this year, some risks can’t be ignored and deserve attention.

It seems no one wants to be short in this market. Bears are falling like dominoes and positioning is increasing, leaving the market very much one-sided ahead of the Fed minutes and European PMI data, along with the results of the world’s most important stock Nvidia.”

VIX futures are consolidating this morning after making a 278-day Master Cycle low yesterday.  The last time a VIX Master Cycle was this long was in March 2023, so it is not unusual for this to happen.  The reason is that VIX is a small index in comparison to the SPX and may be influenced by either bullish or bearish sentiment in the larger index.  In addition, VIX is at a Primary Cycle reversal, which may happen every two years .   Nevertheless, I have not seen any VIX Master Cycles longer than 278 days.

Today’s options chain shows Max Pain at 15.50.  Short gamma resided between 12.00 and 15.00.  Long gamma starts at 16.00 and runs to 60.00.  Hedgers are beginning to take protective positions, although today’s expiration is early.

ZeroHedge observes, “Zoom in…

…and you will see the SPY volume bar.

Source: Refinitiv

The death of volatility

VIX, VXN and VXTLT are all printing new recent lows, hitting levels not seen in years.”

TNX opened at 44.51, above the 50-day Moving Average at 44.35.  The Cycles Model suggests a new trending strength pattern may be about to emerge this weekend that may lead to new highs.  The new Master Cycle may proceed to early July.

ZeroHedge comments, “In January of this year JP Morgan CEO Jamie Dimon argued in an interview with Fortune Magazine that the record US debt ‘Is a cliff…and we’re going 60MPH towards it.”  He claimed that the situation was a global market rebellion waiting to happen.  His comments preceded reports that the national debt was increasing by approximately $1 trillion every 100 days due to the Federal Reserve’s interest rate hikes.  US debt has climbed over $11 trillion since March of 2020.

It’s a problem that bankers should have been able to predict well in advance:  The inevitable Catch-22 scenario in which the Fed must either raise rates to stop inflation but cause debt to skyrocket, or, the Fed must lower rates and return to QE to alleviate debts but also trigger an even greater inflation crisis.”

ZeroHedge further notes, “Aggregate bond indices are up in most countries on an annual basis. But the broadening commodity rally threatens to feed into global inflation and kickstart another bond selloff.

A year ago almost all aggregate (corporate + government) bond indices were on the back foot. But throw in a dash of optimism, a soupçon of disinflation and a helping of less hawkish central banks and almost all indices are up over the last year. Thailand and Israel’s indices are the only two real exceptions; the rest are higher by anywhere from 2% to over 10% in Poland and Hungary’s cases.”

11:36 am

The Agriculture Index has found support at the 50-day Moving Average at 385.35 and is moving toward the upper trendline near 400.00.  A breakout above that level puts the Ag Index in a firmly bullish trend that may last for several years.  It is on a buy signal.

ZeroHedge comments, “I never imagined that we would ever see a time when it takes $177,798 for a family of four to live comfortably in the United States.  Unfortunately, that day has arrived.  Our leaders have been pursuing highly inflationary policies for many years, and now we have reached a point where inflation is wildly out of control.  In fact, the latest wholesale inflation figure that was released on Tuesday came in much higher than expected.  Sadly, this is just the beginning and we are in far more trouble than most people realize.”

11:11 am

BKX, our liquidity proxy< is still marching higher.  However, the Cycles Model suggests the rally may halt by the end of the week.  Its potential target may be the Cycle Top at 111.25.  Look for a final probe higher this week to the Cycle Cycle Top.  Once accomplished, the wheels come off.

ZeroHedge reports, “In the first – but certainly not last – major shake up at a key US financial regulator under the Biden admin, Federal Deposit Insurance Corp. Chairman Martin Gruenberg bowed to pressure to resign from the bank regulator after an external investigation found widespread sexual harassment at the agency and lawmakers of both parties berated his leadership, capping a nearly two-decade career at the agency.

In a press release, Gruenberg said he would resign once a successor had been confirmed, avoiding an outcome that would leave FDIC Vice Chairman Travis Hill, a Republican, as the agency’s acting chairman. Hill is a former staffer at the agency who has served on the five-member board for about a year.”

9:35 am

Good morning!

SPX has broken out of its uptrend this morning, giving it a  sell signal on the two-hour chart.   The trendline is near 5305.00.  A decline beneath 5283 may confirm the signal.  SPX made its Master Cycle high on Thursday, day 258.  However, the lack of movement for th epast week is causing the bears to capitulate.

Today’s options cahin shows Max Pain at 5310.00  Long gamma begins at 5320.00.  Short gamma starts at 5300.00.

ZeroHedge reports, “US futures are flat, reversing earlier losses, with European bourses and Asian markets all lower as the international risk-off tone carries over to the US pre-mkt, likely driven by a desire to see the NVDA print before determining near-term direction. Until then, markets are hunting for catalysts and drifting as they wait, with US stock futures unchanged as of 7:00am, and Nasdaq futures down 0.1%. Bonds caught a bid with yields down 2-3bps across the curve, pressuring USD. Commodities are also lower with weakness across all three complexes but with some safety being found in base metals: oil prices are a little lower, while copper and gold prices have slipped a little from the records they notched up.The macro focus will be on Fedspeak with yesterday’s batch of Fed speakers, not market-moving. From a micro perspective, Day 2 of the JPM TMT Conference will be the focus.”

VIX is still consolidating near Friday’s low.  While the low has been made, the Cycles Model suggests trending strength may appear this weekend.  Dealers are loaded up with shorts, leaving the marketplace in a “boring” mood.  This could easily change after options expiration.

Tomorrow’s monthly options expiration shows Max pain at 15.50.  Short gamma occupies the territory between 12.00 and 15.00.  Long gamma begins at 16.00 and remains strong to 60.00.

TNX has slipped beneath the 50-day Moving Average at 44.28.  However, the buy signal has been made.  Trending strength may begin as the week continues, with peaking strength arriving over the weekend.

ZeroHedge remarks, “Why Next Time May Be Different (And Worse)

In our last post (Maybe the Biden Administration is Damaging The Dollar Intentionally), we included a chart showing Chinese dumping of Treasuries.

British economist Philip Pilkington uses that chart as a jumping off point for the disturbing X thread below. He points out a key difference in Chinese ownership of U.S. Treasuries now:

It used to be that these bonds were bought by China and other governments/central banks. These were stable buyers because it was part of their trade strategy – prop up the US trade deficit to sell more exports. Now increasingly they are bought by private foreign investors.”

Gold futures have pulled back from yesterday’s high at 2454.20 to 2409.55 this morning.  It is in the final two weeks of the current Master Cycle, giving it room to rally to a possible 2500.00.  Be aware that this may cap a series of higher Cycles that lead to a major correction.

7:30 am

Good Morning!  Have you prayed this morning?

SPX futures have consolidated between 5306.00 and 5314.00 thus far this weekend.  All seems quiet this morning, the consensus seems to think things are getting better despite deteriorating conditions domestically.  Iran’s president and foreign minister are confirmed dead in a helicopter crash.  Any talk of foul play may bring about similar results to the assassination of the Archduke Ferdinand to the Middle East, bringing us to the brink of world war.  Today is day 262 of the current Master Cycle.  Any attempt at a new all-time high may bring  a strong reversal.

Today’s options chain shows Maximum Investor Pain at 5275.00.  Long gamma may begin at 5290.00 while short gamma starts beneath 5250.00.

ZeroHedge reports, “Futures are higher across the board as investors shift their focus from macro to micro, following a rollercoaster week that saw stocks slide then reverse higher after a soggy CPI and retail sales print, to close at an all time high and the Dow above 40,000. AI is in focus this week with NVDA earnings on deck, plus we will see a relaunch of sell-side industry conferences. As of 7:30am, S&P futures are up 0.1% and poised to open near record highs on Monday, while Nasdaq futures gained 0.2% as investors looked past the inflation implications of a commodity rally and wagered interest-rate cuts will remain on the cards this year.”

VIX futures are rising from Friday’s Master Cycle low at 11.91 on day 274.  Friday’s low was the lowest reading in the VIX since December.  It is due to make a significant turn off the bottom.  Few investors seem to be aware of any danger.

Wednesday’s options chain shows Max Pain at 18.50.  Short gamma resided between 12.00 adn 15.00.  Long gamma may begin at 16.00 and is filling in strikes up to 50.00.

TNX  has risen above the 50-day Moving Average at 44.22, creating a confirmed buy signal.  The subsequent actions of the TNX may take it above its Cycle Top resistance at 48.86 by early July.  The June 2007 high at 53.16 may be the target for this move.