The Practical Investor

7:30 am

Good Morning!  Are you praying?  Today is Nineveh 40 days minus 1.

SPX futures are flat this morning, with only a 10-point trading range overnight near 5300.00.   The Master Cycle high may have been made yesterday, on day 258 (0n time).  While many pundits think that the SPX has more rally left in it, other forces are at work to frustrate those hopes.  Worldwide, stock markets have begun their declines last week with the rest poised for reversals this week.

In today’s morning options chain, Maximum pain appears at 5300.00.  Long gamma rules above 5325.00 while short gamma becomes strong beneath 5250.00.  The afternoon options expiry shows long gamma down to 5150.00  While this is conducive to the SPX going higher, dealers may wish to see the Max Pain level at 5150.00 for the least payout.

ZeroHedge reports, “US equity futures are flat to end a torrid week which saw all indexes hit a fresh all-time high while the terminally anachronistic Dow Jones briefly topped 40,000. Pre-market, MegaCap Tech are mixed: AMZN +20bp, MSFT +20bp, META -22bp, GOOGL -18bp. WMT is down 27bps pre-mkt, after its +7.0% rally post-earnings yesterday. As of 7:00am S&P and Nasdaq futures are unchanged while bond yields are largely flat. Commodities are mixed: oil is lower; metals/ags are higher. Overnight, China reported mixed April macro data (IP beat, Retail Sales miss) and also announced a new rescue plan to support housing; as a result base metals rallied (Copper +2.0%; Iron Ore +1.4%). Today, key macro focus will be on comments from the Fed’s Christopher Waller, Neel Kashkari and Mary Daly for further clues about the path for interest rates as well as the data from the leading index due at 10:00am (est -0.3%).”

VIX futures made a new morning low at 12.26.  Today is day 274 in the very stretched Master Cycle.  The VIX is a small index and is heavily influenced by the larger markets.  Over the past 4 years VIX has had multiple readings in the 270s.  VIX has become incredibly quiet.  Hedging is heavy in both directions.  A reset may be dramatic.

The May 22 options chain shows Max pain at 15.50.  Short gamma is incredibly strong between 12.00 and 15.00.  Long gamma begins at 16.00 and shows strength to 60.00.

USD futures have risen above the 50-day Moving Average at 104.59.  It may pull back in a consolidation, but note that it is on a buy signal.  It made its Master Cycle low on Wednesday and the Cycles Model suggests a rally to mid-June.

TNX futures are climbing this morning to a high of 44.02 thus far.  The 50-day Moving Average is at 44.10, where a confirmed buy signal awaits.  Yesterday’s low at 43.18 appears to have ended the Master Cycle on day 258.  TNX has the potential to rally to early July, almost two months.

https://www.investing.com/currencies/us-dollar-index

10:35 am

SPX is in a “throw-over” mode above the Cycle Top and upper trendline at 5305.00.  An aggressive sell signal may be made beneath 5305.00.  A trendline (confirmed) sell signal may be available beneath 5275.00.  Sentiment appears at an all-time high as well!  Nineveh’s 40 days are fast approaching on May 18.

ZeroHedge observes, “With US inflation and retail sales both cooling, bets that the Federal Reserve will cut interest rates are back, and there isn’t much left that could stop stocks from hitting new highs.

After most equity markets fully erased April losses — brushing off a perceived delay in rate cuts, sticky inflation and signs of slowing in the US job market — nothing seems to be able to halt stocks. Financial conditions are loose, the economy is holding up and even recovering in Europe, the technical picture is bullish, and the earnings season was overall pretty reassuring once again.

8:00 am  

Good Morning!  Have you prayed this morning?

NDX futures have made a new morning high at 18642.00.  Whether it becomes the new all-time-high is yet to be seen.  Today is day 258 of the Master Cycle.  We may be only a few hours from a reversal.  NDX indicators have not left us an aggressive sell level.  The 50-day Moving Average is at 17965.00, beneath which a possibly confirmed sell signal may await.

Today’s options chain shows Maximum Investor Pain at 18590.00.  Long gamma starts at 18600.00 while short gamma may begin beneath 18560.00.

ZeroHedge remarks, “The Superstar Economy

• The stellar performance of the S&P 500 superstars is not representative of the profits of wider corporate America.
• For the direction of the US jobs market, we should closely monitor the profits of the 6.4 million non-superstar US companies that account for 85 percent of US jobs. These profits have been softening.
• The US stock market’s record 50 percent valuation premium versus the non-US stock market is pricing generative AI to do through the next decade what the Web 2.0 network effect did through the last decade.”

SPX futures rose to 5320.10 this morning, but have subsequently pulled back to the flat line.  The rally has lasted 18.5 days since the April 19 low.  Today is day 258 of the Master Cycle, which is in the process of making a top.  The target needed to accomplish this is “near 5300.00.”  Mission accomplished.  The rest may be likened to guests who refuse to leave the party.  Apparently, the market isn’t reading jay Powell’s lips, “No easing in sight.”  An aggressive sell signal may be used beneath 5290.00.

Today’s options expiration shows Max Pain at 5295.00.  The parameters are tight, as long gamma begins at 5300.00 while short gamma may start at 5290.00.

ZeroHedge reports, “US index futures are flat after notching new record highs on the S&P 500 and Nasdaq 100, spurred on by a miss in the US CPI print and retail sales data on Wednesday, which also boosted bets the Federal Reserve will ease policy. That inflation data, which the market was feverishly anticipating, was inadvertently published 30 minutes early the BLS reported, raising fresh questions about how some of the world’s most sensitive economic information is released. As of 7:30am, S&P and Nasdaq futs are up 0.1% with small caps underperforming, potentially on growth fears, so it will be interesting if this morning’s stronger than expected WMT earnings can ease those fears. With the main data point of the week now past, investors will turn to Fed speakers and jobless claims data for new clues on the path of interest rates. Bond yields are moving +/-1 bp as the curve twists flatter. The US dollar looks to rally for the first time this week. Commodities are higher led by base metals with copper soaring for another day because of a short squeeze on the Comex exchange. The macro data focus is on Housing Starts/Building Permits, Import/Export Prices, and Industrial Production. NVDA reports next week so may see investors begin positioning for that. ”

VIX futures consolidated in place this morning, after the new low that was made yesterday.  The new Master Cycle low was the equivalent of moving the goalposts, as it indicated a higher degree Primary Cycle at play.

The May 22 (monthly) options expiration shows Max Pain at 15.50.  Short gamma stretched from 12.00 to 15.00.  Long gamma starts at 16.00 and shows strength to 60.00.

ZeroHedge is concerned, “The economy is signaling a more volatile, potentially recessionary period. Markets, however, aren’t paying attention. Not only are the twin tail risks of a downturn or resurgent inflation being ignored, but a near-impossible “immaculate acceleration” of boomy growth and benign price appreciation is becoming the base case.

It’s not the first time that markets and the economy have been at odds, but this is one of the most egregious. Just as the economic mood music becomes more somber and underlying signs of persistent price pressures continue to fester, the market has virtually eliminated the tail risks of a recession or an inflationary shock.”

TNX futures dropped to 43.11 (the cash low is 43.19) as it may be making its Master Cycle low this morning on day 258.    Note that the TNX has never dipped meaningfully beneath its trendline since August 3, 2020.  Today the US Treasury is auctioning $80 billion US Bills and will be announcing the 20 year bond auction amount due next week.  There are no 10-year note on auction this month.  It would be a surprise if the Fed offered a 10-year note auction.A TNX buy signal may be made above 44.09.

RealInvestmentAdvice observes, “ince the pandemic-related bazooka of fiscal stimulus, the outstanding Federal debt has risen appreciably. In nominal dollar terms, the recent debt surge is mindboggling. However, the increase is on par with the government’s negligent ways over the last fifty years.

The red bars show the percentage increase in debt starting in 1966. The bars reset to zero every time they hit 50%. The numbers to the left of each series of bars correspond to the number of quarters it took for every 50% increase.”

USD futures are consolidating beneath its 50-day Moving Average at 104.56 this morning.  Today is day 251 of the current Master Cycle.  It is due for a reversal, possibly by the end of the week.  Should that be the case, the USD may make new highs by mid-June.

ZeroHedge notes, “Demand for long exposure in the dollar through options at the back-end of the curve suggests position rebalancing is the main driver of latest spot price action.

Investors were long the greenback in the spot market and at the front-end of the curve until a week ago; BBDXY is now trading at its lowest in more than a month but remains above the April lows”

2:26 pm

SPX has made its target.  Prepare for a reversal.  An aggressive sell signal may be made beneath the 2-hour Top at 5290.00.  Confirmation lies beneath the 50-day Moving Average at 5148.50.

9:55 am

SPX is approaching its target near 5300.00.  The reversal may happen either later today or early tomorrow, day 258.  Everyone seems to be predicting a rate cut by September.

ZeroHedge comments, “With the CPI report came in on top of expectations on 3 of the 4 closely watched metrics, with just headline CPI coming in at 0.3%, just shy of the 0.4% expected (with the retail sales print coming in far uglier and missing across the board), there has been some debate among the usual commenting suspects whether this inflation report was enough to tip the scales to an earlier rate cut or not, although the consensus seems to suggest that the print was enough to keep September, if not the July, FOMC meeting in play for a rate cut.

7:45 am  Note:  I have shut off my comments section, as I have been getting over 1000 spam messages daily.  The majority appear to be generated by Russians, but more likely to be AI generated on a massive scale.  

Good Morning!  Have you said your morning prayers?

NDX futures have risen to 18340.70, just 124 points from a new all-time high.   The 50-day Moving Average is at 18955.00.  Today is day 257 of the Master Cycle. What is normally good news is also a warning that it may end sooner than one can imagine.  We are living in an Apocalyptic age.  The first horseman has already appeared in 2020.  A white horseman (WHO) wearing a crown (coronavirus) has conquered the entire world with its shutdowns.  The next horseman is war, in which many more civilians than soldiers will be killed and maimed.

Today’s options chain shows Maximum Investor Pain at 18300.00.  Long gamma may begin at 18340.00.  Short gamma starts at 18270.00.

ZeroHedge remarks, “There are two classic propaganda narratives used by governments when it comes to keeping the public invested in any war campaign that does nothing to advance their national interests:

• First, there’s the “commitment” lie, which says that once you step in to support a war effort you then must stay exponentially committed, even if that war effort is exposed as pointless. Anytime the public pulls back from that war in a bid to reconsider what purpose it serves they are ridiculed for potentially “risking lives” and setting the stage for defeat. In other words, you must support the effort blindly. You’re not allowed to examine the conflict rationally, because who wants to be blamed for losing a war?
• Second, there’s the “domino effect” lie, which says that if you allow a particular “enemy” to win in one conflict, they will automatically be emboldened to invade other countries until they own the entire planet. It’s the same claim used to trick the American populace into supporting the war in Vietnam and it rarely turns out to be true. In fact, nations that engage in regional wars tend to be so weakened by the fighting that they don’t have the means to move on to another country even if they wanted to.”

SPX futures reached an overnight high of 5252.90, less than 12 points from the all-time-high.  The structure allows a marginal new high before reversing.  However, SPX may add another 100 points if CPI is cooler than expected.

Today’s options chain shows Max Pain at 5220.00.  Long gamma begins at 5250.00 while short gamma starts at 5220.00.

ZeroHedge reports, “Equity futures were set to hold yesterday’s gains ahead of today’s CPI report, but will move violently either higher or lower after today’s CPI number is released, which will either validate or reject Jerome Powell’s latest signals that interest rates will be higher for longer (our CPI preview is here). European and Asian stocks also gained, and the MSCI All Country World Index extended its longest run of gains since January. At 7:15am ET, futures contracts on the S&P 500 were little changed with small-caps catching a bid, while the MSCI All Country World Index extended its longest run of advances since January. Nasdaq 100 futures were also flat after the underlying index hit an all time high on Tuesday.  Bond yields are down 1-2bps across the curve with the USD seeing some weakness. Commodities are higher, led by Energy and Precious Metals. On the macro front, both CPI and Retail Sales at 8.30am ET (previews here and here).”

8:43 am:  We now have our answer.  ZeroHedge reports, “After a fourth straight month of hotter than expected PPI, analysts’ expectations for CPI were tightly ranged around 0.3-0.4% MoM and printed +0.3% MoM (slightly below the 0.4% expected). The YoY headline CPI fell to +3.4% as expected from +3.5% prior

VIX futures are consolidating within yesterday’s trading range.  It is coiled near its Master Cycle low, so a hard break is most likely to the upside.  The Cycles Model suggests the VIX may get a jolt of strength over the weekend of the Nineveh Cycle.  In addition, the rally may last up to two months, giving the VIX a lot of room to rally, possibly to 100?  Analysts are asking, “How Low Can VIX Go?”

The May 15 options show Max Pain at 13.00-13.50.  There is no short gamma.  Long gamma begins at 17.00 and may rist to 60.00.

USD futures declined to the mid-Cycle support at 104.25 on day 250 of the Master Cycle.  The USD Cycles have been longer than normal since the first of the year.  Today could be the MC low.  The Cycles Model indicates that Trending strength may return to the USD over the weekend.

TNX declined to the mid-Cycle support at 43.40 this morning.  Futures were lower, at 43.38 on day 257.  This may be the end of the line for lower rates as other considerations, such as war, resume their commanding position.

Earlier, ZeroHedge suggested, “Perhaps taking a cue from our CPI commentary last week in which we explained why today’s inflation print will likely come in on the dovish side after beating estimates for 5 months in a row…

… moments ago 10Y yields plumbed fresh multi-week lows, sliding to just above 4.40% (from a high of 4.65% two weeks ago), ironically the lowest lowest since the last CPI release five weeks ago….”

The Ag Index is in a corrective mode after making its Master Cycle low on May 2.  The correction has a few more days to go with a possible target being the 50-day Moving Average at 383.28.  The real fireworks come at the breakout above the upper declining trendline at 400.00.  Ag prices have completed their 2-year decline on February 26, but the rally off the low has not been remarkable.  The next phase of the Cycle may be truly remarkable, starting next week.

The third horseman of the Apocalypse is famine.  Forces have been set into motion that not only mean higher food prices, but shortages, as farmers have been forced to cull their herds and flocks directly or indirectly by government mandates.

ZeroHedge remarks, “The concept of mass starvation has not been in the forefront of American society for a very long time. Even during the Great Depression the US was majority agrarian and most people knew how to live off the land. In fact, the US has never suffered a true national famine. There have been smaller regional instances of famine (such as during the Dust Bowl in the 1930s), but nothing coming remotely close to the kinds of famines we have seen in Asia, the Eastern Bloc, Africa or the Middle East in the past 100 years.”

ZeroHedge observes, “Rice is a staple food for over 3.5 billion people worldwide, especially in Asia, Latin America, and Africa. It’s grown in over 100 countries, with 90% of the world’s rice produced in Asia. We have been tracking the prices of Thai white rice, which surged to 15-year highs in 2023 and has since consolidated at these highs with risks of a further upside breakout. ”

3:28 pm

SPX has reached its next resistance at 5250.00, which may ordinarily be the end of the rally.  Today’s structure that triggered the probe higher was a Triangle formation that allows a final surge before the end of the Cycle.  The Triangle view is that SPX may take a couple more days to make a new all-time-high.  The Chart reflects that view, since Wave 5 is too small for its structure.  The alternate target may be as high as 5350.00.

ZeroHedge observes, “Hot PPI initially spooked markets (yields and dollar up, stocks down) but that faded fast (on lower revisions) – but the stag-flation trend continues this week…

Source: Bloomberg

Powell did briefly spook stocks around 1030ET with the following comment:

“it’s a possibility – but I dont think it will be the case – that the next action we take will be a rate hike… most likely we will stay the course….”

8:15 am

Good Morning!

The prospect of an early Master Cycle ending is gone as today is day 257 of the current Cycle.  The Nineveh Cycle is due on Saturday, May 18.  SPX futures are flat, as they await the outcome of the PPI, CPI and Powell’s speech.  What’s missing in that analysis is the cost of war, weighing heavily on interest rates, as our munitions and other supplies are depleted and our naval fleet is aging.  The move ot a war economy will be costly (stagflationary).  Critical support lies at 5135.00 to 5142.00, beneath which lies a sell signal.

Today’s options chain shows Maximum Investor pain at 5230.00.  Long gamma begins at 5250.00 while short gamma starts at 5225.00.  Bearish sentiment is growing.

ZeroHedge reports, “US equity futures are flat into tomorrow’s CPI/Retail Sales print with PPI the major macro data point today, while Fed Chair Powell also speaks. Futures are flat after also closing unchanged yesterday when the return of the meme stonk mania sent GME and AMC soaring, and hammered L/S hedge funds, whose short books exploded, leading to P&L carnage across the board and widespread degrossing which however did not impact index prices.  As of 6:30am, S&P and Nasdaq futures were unchanged. Bond yields are down 1-2bps as the yield curve bull steepens. The USD is flat and commodities are mixed with Ags lagging. Meme Stock Mania returned yesterday with GME +74% and AMC +78%, though Bitcoin was only +3%; As JPM’s Andrew Tyler asks this morning “has the Retail investor reactivated and do they support Mag7?”

VIX futures rose to 13.88 as buying (hedging) pressure rises.  The reversal out of Friday’s low was unmistakably strong.  While trending strength is not in big supply for the remainder of this week, the Cycles Model points out that trendig strength may skyrocket over the weekend.

Tomorrow’s options chain shows Max Pain at 13.50.  There is virtually no short gamma, while long gamma begins at 17.00.

ZeroHedge remarks, “Well bid VIX

You watch well bid VIX closely…”

TNX broke through Intermediate resistance at 45.08 at the announcement of the PPI before receding back beneath it.  This may be an indication that inflationary pressures may have their sway.  Today is day 256 of the Master Cycle.  The MC low may have been made on May 7.  A close above Intermediate resistance may confirm that low and offer a buy signal for higher rates.

ZeroHedge remarks, “Ahead of tomorrow’s CPI, traders are eyeing this morning’s Producer Prices for any hints that the disinflation trend will return…or not.

The answer is “not!”

April Producer Prices rose 0.5% MoM (vs +0.3% exp), with March’s +0.2% MoM revised down to -0.1% MoM. The downward revision did not stop the YoY read rising to 2.2% (from +2.1% in March)…”

USD futures have declined to 104.88 and appear to be heading lower.  Critical support lies at the 50-day Moving Average at 104.25.   The Cycles Model indicates that lower USD prices are possible through the weekend.  The alarms about the loss of USD dominance are growing more strident.  However, there is no other currency that can match the depth of the USD.

ZeroHedge notes, “The total debt owed by the United States federal government has reached incredible levels. Today, the total is $34,541,727,970,599.17 – but by the time you read this article, it’ll probably be higher.

I say “probably” because the debt is growing exponentially that by the time you read this, it’s quite possible that another few hundred billion have taken the total over $35 trillion.”

The Shanghai Composite Index may have reached its Master Cycle high last Friday on day 259 of its Master Cycle.  It is consolidating near the high.  Should it decline, critical support lies at 3058.00-3068.00, where a sell signal may be confirmed.  All indications point to an aggressive sell signal.

ZeroHedge observes, “The latest money data from China shows its capital-outflow problem is worsening, pressuring policymakers to allow a further weakening in the currency.

China released money and inflation data over the weekend. CPI and PPI were not great reading, but money supply data was even more downbeat: M2’s growth disappointed, while M1 growth is moldering, falling 1.4% year-on-year versus +1.2% expected.

Real M1 growth is now also contracting, which is ominous for China’s thus far gingerly-improving growth.”

8:30 am

Good Morning!

SPX futures made a weekend high at 5236.00, missing Friday’s high at 5239.66.  Today is day 255 in the Master Cycle.  There may be an allowance for a new marginal all-time high, but a full week may be needed in the Master Cycle to accomplish it.  The Nineveh Cycle, which matures on May 18 is still a possibility.  I may alter the structure to reflect that possibility should it warrant it.

Today’s options chain shows Maximum Investor Pain at 5200.00  Long gamma starts at 5225.00.  Short gamma may begin at 5185.00.

ZeroHedge reports, “US equity futures extended last week’s solid gains when they traded just about 1% below all time highs, as investors awaited key CPI later this week that will shape the Fed’s actions in coming months. As of 7:30am, contracts on the S&P 500 rose about 0.2% (but still below Friday’s highs), after the index posted a third straight week of gains; meanwhile contracts on the Nasdaq 100 climbed 0.3% even though Alphabet dropped 2% in premarket trading after Bloomberg reported that Apple is closing in on an agreement to use OpenAI’s technology on the iPhone. Treasury yields dipped and the dollar was steady. In addition to the week’s inflation data(both PPI and CPI) a handful of Fed speeches will also be in focus this week, including Cleveland Fed President Loretta Mester and Fed vice chair Philip Jefferson, who speak later in the day.”

VIX futures rose to 13.39 over the weekend and remains positive for the start of the week.  Friday’s low at 12.50 on day 267 may be the low for the old Cycle.  The mainstream crowd is very relaxed when it comes to volatility.  The VVIX has not been this low since 2014, a 10-year span.

The May 15 options expiration shows long gamma clearly trouncing short gamma at 17.00.  Short gamma is clearly on the wane.

ZeroHedge comments, “. No vol……VIX Benjamin Button:ed out of teen-age years and closed at its lowest level since January 23

All in all, too quiet and calm to short into and we do wonder if this is the calm before the melt-up storm…?”

TNX continues to hover just beneath Intermediate resistance at 45.60.  Today is day 255 in the current Master Cycle, suggesting an MC low may still arrive this week.  Should it do so, possible targets may be the 50-day Moving Average at 43.99 or the mid-Cycle support at 43.47.

7:30 am

Good Morning!

NDX futures have rallied to 18208.90, a new retracement high.  Today is day 252 in the current Master Cycle.  The turn window is wide open and NDX appears to be completing its probe .  Overhead resistance is at 18336.00, which may prevent a new high from being formed.  The market is running out of shorts to squeeze.  Critical support lies at 17870.00, beneath lies a sell signal.

Today’s options chain shows Maximum Investor Pain at 18160.00.   Long gamma begins at 18200.00.  Short gamma starts at 18140.00.

ZeroHedge remarks, “An ugly jobless claims print was the day’s early catalyst sending yields significantly lower, stocks, gold, oil, and crypto higher and the dollar down with rate-cut expectations re-ignited…

Source: Bloomberg

A dovish shift supported stocks – which had a “squeezey feel” amid very low liquidity…”

SPX futures ran up to 5235.90 this morning and has since eased back.  The; Cycles Model suggests a powerful turn may be made today, near the open.  The Cycles Model suggests a rise in volatility preceding a possible turn.  Support lies at 5135.00, beneath which lies a sell signal.

Today’s op-ex shows Max Pain at 5200.00.  Long gamma becomes strong above 5225.00.  Short gamma may begin beneath 5190.00.

VIX futures rose to 12.84 this morning after making its Master Cycle low yesterday at 12.68 on day 266 of its Master Cycle.  The turn window is closing for the VIX.

The May 15 options expiration shows virtually no short gamma.  Long gamma may begin at 14.00.

TNX may continue to consolidate after making its Master Cycle low on Tuesday.  The turn window is also closing for TNX.  Look for volatility to begin rising next week.

11:15 am

The same liquidity impulse that is raising BKX higher is also allowing the broader markets to go higher.  SPX has now been elevated above the Fibonacci zone at 5200.00.  I put the next “stop” at 5250.00.  A rally above that level implies a possible new ATH.  A possibility that I had not considered until now may lead to a Key Reversal today or Friday, since Trending Strength (due on Friday) can work in both directions.

ZeroHedge comments, “Stocks and bonds have been rising together again, with investors getting longer of both assets. Inflation fears are taking a backseat for now, allowing lower yields to boost stock prices.

Positioning data for equities shows that investors have been getting longer US stocks all year and are now net long as they have been since late 2021.

10:15 am

BKX, our liquidity proxy, has broken above its previous high at 105.06 and is currently at a 45% retracement of the 2022-23 decline.  A 50% Fibonacci retracement may take BKX to its Cycle Top at 109.39.  However, thee is a massive turn this week in the world markets, so a probe that falls short of that potential target would be no surprise.  The Fed and the Treasury are both keen on keeping banks afloat.

ZeroHedge observes, “In 2009, 140 banks failed, and a recent report from financial consulting firm Klaros Group says that hundreds of banks are at risk of going under this year. It’s being billed mostly as a danger for individuals and communities than for the broader economy, but for stressed lenders across America, a string of small bank failures could quite quickly spread into a larger bloodbath — especially in an economy with hot inflation and a feverish addiction to ultra-low interest rates.”

ZeroHedge remarks, “Billionaire Barry Sternlicht, Founder, Chairman and CEO of Starwood Capital Group has issued an ominous warning about America’s regional banks, which he says will fail at a rate of ‘one or two’ per week.

Speaking with CNBC on Tuesday, Sternlicht says he thinks that primary real estate lenders – community and regional banks – are about to get whacked.”

8:15 am

Good Morning!

SPX futures made a morning low of 5170.80 thus far, challenging yesterday’s intra-day low at 5165.85.  The rally has stopped, but a meaningful decline has not yet emerged.  Support lies at 5133.97, the 50-day Moving Average.  A sell signal awaits beneath that level.  Additional Intermediate support lies at 5126.22.  Should the decline continue, strength to the downside may emerge today or tomorrow with a potential panic decline on Monday.

Today’s options chain shows Maximum Investor Pain at 51990.00.  Long gamma may start at 5200.00 while short gamma may begin at 5180.00.  There is not a lot of conviction in the options market, as clear directionality is not apparent.

ZeroHedge reports, “US equity futures are weaker as yields resume their rise and the USD strengthens after the BOE signaled it was ready to cut rates. As of 7:45am, S&P futures were down 0.2% and Nasdaq futures dipped 0.3% as all Mag7 names and most semis were red in the premarket. Most European markets are lower, tracking US futures and Asian stocks in what appears to be de-risking in a catalyst-light week. 10Y treasuries ticked lower for a second day, pushing the yield about 2bps higher to 4.51% after a $42 billion sale of 10-year notes received tepid demand. Commodities are stronger with Ags/Energy outperforming Metals. Jobless data is not expected to be market moving but keep an eye on the 30Y bond auction.  ”

VIX futures are consolidating this morning, having reached an overnight high of 13.29 and no new low.  Trending strength is returning and we may see an upward explosion in the VIX today or tomorrow.

The May 15 options chain shows Max Pain at 15.00 with no short gamma.  Long gamma begins at 17.00.

ZeroHedge observes, “The VIX roundtrip

It took VIX 15 sessions to go from 13.5 to 21.3….and it took it 13 sessions to go all the way down to 13 again.

Source: Refinitiv

Exhausted selling

“We estimate >$80bn of outflows in the last month across equity ETFs and systematic strategies. Whilst that doesn’t mean a full positioning washout has taken place, it suggested to us an entry point for tactical bullish trades. In the case of a continued rally in equities this week, we expect to start seeing CTA inflows. Our model suggests that if equities were to rally back through YTD, we could see >$15bn buying of US equities from CTAs.”

TNX continues to hover near the Intermediate support/resistance at 44.88.  A possible early Master Cycle low may have been put in on Tuesday, on day 249.  Yesterday TNX closed above Intermediate support/resistance, creating a probable buy signal for TNX.  Trending strength may appear next week.  Nonetheless, the overall trend is higher.

ZeroHedge reports, “After yesterday’s stellar 3Y auction kickstarted refunding week, moments ago the Treasury sold a 10Y paper in an auction that left a bit to be desired.

Starting at the top, the 10Y auction size rose from $39BN in April to a record-matching $42BN in May, and surpassing the record auction sizes sold during the peak of the covid crisis.

The high yield was 4.483%, down modestly from last month’s 4.56% but tailing the 4.473% When Issued by 1basis point, the third consecutive tail in a row.”

USD futures declined to 105.28, approaching Intermediate support at 105.09.  The USD has another 1-2 weeks of potential correction where the target may be the mid-Cycle support at 104.23.  However, a rapidly rising TNX may jolt USD higher.

The Ag Index peaked on Tuesday and is in decline.  A violation of the Head & Shoulders neckline at 385.39 may produce a panic decline lasting 5-6 weeks in the next installment.  This decline may provide some relief for our beleaguered consumers.

SuccessfulFarming reports, “A longtime customer called and said, “I have never seen basis collapse like this before.” He said he had watched the corn futures market rally over $1.00 per bushel, but the local cash market went up only 20¢. Soybeans rallied $2.00 per bushel and the cash market went up only $1.00 per bushel. “Why?” he said. “Why such a gap?”

I explained that the spring rally in the grain markets was very different in 2023 than in the previous two years. In both 2021 and 2022, the grain market rally was driven by demand. This year, the rally was driven by weather scares. The futures market went higher while cash prices struggled to move up at all. “

ZeroHedge remarks, “If you are like most Americans, the cost of living has been going up much faster than your income has been.  Right now, millions of Americans that were once prospering are now deeply struggling.  When I was growing up, most of the population could afford to live “the American Dream”, but now that is no longer true.  At this point, the basics of a middle class lifestyle are out of reach for most Americans.  Poverty and homelessness are steadily rising, and the economy has become the number one issue during this election cycle.  Most of us just want things to go back to the way that they once were, but thanks to the very foolish decisions of our leaders that simply is not possible.”

8:00 am

Good Morning!

NDX futures have hit a morning low of  18044..00, suggesting the rally may have weakened overnight.  If so, we must look for a violation of support at the 50-day Moving Average at 17933.52, which may produce a sell signal.  That sell signal may announce the early termination of the current Master Cycle (shown on the chart).  Should this occur, the Cycles Model suggests a potential panic beginning by the end of this week.

Today’s options chain shows the longs prevail above 17925.00 while short gamma begin beneath 17900.00.

SPX futures have declined to 5169.00 thus far, as the index weakens this morning.  Support lies at the Intermediate interval at 5137.00, where a potential sell signal exists.  Violating this support may signal the early termination of the current Master Cycle.  If so, a month-long panic Cycle may set in.

Today’s options chain shows Max Pain at 5185.00  Long gamma starts immediately at 5190.00, while short gamma may begin at 5180 and strengthens at 5170.00.

ZeroHedge reports, “US equity futures flipped between gains and losses on Wednesday while European stocks hit an all time high as May’s rally in equities continued amid a clutch of solid earnings reports. As of 7:45am,  S&P 500 futures traded down 0.2%, and was near session lows reversing an earlier modest gain after the underlying gauge advanced the previous four sessions. The benchmark Treasury yield rose two basis points to 4.48%. Oil fell to the lowest level since mid-March, after a mildly bearish US stockpile report. The renewed plunge in the yen took the USDJPY as high as 155.5 amid a renewed bout of impotent jawboning by Japanese officials who however have now lost all credibility. Later today the focus will be on comments from Fed officials, including Lisa Cook, and earnings from Uber, Arm and Airbnb.”

VIX futures have risen to 13.48 thus far, indicating a potential change in the Master Cycle on May 7.  Should that be the case, VIX may be due for a panic rally by the end of the week.  In addition, the VIX Master Cycle syncs back (inversely) with the SPX Master Cycle for the next two months.  What comes after may be a very strong rally.

Today’s options expiration inthe VIX shows Maximum Investor Pain at 14.50.  Short gamma dwells at 14.00 while long gamma begins at 15.00 and remains strong to 30.00.

TNX has begun to rise from its low above the 50-day Moving Average at 43.89.  Yesterday is also a potential early MC low.  Multiple indexes appear to be synced up to May 7.  It may be an important turn.  In addition, upcoming Treasury auctions may provide a significant increase in volatility.

ZeroHedge reports, “The first refunding auction of the quarter just concluded when the Treasury sold $58BN in 3 Year paper, unchanged from last month’s size and matching the previous record high hit during the covid crisis.

The auction priced at a high yield of 4.605%, up from 4.548% in April, but while that auction tailed by 2bps, today’s auction stopped through the When Issued 4.608% by 0.3bps, the 4th stopping through auction in the past five as shown below.”

ZeroHedge notes, “We have been referring to the growth of M2 (money supply) as one of the factors that shows that the Fed has NOT been fighting inflation in our previous articles on Zerohedge (“The Fed Is the Instigator of Speculative Bubbles,” and “The Makings of a Huge Speculative Frenzy, Bigger Than The Dotcom Bubble”).

Let’s face it; the Fed is all talk!

Below we show the updated weekly chart of Money Supply M2, which continues to soar. It is the “not seasonally adjusted” and therefore, does not include the usual fudge factor of “seasonal adjustment” (chart via St. Louis Fed, with our annotations).”

8:00 am

Good Morning!

NDX futures are consolidating within yesterday’s trading range after retracing 75% of its decline from March 22.  While the Cycles Model allows almost two more weeks of rally, NDX appears to have reached an early turning point.  Structurally, the rally appears to be an A-B-C retracement that may be complete, or nearly so.  The lack of progress overnight at a strong Fibonacci level urges caution going forward.  Crossing beneath the 50-day Moving Average at 17941.00 may create a sell signal.

Today’s options chain shows Maximum Investor Pain at 18130.00.  Long gamma may arise at 18150.00 while short gamma

ZeroHedge remarks, “More of the same today after last week’s tepid payrolls and dovish Powell with gold, stocks, and bonds bid as rate-cut hopes inched higher.

The market is now pricing in two rate-cuts in 2024 and three more cuts in 2025…

Source: Bloomberg

For now the market appears to prefer the ‘bad news’ from declining growth expectations to the ‘bad news’ from soaring inflation prints…”

SPX futures have stalled this morning after having made a 73.3% retracement of its March 28 decline.  Should SPX go higher, a strong resistance may be found at 5200.00.  While the Cycles Model allows the rally to continue for up to two more weeks, a larger/alternate Cycle turn may hasten the completion of the current Master Cycle.  A sell signal may develop beneath Intermediate support at 5138.00 and is confirmes beneath the 50-day Moving Average at 5130.00.

Today’s options chain shows Max Pain at 5165.00.  Long gamma may begin at 5175.00 with further strength above 5200.00.  Short gamma begins beneath 5160.00.

ZeroHedge reports, “US stock futures are flat after the S&P 500 and Nasdaq 100 both closed 1% higher on Monday, helped by growing optimism among investors that the economy is finally slowing greenlighting earlier rate cuts by the Fed. As of 8:00am ET S&P futures were unchanged at 5,206, trading about 1% above its 50DMA, while Nasdaq futures were down 0.2% amid some mega-cap weakness. European stocks are higher, while indexes in Japan and the UK are catching up after being closed for holidays yesterday. Shares in Swiss bank UBS jumped after it returned to profit and showed more progress in its integration of Credit Suisse. Treasuries rise, with US 10-year yields falling 3bps to 4.46%. The Bloomberg Dollar Spot Index rises 0.1%. The yen weakens 0.4% against the greenback, pushing USD/JPY up to ~154.50. The Aussie falls 0.4% after the RBA kept rates on hold and maintained a neutral stance. Oil prices advance, with WTI rising 0.3% to trade near $78.70. Spot gold falls 0.4% and bitcoin traded in a range around $64,000 with the now daily European open/US slam down pattern.  US economic data slate includes March consumer credit at 3pm, while Fed’s Kashkari is scheduled to speak twice (11:30am, 1:20pm).”

VIX futures appear to be rising from their Master Cycle low at 13.44 yesterday, on day 263.  The Cycles Model suggests the rally may come on strong for the rest of the week.

Tomorrow’s op-ex shows Max Pain at 14.50.  Short gamma resides at 14.00 while long gamma comes on strong at 15.00 and continues to 30.00.

ZeroHedge observes, “Panic is gone

Goldman’s vol panic index has completed the “round trip”.

Source: GS

Hedging ain’t expensive

Hedging overall market risk with VIX options is rather cheap. VVIX has basically not closed much lower over the past decade.”

TNX has declined through Intermediate support at 44.72 and is poised just above the 50-day Moving Average at 43.85.  The current Mater Cycle has about a week-and-a-half to go, but may turn early given enough underlying support.

8:15 am

Good Morning!

SPX futures have risen to a new retracement high at 5148.00 this morning.  The Cycles Model allows up to two more weeks of possible rally. However, today is day 248, where early turns may happen.  SPX has risen above Intermediate resistance at 5136.00, allowing the bounce/rally to proceed.   Should the Cycle allow SPX to proceed the full term, a possible target for htis Master Cycle may be the Cycle Top resistance at 5371.60.  However, an early turn may shorten the target to the March 28 high at 5264.65.

Today’s options chain shows Maximum investor pain at 5115.00.  Long gamma may start at 5135.00 with strength developing above 5150.00.  Short gamma may begin at 5100.00.

ZeroHedge reports, “Global stocks and US equity futures jumped to start the new week, with the S&P 500 poised to extend last week’s rally as traders grew increasingly confident in the likelihood that the Fed will cut interest rates this year. As of 7:40am, S&P 500 and Nasdaq 100 futures added 0.3%, tracking gains in European and Asian markets although trading volumes were lower than average as UK and Japanese markets are shut for a holiday. Apple slid in pre-market trading after Berkshire Hathaway trimmed its stake for a second consecutive quarter. German 10-year yields fell and the yen weakened. Oil advanced after Saudi Arabia raised prices for customers in Asia. On today’s calendar we get the latest Senior Loan Officer Opinion Survey (SLOOS) which will signal whether demand for tight credit remains dismal.”

VIX futures are consolidating above Friday’s low on day 260 of the Cycles Model.  The reason I am allowing for an early turn in the SPX is because the VIX Cycle does not Sync with the SPX Cycle.  While the VIX may rise alongside the SPX, it is not commo and suggests other forces may be at work.  A rising “fear factor” may suggest a certain wariness among investors causing them to react more quickly.

The May 8 op-ex shows Maximum Investor Pain at 14.50.  There is a contingent of short gamma at 14.00, but long gamma starts immediately at 15.00 and runs with some conviction to 30.00.

TNX consolidated above Friday’s low at 44.53 this morning.   The Cycles Model allows up to two more weeks of decline, but multiple supports between 44.38 and 43.40 may ultimately exhaust the decline with no trending strength to power it through those levels.

ZeroHedge comments, ” The Fed’s preferred inflation measure rose 2.8% in March from a year ago. This is the core personal consumption expenditures price index, excluding food and energy, which should be less volatile than the consumer price index and a better indicator of the real process of disinflation.

This figure is not only concerning, considering the propaganda that repeats that the fight against inflation is nearing its conclusion, but it becomes even more so when we observe the upward trend over the last three and six months. Inflation has accelerated on a quarterly and half-year basis.

As E.J. Anthony, PhD economist, points out, “there was never any indication we were heading to the 2.0% inflation target, let alone the pre-pandemic 1.8% average; we’ve arrived at 3%+ with no indication we’re going significantly lower anytime soon, not with the current levels of Treasury borrowing and Fed allowing money supply growth.”

USD futures continue to consolidate above the 50-day Moving Average at 104.39.  While it may have up to two more weeks in its Master Cycle, it doesn’t have far to go, as the mid-Cycle support at 104.19 may be its ultimate support.