The Practical Investor

1:00 am

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

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

9:51 am

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

8:00 am   2 Chronicles 7:14 

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

Good Morning!

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

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

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

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

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

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

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

8:35 am

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

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

9:40 am

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

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

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

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

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

Source: Bloomberg

This prompted a massive plunge in Treasury bond yields…”

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

10:57 am

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

]10:49 am

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

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

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

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

7:45 am   2 Chronicles 7:14

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

Good Morning!

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

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

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

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

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

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

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

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

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

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

7:45 am    2 Chronicles 7:14

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

Good Morning!

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

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

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

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

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

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

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

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

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

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

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

8:00 am     2 Chronicles 7:14

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

Good Morning!

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

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

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

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

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

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

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

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

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

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

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

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

9:55 am

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

7:30 am    2 Chronicles 7:14

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

Good Morning!

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

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

ZeroHedge observes , “Baby Pool Closed for “Maintenance”

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

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

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

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

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

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

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

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

ZeroHedge remarks, “The rates reset

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

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

7:45 am    2 Chronicles 7:14

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

Good Morning!

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

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

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

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

Source: Bloomberg

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

8:15 am  2 Chronicles 7:14

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

Good Morning!

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

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

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

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

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

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

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

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

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

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

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

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

12:33 pm

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

11:01 am

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

7:30 am   2 Chronicles 7:14

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

Good Morning!

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

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

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

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

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

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

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

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

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

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

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

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

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

Shaky Ground

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

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

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

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

2:36 pm

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

7:30 am    2 Chronicles 7:14

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

Good Morning!

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

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

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

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

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

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

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

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

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

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

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

Source: Bloomberg

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

Source: Bloomberg

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

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

8:00 am   2 Chronicles 7:14

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

Good Morning!

NDX futures bounced to 19721.80 this morning, just above Intermediate resistance at 19700.00 but under the trendline near 19750.00.  Should it go higher, short-term resistance is at 20000.00.   The 50% retracement level is near 20075.00.  The bounce may last a day or so, correcting last week’s drubbing.

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

ZeroHedge remarks, “Most common plain bull market

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

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

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

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

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

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

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

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