The Practical Investor

10:09 am

The Ag Index suddenly took a dive beneath its prior low and may have triggered a Head & Shoulders formation.  Normally H&S structures occur above or beneath a Wave (1).  This pattern is beneath a Wave (3), which is a bit unusual.  However, the pattern is valid.  The normal Wave structure allows for a decline to 225.00, so the H&S may allow for an extension.  Something may be going on that is quite unexpected.

Food wars?  ZeroHedge observes, “Sunny Verghese, CEO of Olam Agri, a Singapore-based agricultural trading firm, spoke at the Redburn Atlantic and Rothschild consumer conference last week, warned the audience that the world is heading towards a period of “food wars” as geopolitical wildfires spread across the globe.

“We have fought many wars over oil. We will fight bigger wars over food and water,” Verghese said, quoted by the Financial Times, adding that food protectionism has forced some governments to boost domestic food supplies, exacerbating food inflation.

Meanwhile, consumers hesitate at the grocery stores.  ZeroHedge remarks, “General Mills shares plunged nearly 8% at the start of the US cash session, marking its steepest intra-day drop since May 2022. The decline followed the packaged-food company’s report of fourth-quarter sales that missed average analyst estimates, coupled with a full-year sales forecast that also fell short. This disappointing outlook signals more evidence of a consumer pullback amid elevated food prices and builds on our weak consumer theme. ”

7:50 am  2 Chronicles 7:14

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

Good Morning!

NDX futures declined this morning to 19618.30.  NDX is on an aggressive sell beneath its Cycle Top and may be due for a further decline today.  Short-term support is at 19572.00.  Intermediate support and the 2-month trendline is at 19949.30, where a confirmed sell signal may be made.  The 50-day Moving Average is  at 18493.58.  NDX has the “feel” of going higher, but insiders and hedge funds are distributing a record amount of shares shares to retail investors.

Today’s options chain shows Maximum Investor Pain at 19760.00.  Long gamma may begin at 19770.00 while short gamma may start at 19750.00.  The lines are being clearly drawn.

SPX futures declined to 5451.60 this morning, testing short gamma at 5450.00.  A decline beneath that level is an encouragement for an aggressive sell.  Short-term support lies at 5420.64 while Intermediate support and the trendline lie at 5343.67, where a confirmed sell signal may be made.

Today’s opotions chain shows Max pain at 5475.00.  Long gamma may start at 5500.00, while short gamma may begin at 5455.00.

ZeroHedge reports, “US index futures are down but well off session lows as Treasury yields stay at a two week high high this morning ahead of a flurry of economic data over the next two days which will help set the path for Fed policy. At 8:00am ET, S&P futures were down 0.1% as ugly earnings from Walgreens confirmed the consumer weakness is spreading, while Nasdaq futures dropped 0.2% after Micron’s disappointing sales forecast weighed on tech giants. Semis are mostly lower post MU’s earning as hedge funds continue to dump TMT/semi names to retail investors: NVDA -1.1%, AMD -47bp, QCOM -40bp. MU is down -5.4% pre-market, partially recovered from the initial 7% loss. Bond yields are flat while the USD is modestly lower. Commodities are mostly higher led by oil complex, ags and precious metals. Today, the key macro catalysts are Jobless Claims, Durable/Cap Goods Orders and the first presidential debate tonight, while tomorrow we get the closely watched core PCE figures. The figures come after Fed Governor Michelle Bowman yesterday tempered market expectations for interest rate cuts. We also receive WBA and NKE earnings.”

VIX futures consolidate as the market winds up for  a release of volatility next week.  A Minsky Moment may be coming, as call chasing equities by investors may do a turnabout.  The Cycles Model suggests a very intense 2-3 week reversal just ahead.

The July 3 op-ex shows a very calm volatilities scenario.  There is no short gamma, but long gamma is also scarce.  The July 17 monthly options expiration comes alive at levels not seen in a while.

TNX futures raced up to 43.47, testing the mid-Cycle resistance at 43.53., then backed away.  The Cycles Model suggests a further decline to the trendline over the next week before moving higher.  The volatility in bonds is striking, mirroring the European chaos as money flees to the US.

ZeroHedge reports, “After yesterday’s solid 2Y auction stopped through with the best Bid to Cover in one year, moments ago the Treasury sold $70BN in 5Y paper in another very strong auction.

The high yield of 4.331% stopped through the When Issued 4.335% by 0.4bps, the third consecutive stop through in a row, and also the lowest high yield since the 4.235% in march.

The bid to cover rose to 2.35 from last month’s 2.30, but it was still well below the six-auction average of 2.39 and was the second lowest this year.”

USD futures may have put in a Master Cycle high yesterday and shows signa of reversing lower, down to 105.40 today.  The Cycles Model suggests a decline toward 103.00 before resuming its uptrend.

1:12 pm

GKX, the ag index, is testing its February 24 low at 363.23, but has not ventured beneath it.  Today is day 267 in the current Master Cycle and may have produced a high probability low.  Should it decline beneath that level, we may see a multi-month decline.  The Wave structure favors a multi-month rally instead, so we await the final outcome.

ZeroHedge advises, “General Mills shares plunged nearly 8% at the start of the US cash session, marking its steepest intra-day drop since May 2022. The decline followed the packaged-food company’s report of fourth-quarter sales that missed average analyst estimates, coupled with a full-year sales forecast that also fell short. This disappointing outlook signals more evidence of a consumer pullback amid elevated food prices and builds on our weak consumer theme.”

7:45 am  Are you praying for our country?

Good Morning!

SPX futures topped out at 5488.40 this morning, then subsided to the flat line.  This formed a possible flat correction, nearly matching the previous high at 5490.66.  Having completed its correction, it may resume its decline.  SPX may be on an aggressive sell signal.  There is a minor support near 5408.00.  Intermediate support and the 2-month trendline lie at5330.00, beyond which the sell signal may be confirmed.  The 50-day Moving Average is at 5241.00.

Today’s options chain shows Maximum Investor Pain at 5470.00.  Long gamma starts at 5500.00.  Short gamma may begin at 5450.00.

ZeroHedge reports, “Futures are trading modestly in the red near sessions lows, erasing earlier gains of as much as 0.2% even as gigacap tech stocks continue their meltup. At 8:00am ET, S&P futures were down 0.1%, while Nasdaq futures were still green, rising 0.1% but also fading their earlier gains in another quiet start to the day (volumes this week have been tracking down 10-15% vs 10dma), with the snapback in momentum yesterday looking to continue its rally this am (NVDA +2% in premarket). Bond yields are 2-4bp higher after Fed Governor Michelle Bowman reiterated her view that borrowing costs should remain elevated for some time; USD is higher as the yen plunges below 160 vs the USD, the lowest since 1986 with another BOJ intervention now imminent. Commodities are mixed: oil and Ags are higher, while base metals are lower. Today, the key macro focus will be on MBA Mortgage Applications (up 0.8%), New  Home Sales (10am, est 633k), $70bn UST 5yr note auction, Fed will release bank stress test results after the close today; Micron, Jefferies and General Mills are among companies reporting results.”

VIX futures may have reached their corrective low at 12.75 this morning.  The Cycles Model suggests a relative calm for the rest of June, but volatility may strengthen in early July.

Today’s op-ex shows calls dominating the chain above 13.00.  Long gamma may exist at 22.00, but that may not be of any significance on such a short notice.

TNX futures made a morning high at 42.95, while the cash market topped out at 42.90.  The Cycles Model shows TNX entering the reversal window that may last a week or more.  The Wave structure is incomplete,  favoring another probe lower.  The possible target ma be the trendline near 41.50.  The Treasury auction schedule shows $70 billion of 5-year notes being offered today.

ZeroHedge reports, “Another week of coupon auctions has begun, and with $70BN in 5Y paper due Wednesday, and $44BN in 7Ys for sale on Thursday, moments ago the Treasury sold $69BN in 2Y paper in a solid auction.

The high yield of 4.706% was “on the screws” with the When Issued which was also 4.706% ahead of the 1pm auction deadline, in fact this was the 2nd On The Screws auction this year, following a similar result in January; it was also the lowest 2Y auction yield since March and well below the 4.90% in both April and May.”

The USD (cash settle) market reached a morning high at 106.08.  It is very near its Master Cycle high today on day 267.  Should that be the case, we may see USD decline toward the Cycle Bottom at 101.58.

11:10 am

BKX tested Intermediate resistance at 103.86 and failed.  It has since declined beneath the 50-day Moving Average at 102.87, reinforcing the confirmed sell signal.  Ahead of it is a two-week decline that may take your brea(d)th away.  Its target may be the Cycle bottom and Head & Shoulders neckline near 72.50.  This Cycle may complete a round trip to the October low.  The question is, how may banks are set to fail in the next two weeks?

8:15 am  Ar you praying for our country?

Good Morning!

NDX futures rose to a morning high of 19592.00.  A bounce ending beneath 19689.00suggests a minor correction with a resumption of the decline to Intermediate support and the 2-month trendline at 18853.00.  The NDX star performer, NVDA, gained $1 trillion in 23 days, but lost $430 billion in 3 days.  The market is dependent on this single pony to pull a wagon loaded with expectant investors.  Good luck.

Today’s options chain shows Maximum Investor Pain at 19525.00  There is no discernible long gamma.  Short gamma begins at 19500.00.

SPX futures bounced to 5463.00 this morning.  The bounce may not last before resuming its decline.  Smart money is shorting the bounce.  The Cycles Model calls for an intensification of the decline starting today.

Today’s options chain shows Max pain at 5465.00.  Long gamma may begin at 5500.00 while short gamma starts at 5450.00.

ZeroHedge reports, “US index futures are higher, led by a rebound in the tech names in general and Nvidia in particular which rose as much as 3.5% in premarket trading after getting routed by a three-day, 13% selloff that wiped out $430 billion in market cap and saw it drop back into 3rd place behind Microsoft and Apple, after briefly becoming the world’s most valuable company last week. As of 8:00am ET, S&P futures are up 0.1% while Nasdaq futures gain 0.4%. European stocks are in the red, led lower by industrial names, while Asian equities gained, snapping a three-day losing streak, as advances in value stocks helped offset weakness in the tech sector. Bond yields reversed a modest rebound and have extended their Monday drop with 10Y TSYs trading at session lows of 4.21%, down 2bps, while the USD is at session highs. Commodities are mostly lower, particularly base metals and Ags. Overnight, the news flow was relatively quiet as investors are mostly digesting the tech correction. Today, we will receive Conf. Board Consumer Confidence data at 10am. On earnings, FDX will report after market close.”

VIX futures have risen to 13.52 this morning.  A rise above the 50-day Moving Average earns the recognition  by many of a possible buy signal.

Wednesday’s options chain reveals Max pain at 13.00 with no short gamma.  Long gamma begins at 15.00.

USD futures continue their rise above the  50-day Moving Average at 105.08.  A brief decline to retest the mid-Cycle support is possible.  However, the trend is higher over the next six weeks.

TNX futures tested last week’s low with a morning low of 42.08.  TNX shows a possible Triangle formation that points to a final probe lower.  The target may be the trendline at 41.50.  Today is day 246 in the Master Cycle, suggesting another week at or near the lows.  Today’s auction of ($70 billion) 5-year notes and tomorrow’s auction ($44 billion) of 7-year notes may either make of break this outlook.

Gold futures declined to a morning low of 3332.95 in a two-week consolidation beneath the 50-day Moving Average at 2356.52.  This is not a healthy sign.  The Cycles Model suggests the path of least resistance may be a decline to the mid-Cycle support at 2132.82.  The Cycles Model suggests a decline to a lower target may be possible.

ZeroHedge comments, “Central banks have been gobbling up gold, and based on responses to the World Gold Council’s 2024 Central Bank Gold Reserves Survey, their appetites for the yellow metal aren’t going to be satisfied any time soon.

Last year, central banks added a net 1,037 tons of gold to their reserves, just slightly below the record of 1,082 tons in the previous year.

That pace of buying will likely continue.”

Crude Oile futures rose to a morning high of 81.89 in a likely completion of a three week correction of its decline.  The Cycles Model calls for a possible 5-week decline that may breach the Head & Shoulders neckline.

ZeroHedsge remarks, “Don’t tell Greta, or her much easier on the eyes replacement, Sophia.

At a time when the peak of “green” virtue signaling has come and gone, we regret to inform you that all that jawboning and posturing has achieved… absolutely nothing because according to the Statistical Review of World Energy report released on Thursday, global fossil fuel consumption and energy emissions hit all-time highs in 2023 (even as fossil fuels’ share of the global energy mix decreased slightly on the year).”

:45 am  Are you praying for our country?

Good Morning!

NDX futures are hovering in a 60-point renge on either side of 19700.00.  It is beneath the Cycle Top support/resistance at 19901.50, making it a candidate for an aggressive short position.  At the very least, longs should consider lightening positions.  Investors have been jumping almost entirely into tech, causing the internal supports to weaken.  Should those supports give way, the losses may be shocking.

Today’s options chain shows a very large short position at 19750.00, clustered in an environment of indecision.

ZeroHedge remarks, “Ok, calling this a “one stock” stock “market” seems a bit extreme, but is it? On Thursday when stocks rolled over (the Nasdaq 100 started higher at the open and then dropped almost 300 points from there), virtually everyone I spoke to pointed to NVDA shares reversing as the main weight on the overall indices. Throughout much of Thursday and Friday, I was receiving many more notes on support/resistance related to NVDA than the indices, Treasuries, or anything else that could be whipping markets around. Yes, Friday was “triple witching,” which likely added to the volatility, but there was one stock that dominated all market conversation.

I’m wondering if that is why it is so difficult to make sense of markets on many fronts? Why we seem to be getting a variety of indicators, all pointing in different directions?

Breadth, one of the topics in last week’s Same But Different, is clearly front and center in this report.”

ZeroHedge shrugs at the news, “NVDA: Probably nothing…

First negative week for Nvidia since April. Only short consolidation or trend reversal?

Source: Bloomberg

Probably nothing (II)

Insider selling in NVDA is at the fastest pace in years.”

SPX futures have been hovering between 5452.00 and 5479.00, waiting for a break in either direction.  Short-term support lies at 5379.67, where an aggressive sell may be made.  A two month trendline lies at 5350.00.  Intermediate support lies at 5312.99 where sell signal confirmations begin.  The Cycles Model shows downside strength building with risk intensifying over the next two days.

Today’s options chain shows Maximum Investor Pain at 5470.00, with long gamma above and short gamma beneath it.

ZeroHedge reports, “Futures are flat, set for a muted open after erasing an earlier drop, and trading at record highs after three straight weeks of gains ahead of key inflation data later this week and the first debate between Joe Biden and Donald Trump, as well as the first round of the French snap elections. At 8:15am, S&P futures were unchanged while Nasdaq futures dropped 0.1% pressured by a 3% fall in Nvidia, which was set to extend losses for a third consecutive session, and poised to wipe out another $70 billion in market capitalization after news that ByteDance and Broadcom were discussing collaborating on a potential AI superprocessor. Bond yields are higher, and the Bloomberg Dollar Spot Index falls 0.2% after a five-week rally. Over the weekend, macro catalysts were relatively quiet. Oil prices have calmed after a drop last week, while iron ore futures sunk amid further fears about a recovery in the Chinese property market. Bitcoin tumbled on a report the MtGOX trustee will begin $9 billion in repayments in July. This week, traders will be focused on the release of the Fed’s favored inflation gauge, the core PCE, which is expected to show the slowest advance since late last year and open the door to possible interest rate hikes. Other key events include the first presidential debate on Thursday and earnings from Fedex (Tue), Micron (Wed) and Nike (Thu).”

VIX futures have broken out higher to 13.88 this morning.  The 50-day Moving Average lies at 13.99.  A breakout above that level confirms the buy signal for the VIX.  The Cycles Model shows building strength, with particular intensity in the first two weeks of July.

Wednesday’s options chain shows heavy long positions at 15.00 and 22.00.  There is no short gamma.

TNX continues to consolidate as it closes in on the next master Cycle.  The next two weeks open the window for a reversal, but the structure lacks completion.  The primary move may be to test the trendline near 41 b efore moving to higher ground.  The crumbling economies in Europe and Japan are bringing overseas investors into US Treasuries, causing yields to decline.  The trendline near 41.00 defines the floor of the uptrend and is likely to be tested or challenged.

7:45 am.  I am leaving this morning for an out-of-state conference.  I will return on Monday, June 24. 

Good Morning!  Are you praying for our country?

SPX futures have risen to an overnight high of 5516.10, precisely in the center of the proposed target of 5510.00-5522.00.  This is not a place to linger on the long side to see what happens next.  Even the bullish analysts are beginning to suggest it’s time to hedge.  There is no sell signal, yet time and price are getting very thin.  The NYSE Hi-Lo Index shows only 27 companies out of 3300 have made new 52-week highs, compared to 283 last week.  The Magnificent 7 have pared down to the Magnificent 3.  The Cycles Model is proposing a possible surprise low by mid-July.  It may be time for a Key Reversal.

Today’s options chain shows Maximum Investor Pain at 5475.00.  Long gamma begins at 5500.00 while short gamma may start at 5450.00.

ZeroHedge reports, “After hitting the beach during yesterday’s blistering Juneteenth holiday, the “buy everything” algos are back and bigger than ever, pushing futures to a fresh all time high with tech leading – as always – and small-caps lagging after the Swiss National Bank unexpectedly cut rates for a second time this year, setting the stage for much more monetary easing. As of 8:00am, S&P 500 futures are up 0.4%, while the ongoing AI frenzy pushed Nasdaq 100 futures 0.6% higher, and are now up for an 8th straight day, the longest stretch since November.”

VIX futures are consolidating inside yesterday’s trading range.  VIX is signaling a potential change in trend, as it did not make new lows as the SPX made its ATH.  The Cycles Model infers the VIX may be at new highs by mid-July.

The June 26 options chain shows long gamma beginning at 13.00, but there is little or no conviction for VIX to rise appreciably above 20.  This is where surprised may occur.

TNX futures have risen to an overnight high at 42.59.  The Cycles Model suggests TNX may be making new highs by the second week of July.

The bounce in the BKX may have met its waterloo at the Intermediate resistance at 102.83.  If so, the ensuing decline may have a touch of panic.  However, there may be enough time to make a low at the Cycle bottom at 72.92.

the next visual support is at the mid-Cycle at 93.18.

I’ll write again on Monday.  Have a good weekend!

12:43

A Fractal analysis of the NDX shows the limitations of the rally.  There are two Fractal resistances that emerge from this analysis.  The first Fractal resistance is at 20097.00, near the trendline.  The second Fractal resistance is at 20172.00, the maximum for this rally.  Keep in mind that any rally above 19977.84 fulfils the minimum value that completes the Fractal.

ZeroHedge remarks, “Holding and Hoping

US stocks reset record highs overnight as the NASDAQ rose 1.25% and the S&P500 closed up 0.77%. Even European stocks shook off the turmoil of the last few days to close higher. The EuroStoxx 100 was up 0.85%, the DAX rose 0.37% and the CAC40 rebounded from steep losses last week to close up 0.91%.”

7:35 am

Good Morning!  Have you been praying for our country?

SPX futures are in a flat correction with yet a final probe higher to go.  The probable target may be from 5510.00 to 5522.00.  Then a reversal.  You may notice that I have determined that the Master cycle had ended on May 23.  You will see why on the next chart of the DJIA.  Structurally, the May 23 high had all the elements of an all-time-high.  However, it extended due to the magnificent 5 stocks that caught investor’s attention.  In the meantime, the internals have been deteriorating.  The percent of SPX stocks above their 50-day Moving Average have fallen to 43.6% last week.  The NYSE Hi-Lo Index has fallen to -9.00.  All of these (and other) indexes have begun to fail on May 20.  In other words the SPX is in a rogue Wave based almost solely on the Magnificent 7 stocks.  A Key Reversal is possible with a close beneath 5420.00.

Today’s options chain shows Maximum Investor Pain at 5450.00.  Long gamma may begin at 5475.00 while short gamma starts beneath 5440.00.

ZeroHedge reports, “Futures are flat with gigatech naturally outperforming into today’s retail sales print where the expectations are for beats to resume after last month’s sharp miss. As of 8:00am ET, S&P futures were completely flat, while Nasdaq futures were up for the 7th day in a row as it nudges toward the 20,000 mark, with semi shares higher of course, while Mag7 names are also up small. European stocks rise for a second session as political premium fades while French government bonds drift as investors keep a close eye on political developments. Bond yields are up 1-2 bps across the curve after falling Monday amid a flurry of high-grade corporate bond sales that exceeded $21 billion. A gauge of the dollar was higher with EUR, GBP, and JPY weaker. Commodity markets are mostly lower, but WTI remains above $80/bbl with CTAs now set to buy over $30BN. The macro data focus is on Retail Sales but there is another batch of Fedspeakers; yesterday’s speakers indicated a still strong economy with no consensus among the path of inflation with risks tilted more towards a growth slowdown rather than another inflation spike.”

The INDU futures are also flat, but due for a final probe higher, but not to an all-time high.  The DJIA shows its all-time-high on May 20.  Normally the SPX more closely follows the Industrials with the NDX being the occasional outlier in the Cycles.  However, the Magnificent 7 had a larger weighting in the SPX than the DJIA, causing it to part ways with the Industrials.  So, both SPX and NDX are in an inversion to the normal Cycle.  You may recall that I had been predicting an all-time-high near May 18, which was a Saturday.  That prediction may still prove to be correct, since the correction in the DJIA may be over today.

VIX futures have also been trading flat in the overnight market.  You will notice that the VIX made its Master Cycle low on May 23, when the SPX put in its high.  However, the VIX did not make a new low, even though the SPX was making new highs.  There is no inversion here.  The VIX is simply waiting for the SPX final reversal, possibly due today.

Today’s op-ex shows Max Pain at 14.00-14.50.  Short gamma resides between 12.00 and 13.50.  Long gamma may begin at 15.00 and rises to 47.50.  A lot may depend on the timing of today’s possible reversal.

TNX declined to 42.35 this morning.  TNX has also been in an inversion, with money flow likely coming from a collapsing European market.  Note that TNX has about 3 weeks left in its Master Cycle.  The likelihood of a new low in the TNX may be declining.

USD futures declined this morning beneath the 50-day Moving Average at 105.04 and may be testing Intermediate support at 104.78.  Today is day 259 in the Master Cycle and a possible Master Cycle low.  An alternate view may be that the USD low may be due at the mid-Cycle support at 104.22.

2:00 pm

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

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

8:15 am

Good Morning!  Hove you prayed for our country?

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

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

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

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

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

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

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

9:43 am

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

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

Just look at what is happening to our banks.”

8:00 am

Good Morning!  Are you praying for our country?

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

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

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

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

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

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

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

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

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

ZeroHedge exclaims, “Sacre bleu!!

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

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

8:00 am  Are you praying for our country?

Good Morning!

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

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

ZeroHedge observes, “Not your bull break out candle

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

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

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

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

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

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

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

3:32 pm

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

11:55am

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

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

8:00 am  Have you prayed for our country?

Good Morning!

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

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

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

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

UPDATE: Here is the CPI News Release.

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

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

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

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

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

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

Source: Bloomberg

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

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

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

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