The Practical Investor

1:55 pm

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

8:00 am  Are you praying for our country?

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

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

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

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

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

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

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

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

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

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

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

The End, or Just Change?

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

Nope.

America is slipping, but not ending.

The USD is being repriced not replaced.”

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

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

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

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

9:35 am

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

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

Source: Bloomberg

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

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

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

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

8:00 am

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

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

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

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

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

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

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

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

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

8:15 am

Good Morning!  Are you praying for our country?

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

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

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

8:50 am

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

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

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

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

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

ZeroHedge notes, “Size long gamma

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

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

7:45 am

Good Morning!  Have you been praying for our country?

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

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

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

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

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

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

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

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

After Hours

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

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

8:15 am

Good Morning!  Are you praying for our country?

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

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

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

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

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

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

9:00 am

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

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

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

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

ZeroHedge remarks, “The evaporated short

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

Source: UBS

“Pro” longs

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

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

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

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

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

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

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

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

ZeroHedge remarks, “Wow oil

Oil at the most oversold levels since March 2023.

Source: Refinitiv

Never forget

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

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

3:04pm

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

7:30 am

Good Morning!  Ae you praying for our country?

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

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

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

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

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

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

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

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

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

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

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

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

8:40 am

Good Morning!  Have you prayed this morning?

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

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

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

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

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

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

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

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

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

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

10:42 am

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

10:29 am

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

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

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

Good Morning!  Have you prayed yet today?

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

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

ZeroHedge comments, “Groupthink

Hedgies are all in on the semis long logic.

Source: GS

and the daily NVDA…

The one and only

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

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

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

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

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

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

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

9:48 am

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

8:00 am

Good Morning!  Have your prayed this morning?

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

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

ZeroHedge remarks, “Little did we know

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

One stock to rule them all

Since May 22nd: NVDA +20%, SPX down.”

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

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

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

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

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

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

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

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

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

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

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

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