The Practical Investor

2:10 pm

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

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

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

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

1:59 pm

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

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

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

7:45 am

Good Morning!  Have you prayed this morning?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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10:05 am

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

9:55 am

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

8:00 am

Good Morning!  Have you prayed yet?

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

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

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

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

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

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

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

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

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

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

 1:19 am

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

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

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

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

8:00 am

Good Morning!  Have you been praying?

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

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

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

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

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

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

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

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

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

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

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

9:35 am

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

8:15 am

Good Morning!  Have you prayed yet?

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

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

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

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

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

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

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

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

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

ZeroHedge observes, “Zoom in…

…and you will see the SPY volume bar.

Source: Refinitiv

The death of volatility

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

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

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

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

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

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

11:36 am

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

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

11:11 am

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

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

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

9:35 am

Good morning!

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

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

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

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

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

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

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

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

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

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

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

7:30 am

Good Morning!  Have you prayed this morning?

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

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

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

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

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

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

7:30 am

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

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

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

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

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

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

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

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

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

10:35 am

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

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

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

8:00 am  

Good Morning!  Have you prayed this morning?

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

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

ZeroHedge remarks, “The Superstar Economy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2:26 pm

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

9:55 am

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

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

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

Good Morning!  Have you said your morning prayers?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3:28 pm

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

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

Source: Bloomberg

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

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

8:15 am

Good Morning!

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

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

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

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

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

ZeroHedge remarks, “Well bid VIX

You watch well bid VIX closely…”

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

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

The answer is “not!”

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

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

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

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

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

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

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

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