The Practical Investor

8:30 am

Good Morning!

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

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

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

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

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

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

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

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

7:30 am

Good Morning!

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

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

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

Source: Bloomberg

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

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

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

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

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

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

11:15 am

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

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

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

10:15 am

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

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

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

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

8:15 am

Good Morning!

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

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

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

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

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

ZeroHedge observes, “The VIX roundtrip

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

Source: Refinitiv

Exhausted selling

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

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

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

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

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

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

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

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

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

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

8:00 am

Good Morning!

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

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

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

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

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

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

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

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

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

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

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

Let’s face it; the Fed is all talk!

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

8:00 am

Good Morning!

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

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

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

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

Source: Bloomberg

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

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

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

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

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

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

ZeroHedge observes, “Panic is gone

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

Source: GS

Hedging ain’t expensive

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

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

8:15 am

Good Morning!

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

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

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

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

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

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

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

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

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

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

2:09 pm

SPX is rising back above its 50-day Moving Average at 5125.00.  The next hurdle is close by at 5138.00.  Once above thos3e hurdles, it may have a target of 5370.00-5400.00.  However, next week opens the door for a major Cycle Turn.  The catalyst for the turn may be surprising…

8:00 am

Good Morning!

SPX futures are have overtaken yesterday’s high, rising to 5090.50 thus far and remains near that level.  The 50-day Moving Average is at 5122.00, a level to watch as the reaction to the jobs report comes in.  Should SPX go higher, it may accelerate the Master Cycle, as the “turn window” opens next week.  The Cycle Top is 5366.23,, the maximum high in a fifth Wave.

Today’s options chain shows Maximum Investor Pain at 5060.00.  Long gamma begins at 5075.00 while short gamma may start beneath 5050.00.

ZeroHedge reports, “US stock futures pointed to further strength on Wall Street ahead of the April jobs report after solid earnings and a record buyback announcement from Apple As of 8:00am, S&P futures rise 0.3% while Nasdaq 100 contracts add 0.6% thanks to a 6% surge in Apple in premarket trading.  The dollar weakened for a third day, while Treasuries were steady. The US 10-year yield is down about 9 basis points this week at 4.57%, its first weekly drop since March, after Powell struck a less hawkish tone than feared. Traders have also pulled forward expectations for the Fed’s first full interest-rate cut by a month to November.”

VIX futures are consolidating above the Master Cycle low made on Wednesday.  The correction is very near its maximum pullback.  The Cycles Model may allow a rally starting today.

Wednesday’s op-ex shows Max Pain at 14.50.  Short gamma resides at 14.00 while long gamma starts at 15.00 and extends to 30.00.

TNX plunged to 44.53 thus far this morning, as it declined beneath Intermediate support at 44.63.  This has created a sell signal for TNX (a buy signal for UST (10-year Treasury bonds).

ZeroHedge observes, “US yields are at the margin more exposed to a lower-than-expected payrolls release today after Powell’s pushback on a rate hike this week. Nonetheless, leading indicators are pointing to an inflection higher in payrolls growth in the coming months.

Yields are off their recent highs, but are still prone to falling further if payrolls disappoints. My fair value model for 10-year yields, which uses global central-bank rate policy, the yield curve, oil prices and the Federal Reserve’s policy rate, suggests a 10-year yield ~40 bps lower.”

ZeroHedge announces, “‘Bad’ news is back to being good news for markets as a disappointing rise in payrolls pushed rate-cut expectations higher. 2024 is now fully pricing in two rate cuts and 2025 an additional three rate-cuts…

Source: Bloomberg

As Academy Securities’ Peter Tchir writes, this report should be very good for bonds.”

USD futures declined to 104.41 while the cash market sank to 104.52.  USD has declined beneath the Intermediate support at 104.89, creating a potential sell signal.  The 50-day lies beneath that at 104.37.  The current Master Cycle may run to May 18.  The Cycles Model shows a possibly dramatic uptick in volatility over the weekend.

Gold futures have plummeted to 2285.65 this morning, beneath Intermediate support at 2297..5 and confirming its sell signal.  The 50-day Moving average is at 2231.00 and may give more credence to the bears.  The Current Master Cycle may last to early June with a possible target of 1996.40.  This may not be an ordinary pullback.

7:45 am  I will be away for the day.  Perhaps tomorrow may bring more certainty.

Good Morning!

NDX futures rallied to an overnight high at 17502.50, a 57% retracement, but deflated back beneath the 100-day Moving Average at 17485.15.  The loss of critical support is telling, since the next support is at 16419.47.  This suggests the decline may have resumed with the Cycle bottom at 13850.54 being a possible target in the next 2-3 weeks.  However, should the 100-day Moving Average be surpassed, the near-term outlook may be positive.

Today’s options chain shows short gamma beneath 17390.00.  Watch that level today.

SPX futures bounced in the overnight session to 5057.40, a 50% retracement of the Wednesday afternoon decline.  This appears to be bearish, but SPX must decline beneath yesterday’s low at 5013.00 to confirm the sell signal.  The 1987 trendline lies near 4970.00, beneath which a panic decline may occur.  Assuming the Cycle turns at the regular time, we may see a decline lasting 2-3 weeks.  As an alternate, a “push” higher over the weekend may hasten the Cycle Pivot to next week, leaving a much more bearish scenario.

Today’s op-ex shows Max Pain at 5055.00.  Long gamma kicks in above 5075.00, whereas short gamma reigns beneath 5050.00.

ZeroHedge reports, “After a bizarre reversal when US stocks first slumped and then dumped after Powell’s very dovish FOMC statement and press conference, US equity futures have regained their footing this morning and advanced as traders took comfort from the Fed’s signal that there’s no plan to raise interest rates and looked ahead to Apple’s earnings after the close. As of 7:40am, S&P 500 contracts climbed 0.7%, while Nasdaq 100 contracts add 0.9% with Apple, Amazon.com and Nvidia all posting small gains in pre-market trading.”

VIX futures are consolidating this morning after having made a possible Master Cycle low yesterday at 14.35 on day 258.  However, there is just enough uncertainty to suggest a deeper low may be in the works.

TNX is barely positive this morning after yesterday’s dip beneath the trading range.  The Cycles Model calls for a possible decline lasting 2-3 weeks that may set the tone for equities, as well.  Traders’ attempt to front-run the June taper.  However, rising prices (including stocks and bonds) are inflationary and may nip the mythical taper in its tracks.

ZeroHedge comments, “More problematically, since the last FOMC meeting, inflation data has dramatically surprised to the upside and growth data to the downside – screaming stagflation in the face of the Fed…

Source: Bloomberg

Rate-cut expectations (for 2024 and 2025) have plunged significantly since the last FOMC (that is now just one 25bps rate-cut priced in for 2024)…

Source: Bloomberg

Expectations are fully priced for a nothing-burger today on rates…”

4:00 pm

SPX made a 75% correction of the decline, then puked to the lows.  This is not a good sign.  Could this be the beginning of a Wave 3 decline?  Comments in the morning.

ZeroHedge remarks, “Powell to traders today…

…but who will have the last word?

11:10 am

SPX is in no-man’s land, waiting for the verdict.  What is announced and interpreted today may have a strong effect on the direction of the SPX.  More to come after 2:00 pm.

ZeroHedge observes, “Higher for Longer Anxiety

Markets are very, very nervous going into the FOMC decision. The Wall Street Journal’s Timiraos tells us the Fed’s message will be “higher for longer”, language that had been dumped in December.”

8:00 am: Day 23 of the Nineveh Cycle (April 8 – May 18)

Good Morning!

SPX futures declined to 5008.90 thus far this morning, threatening the 1987 trendline at 4970.00 and a Head & Shoulders formation at 4953.56.  The probability of a follow-through to the downside is high.  Traders are still pricing rate cuts into the market amidst a declining GDP and sticky inflation.  Will their hopes be dashed…or will Powell offer some hope for easing?

Today’s options chain shows short gamma beneath 5065.00.  Can Powell save the day?

ZeroHedge reports, “US equities were set for a second day of losses, as investors weighed disappointing tech earnings and braced for today’s Quarterly Refunding Announcement and Fed rate decision and Powell press conference where the Fed chair is expected to signal a delay to rate cuts. S&P 500 futures slid 0.4%, while Nasdaq 100 contracts dropped 0.8% as of 7:40 a.m. in New York, extending losses from Tuesday with markets digesting the surge the employment cost index, a measure of wages and benefits, driven by soaring union and government wages as well as the drop in US consumer confidence to its lowest since level 2022. Europe’s Stoxx 600 gauge edged lower in holiday-thinned trading. The Bloomberg dollar index was little changed, while the two-year Treasury yield held near a six-month high. Gold rebounded from yesterday’s rout but bitcoin did not and instead tumbled deeper below $60,000 driven by European selling. It’s a busy calendar and besides the FOMC, we also get the April ADP employment change (8:15am), April US manufacturing PMI (9:45am), March construction spending and JOLTS job openings and April ISM manufacturing (10am).

Trannies all-time high remains at November 1, 2021.  A second attempt to make a new high this year failed with dire consequences.  Dow Theory tells us that this non-confirmation is not healthy for the rest of the market.  In addition, there is a Head & Shoulders structure that indicates a major decline, should it be breached.  Trannies are beneath all Cyclical supports, including the mid-Cycle support at 15404.00.

ZeroHedge remarks,”Remember Trannies?

Dow Jones Transport index closed at the lowest levels of the year, not far from the 200 day moving average. These days it is all about AI, but do we worry about the weakness in the Trannies?”

VIX futures have risen to a new high at 16.15 after putting in its Master Cycle low on Monday, day 256 of the old Master Cycle.    The new Master Cycle may last until early July.  This does not bode well for equities.

Today’s options chain shows Max Pain at 15.00.  Short gamma inhabits 12.50 – 14.50.  Long gamma begins at 16.00but doesn’t show a lot of enthusiasm, yet.

TNX continues its consolidation, awaiting a directional push.  Whichever direction it takes may last until May 18.  Today traders will monitor Powell’s plan to taper the balance sheet runoff.  Remember, the Fed has no control over interest rates.  It can only follwo what the market dictates.

ZeroHedge comments, “How the Treasury intends to meet its borrowing requirements – the mix between shorter-term bills and longer-term coupons – will strongly influence liquidity and thus the performance of risk assets.

Quantitative tightening is thus on borrowed time, and the Federal Reserve’s next move this year is still likely to be an interest rate cut, despite the re-emergence of inflation.

On Wednesday the Treasury will announce how it intends to borrow $243 billion in Q2 and $847 billion in Q3, the amounts it announced on Monday that it wanted to raise. Q2’s figure was above the previous estimate, while Q3’s number was toward the upper end of expectations. The consensus is leaning toward the increase being made up for by issuing bills rather than coupons.”

USD futures are easing lower as the market focuses on the FOMC announcement this afternoon.  Continued higher rates may strengthen the USD.  The current Master Cycle may continue through May 18.

8:15 am

Good Morning!

SPX futures slipped to 5104.40 this morning after having tested short-term support at 5085.29 (not shown) during yesterday’s session.  The 50-day Moving Average remains as resistance at 5121.79.  Intermediate resistance is at 5147.06.  A break higher may lead to a new all-time high.  Should the SPX decline, the 1987 trendline at 4960.00 remains as support.  The Cycles Model allows up to three weeks to resolve its dilemma of what to do next.  However, should the SPX remain elevated this week, it may hasten the arrival of a Master Cycle high.

Today’s options chain shows Maximum Investor Pain at 5075.00.  Long gamma may begin at 5100.00 while short gamma starts at 5050.00.

ZeroHedge reports, “US equity futures dropped, and European markets were mixed on the last day of the month amid concerns the Fed may stick to its hawkish messaging at its meeting on Wednesday. As of 7:40am, S&P 500 and Nasdaq futures were down 0.1% while Europe’s Stoxx 600 index retreated 0.4%, while Asian stocks gained on Japan’s return from holiday. The Bloomberg Dollar Spot Index climbed and 10-year Treasury yields were steady at 4.62%. The yen resumed its decline even as a Bloomberg analysis found that Japan almost certainly conducted its first currency intervention since 2022 to prop up the yen on Monday. Commodities were mixed with metals down and oil rebounding from its biggest drop in almost two weeks amid discussions on a possible cease-fire in the Middle East. Macro data today includes Q1 employment cost index, Case Shiller home prices, April MNI Chicago PMI, consumer confidence and Dallas Fed services activity. Bitcoin tumbled after activity on Hong Kong’s new crypto ETFs came in far below expectations.”

VIX futures are consolidating above the mid-Cycle support at 14.94 after having made a potential Master Cycle low on day 256.  Should yesterday’s action mark the low, we may expect to see  the VIX resume its rally to early July.

Tomorrow’s options Chain shows Max Pain at 15.00.  Short gamma rules from 12.50 to 14.00.  Long gamma begins at 17.00, but doesn’t show much enthusiasm.

TNX is rising this morning.  The new Master Cycle is due for completion by May 18.  We may see a phase shift into high gear (rates) over the next 2-3 weeks.

ZeroHedge comments, “Highlighting just how sensitive the market is to any ‘inflation/deflation’ narrative questions, the Q1 Employment Cost Index (ECI) – a data point that is typically of secondary import – printed hotter than expected this morning and sent markets reeling.

The ECI rose from +0.9% QoQ in Q4 to +1.2% QoQ in Q1 (well above the +1.0% QoQ expected). That is the biggest QoQ jump in a year…”

ZeroHedge remarks, “The Federal Reserve’s next move this year is likely to be a rate cut – despite the re-emergence of inflation – leaving markets at risk of a dovish repricing.

When it comes to the Fed, it’s easy to get hung up on what they should do, and neglect what they actually will do. From an inflation perspective, it’s becoming increasingly clear the central bank needs to raise rates further to quell resurgent price growth. But that’s unlikely. Instead, the risks to government funding costs and mounting pressure on liquidity are likely to tilt the Fed in favor of cutting rates, even as inflation is making an unwelcome return.”

USD futures are consolidating in place.  The Wave structure allows the USD to go higher.  Should that happen, we may see a “phase shift” into higher rates until the end of May.

Gold futures have declined beneath the Cycle Top at 2315.23, creating a sell signal.  Further support lies at the Intermediate level at 2285.32.  Critical support lies at the 50-day Moving Average at 2214.23.  The Cycles Model suggests a possible decline to early June, where the 50-day May come into play.