For those who wish

For those of you who wish to support a spiritual message during the Lenten Season I recommend looking up theholyfaceproject.com.  As a Catholic Christian I find this project worthy of support.  In fact, I have gone on a limb and have contracted 4 billboards in the Lansing area, with an option to expand to 12 until June 30.  I have found other communities who also have an interest in promoting this message and I am coaching them in setting up their own projects.  These billboards contain no advertising.  They simply have the face of Christ as seen on the Shroud of Turin with theholyfaceproject.com beneath it.

Lansing has its own support page on the website.  As I am not currently charging for my blog, I would appreciate your support of a project dear to my heart that I have committed my own support.  Thank you.

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February 2, 2023

2:02 pm

VIX may be on its way to a Key Reversal day. It made a new low, touching the Cycle Bottom support, reversing from that low.  It has since exceeded the prior day’s close at 17.87, fulfilling the requirements of a Key Reversal.  It also gives us an aggressive buy signal that may be confirmed above the 50-day Moving Average at 20.95.

ZeroHedge remarks, “Mean reversion

Volatility is mean reverting over time for “natural” reasons. You don’t buy protection when you must. You to buy it when you can. We outlined our logic on volatility earlier this week (here). VIX around 18, give or take, is close to the lower part of the “mean reversion” range. Sure, maybe we undershoot, but volatility you trade in “batches”, i.e lean into the trade logic. We would be looking to add a “batch” around these levels.”

 

12:27 pm

SPX overshot our maximum target.  It was based on the weekly mid-Cycle resistance, now at 4170.00 from 4165.00 two days ago.  As mentioned this morning, this market is being propelled higher by gamma influence.  There is a huge volume of gamma-chasing trades using single-day options.  For example, over 39,000 put contracts have been traded thus far today at the 4150.00 strike.  Even more amazing, over 55,000 call contracts have been traded thus far today at the 4200.00 strike.  This is a veritable feeding frenzy.  However, after 1:00 pm the frenzy may flatten out and profits taken as the close looms.  This is an ideal setup for a key reversal.

ZeroHedge advises, “Here is why, should the market rise just a modest 2% higher from here, what has already been a painful, short-squeeze driven meltup, could become a full-blown capitulatory panic as the Dealers cover shorts and go all-in the upward chase (just as Hartnett warned last Friday in “Another 3-5% Will Feel Like Bathing In Lava If You’re A Bear“).

As Goldman derivatives guru Brian Garrett calculates, at current spot, the Goldman model suggests dealers are long between $2.5-$3bn of option gamma (ie, dealers sell ~14.5k ES1 futures if the SPX rallies 100bps).

But, in the up 3-4% node, the GS model suggests this gamma profile flips from long to flat (dealers are no longer a seller in an up tape, and instead start chasing the market, buying more as stocks accelerate to the upside)

 

8:00 am

Good Morning!

SPX futures stayed positive, reaching an overnight high of 4146.70.  This may be due to dealers chasing long gamma into the close.  Note that today is day 258 of the Master Cycle and 3 days into the new 12.9-month Primary Cycle.  Today is also a day of trending strength which may make a reversal very sharp and strong.  There is no technical support until SPX reaches the descending trendline at 4006.00.  The 50-day and 200-day Moving Averages are very near 3950.00, with a confirmed sell signal beneath.  Most of yesterday’s blazing spike may have been due to same day call options chasing long gamma above 4050.00 and not to short covering per se.  Should the rally persist into the open, maximum resistance lies at 4165.00.

Today’s op-ex shows Maximum Pain for options investors at 4055.00.  Long gamma starts at 4100.00 while short gamma begins at 4050.00.  There appears to be a growing conviction among the shorts.  There are fewer calls at 4150.00 than puts at 4050.00.

ZeroHedge reports, “Global markets rose, with US futures solidly in the green as tech stocks were set to extend their rally on Thursday, lifted by Powell’s comments on inflation and Meta surging 20% in US premarket trading after the social-media giant’s earnings and buyback news. Summarizing yesterday’s market moving FOMC decision and presser, Goldman said that even though the “FOMC Statement was Hawkish: kept ‘ongoing’ and ‘appropriate’, however “more importantly presser was dovish: 1) Powell’s disinflation language (“we can say the disinflation process has started”, something that’s “welcome, encouraging, and gratifying”) and 2) the fact Powell didn’t warn markets RE easing financial conditions in the last few weeks.” In kneejerk reaction bears everywhere were steamrolled as Powell triggered a marketwide short squeeze.

Nasdaq futures were up 1.3% at 7:45 a.m. ET after the tech-heavy index jumped 2% during the previous session and closed at its highest level since September; the Nasdaq 100 is up 13% this year, having posted the best monthly gain since July in January. The recovery follows last year’s 33% slump, which was the worst since the 2008 global financial crisis. S&P futures added another 0.4% to yesterday’s surge, which pushed spoos to 4152, the highest since August as the consensus bearish trade (JPM, MS, GS, BofA are all bearish) gets steamrolled.”

 

VIX futures extended lower to 17.49 this morning, possibly due to dealers chasing short gamma from yesterday’s op-ex.  Dealers may use the futures market to obtain their liquidity to pay off matured in-the-money puts, thus the futures are pushed lower, then sold to raise liquidity.  The dip may not last beyond the open.   Once those transactions are complete, the VIX may make a substantial bounce.  A buy signal is made above the 50-dqay Moving Average at 21.03.

 

TNX has tested the 200-day Moving Average at 33.47, but hasn’t bounced yet.  It’s low thus far is 33.54 on day 253 of the Master Cycle.  It may retest the 200-day, but once it rises above the mid-Cycle resistance at 33.83 it may be on an aggressive buy signal.  TNX is due imminently for a double dose of trending strength.  Should that occur after the reversal, the surprise to the markets may be complete.  The new Master Cycle may extend through late March.  Is Yellen trying to prevent a panic?

ZeroHedge reports, “Amid the escalating debt ceiling standoff which is sure to culminate with fireworks some time in September, the Treasury announced on Wednesday morning that it would offer $96 billion of Treasury securities to refund approximately $67.1 billion of privately-held Treasury notes and bonds maturing on February 15, 2023. The amount was inline with expectations and was unchanged from last month. This issuance will raise new cash from private investors of approximately $28.9 billion. Issuance plans for Treasury Inflation-Protected Securities, or TIPS, were also kept unchanged compared with sizes over the prior quarter.  The securities to be issued are:

  • 3-year note in the amount of $40 billion, to be sold on Feb 7 and maturing February 15, 2026;
  • 10-year note in the amount of $35 billion, to be sold on Feb 8 and maturing February 15, 2033
  • 30-year bond in the amount of $21 billion, to be sold on Feb 9 and maturing February 15, 2053.”

 

USD futures made a new low at 100.68 this morning on day 280 of the current Master Cycle.  USD may be wrapping up a 25.8-month Cycle, due in February.  Since the current Master Cycle is running over, it may be possible that it had ended on January 18.  If USD does not reverse by the weekend, the chart may be modified to reflect that  and a new Master Cycle low may be seen by the end of the month between 93.50 and 98.25.  The Cycles Model shows a strengthening of the trend starting this weekend.

 

Crude oil (WTIC) made a new morning low at 75.73 after declining beneath the 50-day Moving Average at 77.81 yesterday.  It is now on a confirmed sell signal.  The Cycles Model calls for a decline that may last through the end of February.  Should it cross the Broadening Wedge trendline near 71.00, that formation may be triggered with the knock-on consequences.  The Wave structure may need to be modified to accommodate an extension of the decline.

 

 

 

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February 1, 2023

3:10 pm

The “mild” report has goosed sentiment enough to spark a melt-up  in SPX that may end in tears.  The 50% retracement value of last year’s decline is 4142.00.  Weekly mid-Cycle resistance (not shown) is strong at 4165.00.  Either target may be a stopper for this rally, if it gets that far.  As of tomorrow (day 258), we will have two Cycles pointing down.  It may be time to take short positions.

ZeroHedge observes, “The Fed hiked 25bps as fully expected and the statement had 3 key highlights:

  1. Hawkish – keeps “ongoing increases” (plural) language signaling no pause in March.
  2. Small Dovish – adds inflation “has eased somewhat” but notes “remains elevated.”
  3. Dovish – Changes “pace” of future increases with “extent”, as it transitions from the rate of hikes to the duration of higher rates before any pivot.

As Inflation Insights suggests:

“The one word change from the ‘pace’ of future rate hikes to the ‘extent’ of future hikes tells you that when the Minutes come out, we’ll likely read that officials have begun to debate when to pause.”

While everyone expects a ‘hawkish’ rhetoric from Powell in the presser, we suspect it won’t be ‘hawkish’ enough.”

 

8:20 am

Good Morning!

SPX futures have declined, but remain within a trading range above the declining trendline now at 4008.00.  A decline beneath that level produces an aggressive sell signal, while the 200-day Moving Average is at 3954.00 and the 50-day is at 3947.00, where the sell signal is confirmed.  A mixed message from the FOMC may produce a lot of volatility with a possible new high before the reversal.  A hawkish message may cause an immediate and spectacular decline, as today is day 257 of the Master Cycle.  Today is day 257 of the ending Master Cycle.  The 12.9-month Cycle may have ended on Monday.

Today’s op-ex shows Maximum Pain at 4045.00.  Long gamma may start at 4050.00, while short gamma begins at 4000.00.  The sentiment in options is getting more bearish than bullish.

ZeroHedge reports, “S stock index futures slipped on Wednesday – after a frenzied late rally into Tuesday’s month-end thanks to a monstrous, $6 billion in Market on Close buy orders – but were off session lows as investors awaited the Fed’s policy decision after a stellar start to the year for stocks amid speculation the central bank will signal a slowdown in the pace of rate hikes.

Futures on the S&P 500 were 0.2% lower, trading around 4083, while Nasdaq 100 futs popped into the green as of 745am ET, with both underlying indexes surging more than 1% on Tuesday. The Nasdaq soared more than 10% in January in a furious short-covering rebound unseen in more than two decades. An index of global stocks excluding the US is making history with a gain of 8.6% last month — the best start to a year on record. Elsewhere, European and Asian stocks rose, the 10-year Treasury yield fell about three basis points and the dollar index dipped before the Fed statement, where it’s forecast to unveil a 25 basis point rate increase.”

 

 

VIX futures consolidated within a narrow trading  range between 19.40 and 19.73.  A credible reversal was made on Monday, day 270 of the expired Master Cycle.  Circumstances allow an aggressive buy signal.  Confirmation of that signal lies above the 50-day Moving Average at 21.16.

ZeroHedge remarks, “On October 12, 1987, a week before Black Monday, the Wall Street Journal warned of the potential for significant market turmoil. Per the article: The use of portfolio insurance “could snowball into a stunning rout for stocks.” Today, we are increasingly alarmed that another trading tool similar to portfolio insurance could set markets up for a bout of turmoil.

The quote above and a detailed analysis of Black Monday can be found in a Federal Reserve white paper entitled A Brief history of the 1987 Stock Market Crash.

Despite the growing risk to foster market turmoil, 0DTE is a term few investors have heard of.”

 

TNX is lower this morning, as anticipated.  Today is day 252 of the current Master Cycle.   It is in the “time window” for a reversal and now must reach the price target near the 200-day Moving Average at 33.45 to complete the correction.  The Cycles Model allows a 7-week rally out of this low that may exceed the current high.  Trending strength comes roaring back by mid-week which may lead to a panic Cycle.

ZeroHedge remarks, “Cutting to the chase, ahead of the Fed’s decision (due at 2pm, Powell press conference 2:30pm, no projections so no new dots so no way to push back more on market expectations for sub-5% terminal rate), the key question – as Goldman puts it – is “what the FOMC will signal about further hikes this year” since 25bps tomorrow is in the bag and what matters to stocks is i) will this be the final rate hike and ii) how long will the Fed keep rates here before starting to cut.

“The Fed is approaching a critical inflection point and whether they finish with 25bp tomorrow (at 4.75%) or 25bp on 3/22 (at 5%), the end is very much in sight (but what really matters is how long they hold this level which i am betting will be much longer than most currently expect).” – Goldman trader John Flood”

 

USD futures are edging lower this morning.  However, having made its Master Cycle low on January 18, the USD is now in a position to break considerably higher.  New trending strength begins this weekend and the current Master Cycle has until the end of February to move higher.

 

Crude oil futures are hovering just above the 50-day Moving Average at 78.02.  Beneath that lies a sell signal.  The current Master Cycle extends to the end of February.  The chart warns that, should WTIC decline beneath the 50-day , there may be a substantial decline.

ZeroHedge observes, “Oil prices rallied on the day, with WTI rebounding back above $79 as factors ranging from the end of the Fed’s (dovish) rate increases to swelling demand in China give bulls more ammunition.

“The main driver for oil lately has been the potential for a resurgence of oil demand out of China, which may continue into February considering how Chinese economic momentum picked up in the overnight PMI reports,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

The nationwide ‘deep freeze’ has clearly been impacting the inventory data over the last few weeks. We suspect today could be the first ‘clean’ indication…”

 

 

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January 31, 2023

12:12 pm

While SPX futures have declined beneath the trendline at 4010.00, the cash market has not.  This morning’s bounce keeps the SPX in positive territory…yet.  However, beneath the trendline lies an aggressive sell signal.  Confirmation of the sell signal comes beneath the 200-day Moving Average at 3953.84.  We may end up waiting until the FOMC minutes are revealed tomorrow on day 257 of the Master Cycle.  Remember, a reversal may have been made on Monday where an overlapping 12.9-month Cycle has ended.

 

12:00 pm

After testing the mid-Cycle support currently at 11863.00, NDX has bounced back above the 200-day Moving Average and descending trendline at 11981.00. A close beneath it reiterates the aggressive sell signal, while a further decline beneath the mid-Cycle support confirms the sell signal.  These benchmarks are declining at the rate of 11 points per day, thus explaining the changing reference points.

ZeroHedge remarks, “NASDAQ’s kiss of the 200 day

From above to below the 200 day moving average. The question is, how many people got sucked into this squeeze buying stuff they never wanted to buy…?

Source: Refinitiv

The inverse to last year – time for a move lower?

JPM positioning intelligence team writes: “On a longer term basis, positioning still looks below average, but hard to argue it’s extremely light anymore and the changes in positioning are showing a much more positive swing in the recent past. Thus, perhaps it’s possible that we get a reversal in the rally sometime soon…i.e., the opposite of what happened at the end of last Jan/early Feb when the market bounced after the sharp sell-off at the start of the year.”

 

7:30 am

Good Morning!

NDX futures declined beneath the mid-Cycle support at 11868.00 to a low of 11388.00, confirming the sell signal.  While yesterday was day 255 (within the reversal window) in the current Master Cycle, it may have also fulfilled yet a larger 12.9-month (Primary) Cycle (1 year and 27 days) starting at the January 3, 2022 high.  It is not unusual to see Cycles shortened or prolonged to match up with the Cycles of other major indices or with larger degree Cycles that superimpose over smaller ones.  Should the Primary 12.9-month Cycles persist, the new pattern may persist until the end of February 2024.  The Primary Cycle following may be targeted for the end of March, 2025.  This is only an approximation, since the new Primary Cycle may be longer than 12.9 months.  This bear market may be larger than anyone has seen or expected since the 12.9 year bear market between 1969 and August 1982.  I was a rookie at the time.

NDX op-ex shows Maximum Pain for options investors at 11725.00.  Long gamma starts at 11800.00 while short gamma begins at 11700.00.

ZeroHedge comments, “Technology-heavy Nasdaq is experiencing one of its best months in two decades despite accelerating mass job cuts at tech firms and increasing risk of recession.

The Nasdaq Composite Index is up 10% so far this month, on track for its best January performance since 2001, when it recorded a 12% gain.

Stocks are flying ahead of the Wednesday FOMC meeting. What could derail optimism is Fed Chair Powell re-emphasizing that the rate hike cycle isn’t over, which would force financial conditions to retighten.”

 

SPX futures declined to 3993.80, challenging the trendline at 4000.00.  A sell signal awaits a close beneath 4,000.00, but be aware that NDX may be taking leadership in this decline.  In addition, the DJIA may have reversed yesterday from a second lower high since the December 13 peak.

There seems to be a blackout on the options chains for SPX  and SPY since yesterday.

ZeroHedge reports, “US equity futures showed no sign of rebounding on Tuesday from the Nasdaq’s worst single-day drubbing in over a month, with investors growing nervous ahead of this week’s barrage of central bank meetings which include the BOE and ECB Thursday and start tomorrow, when the Fed is expected to hike rates by 25bps; a barrage of earnings reports from some of the world’s biggest companies is also keeping investors busy.

Futures for the Nasdaq 100 and the S&P 500 indexes slipped 0.6% and 0.3%, recovering from even bigger losses earlier in the session as doubts continue to grow about the sustainability of a four-month old rally, which has accelerated further since the start of the year. The Nasdaq benchmark tumbled more than 2% on Monday, its largest decline since Dec. 22 . Despite the pre-Fed jitters, however, both the S&P 500 and the Nasdaq 100 are poised for their best start to a year since 2019 as optimism over slowing inflation and resilient economic growth fueled appetite for risk. However, the start of the earnings season with corporate warnings and reiteration of the Fed’s resolve to raise rates have put a damper on the recovery. Treasury yields dipped, the dollar edged higher and oil extended its recent losses.”

 

 

VIX futures made an overnight high at 20.70 as the reversal from Friday’s Master Cycle low (Primary Wave [B]) takes hold.  The Master Cycle was stretched to 270 days to fit the 12.9 month Primary Cycle which also ended on Friday.  Many analysts are talking about “mean reversion” in the VIX.  This does not mean a return to the mid-Cycle at 25.24.  For many, the reversion will be just beginning at that level,, since elevated risk does not register until then.  The minimum rally may be to the top of Primary Wave [A] at 38.94.

 

USD futures made a new high at 102.45 this morning.  The Cycles Model shows trending strength coming out of the Master Cycle low on January 18.  The new Master Cycle may last through the end of February.

ZeroHedge comments, “Got dollars?

The move has been extreme. Time for some mean reversion?

Source: MS

They puked the dollar

Net specs are short. Not massively, but the “sell” has been rather impressive.

 

 

TNX was repelled by Intermediate-term resistance at 35.93 and may decline over the next week to the 200-day Moving Average at 33.42.  Intermediate Wave (3) of Primary Wave [4] does not appear to be complete and must decline beneath its prior low, if only for a day.  Investors buying bonds may not be aware of the corrective nature of this decline in yields.

ZeroHedge observes, “2023 started with a buying-panic in bonds (approaching their best start to a year in over 30 years at one point) as confidence grew about The Fed’s terminal rate (not as high as some feared) and a soft landing (growth cooling and inflation slowing)…

Source: Bloomberg

But, as the last week’s surge in positive macro data (driven largely by better than expected labor market prints), we have seen bonds sold (and stocks bought)…

And hedge funds have piled in, building, as Bloomberg reports, the biggest bearish bet on bond futures on record…”

 

 

 

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January 30, 2023

7:00 am

Good Morning!

NDX futures are lower this morning. The bullish signal may be changing to bearish this morning since NDX is challenging the trendline at 12000.00.  A close beneath  12000.00 would confirm it.  Technically, NDX may have met its minimum requirement for a retracement rally (a Flat Correction).  The 12.9-month Cycle may be complete, or nearly so.  Cyclically, the bear market resumes in the NDX beneath mid-Cycle support at 11876.78 where a sell signal may be confirmed.

However, should the bulls prevail, Wave (C) is equal to Wave (A) at 12699.00.  In addition, the first Fibonacci retracement at 38.2% is at 12890.00.  There is no assurance that any of those targets may be met.  Today is day 255 in the current Master Cycle.  It takes both time and price to meet for a reversal.  The NDX is closing in on both this week.

This morning’s op-ex shows Maximum Pain for options investors at 12175.00.  Long gamma starts a 12250.00 while short gamma begins at 12150.00.  Dealers and hedge funds working the options market may exert influence to keep the NDX out of either camp.

ZeroHedge observes, “Back on January 9, despite a wave of raging pushback (putting it mildly) as the consensus bearish call was dead certain that the bottom was about to fall out of the market – after all, who in their right mind would fight the Fed when the Fed has clearly telegraphed that it wants risk lower – we warned that “We Are Setting Up For A Tech-led Squeeze Higher As Shorting Gets Extreme.”

What happened next was a historic tech-led squeeze as shorts got steamrolled over and over, and every attempt to push stocks lower was met with furious dip-buying (mostly by retail) which pushed S&P futs above all key resistance levels (50DMA, CTA trigger, 200DMA, descending channel) which sent it to a two month high of 4,100.

The bear-capitulating result, as Goldman’s Michael Nocerino puts it in his latest market note (available to pro subs), is that with just two trading days left in the month, “the January effect has come to fruition as the SPX is +6.02% and NDX is +11.2%, making this Nasdaq’s best start in over 20 years.”

 

SPX futures are lower, but must close beneath the declining trendline at 4000.00 to create an aggressive sell signal.  Confirmation of that sell signal comes beneath the 50-day Moving Average at 3944.25.  Should SPX (and NDX) follow the calendar Model, the reversal may come on Wednesday or Thursday.  However, the window for a reversal is now open and the minimum retracement may be met at 4100.00.  Other retracement values are the 50% retrace at 4142.03 and the Weekly mid-Cycle resistance at 4162.69.   Resistance in the INDU is at 35026.00.

The options chain in the SPX is not available this morning.

ZeroHedge reports, “US equity index futures dipped, with megatech underperforming after a month of blowout gains. MegaCap Tech are lower ahead of key earnings this week: AAPL -1.3%, AMZN -1.8%, GOOGL -1.3% (all three will report on Thur, post-mkt) and META -1.8% (will report on Weds, post-mkt). Investors are also bracing for a barrage of central bank announcements including the Fed’s 25bps rate hike on Wednesday, and looked ahead to the busiest week in earnings season with 107 S&P companies reporting, representing a whopping 35% of earnings by sector. Commodities are mixed with lower energy; the dollar and Treasuries were both weaker. The question – as we hear from the Fed, ECB and BOE – is will stocks sustain last week’s rally?

S&P 500 futures slipped 0.9% at 7:30 a.m. ET, dropping to 4,406 after briefly printing above 4,100 on Friday and closed 2.5% higher last week. Nasdaq 100 futures declined 1.2% after the tech-heavy index soared 4.7%, its fourth straight week of gains. Despite today’s drop, the index is set for the best January since 1999.”

 

VIX futures rose to 20.20 this morning out of Friday’s Master Cycle low on day 270.  The extension was unexpected, but the decline is now complete.  An aggressive buy signal may have been made, to be confirmed by crossing above the 50-day Moving Average at 21.34.  The mid-Cycle resistance at 25.27 (25.00) may be universally recognized as a buy signal by most analysts.  A breakout above the December high at 25.84 may trigger massive buying/hedging.

ZeroHedge observes, “Time to get busy

We have a bombastic week ahead of us.Three major central bank decisions, massive earnings and many major macro releases. Hard to remember such a busy calendar. Volatility has imploded and given the busy schedule going forward we find protection is a must, bullish or bearish. Time for a thread on volatility.

The volatility reset

SPX 1 and 3 month implied vols have moved one way over the past months: lower.

Source: Refinitiv

The protection puke

Goldman’s Garret shows the change in 3 month SPX implied volatility; “…effectively cut by a third over the last few weeks.”

 

USD futures continue to consolidate between 101.45 and 101.85.  The low made on January 18 has not been exceeded.  he Cycles Model shows trending strength rising this entire week.  The 4-month decline in the USD has lulled investors to sleep.  This week may give a wake up call.

 

TNX futures rose to 35.63 this morning, still sort of the overhead resistance at 35.92 that carries a buy signal.  The next Master Cycle terminus is only a week away.  The inability to rise above resistance suggests another decline beneath the mid-Cycle support at 33.73, possibly to the 200-dy Moving Average at 33.34, completing the Master Cycle.

 

Crude oil futures have declined to 78.75, approaching the 50-day Moving Average at 78.36.  A decline beneath it triggers a sell signal.  The trendline near 70.00 may trigger the Broadening Wedge formation with a target near 50.00.  Stay alert for a continued decline through the end of February.

OilPrice.com reports, “Traders believe the Federal Reserve could finally stop hiking interest rates this March as indicators suggest inflation is finally coming under control.

  • Oil prices climbed on Friday on positive economic data coming out of the U.S., and expectations are the hike this week will be lower than previous ones.
  • Other bullish factors for oil prices include rising Chinese demand and growing geopolitical risks in the Middle East following reports of drone attacks in Iran.

Traders expect the Federal Reserve to end its rate hikes in two months, which could push oil prices higher due to the generally inverse relationship between rates and oil prices.”

 

Gold futures re consolidating around the Cycle Top support/resistance at 1927.42.  Having made its Master Cycle high last Wednesday, gold is susceptible to a turn-down with the Cycle Top as the trigger for an aggressive sell signal.  Should that occur, gold may decline through the end of March.

 

 

 

 

 

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January 27, 2023

3:36 pm

BKX may have met its Master Cycle high today on day 259 of its Master Cycle.  The Cycles Model suggests a burst of negative energy early next week.  Banks are facing troubles on multiple fronts and the Cycles are primed for a strong reversal.

ZeroHedge observes, “We’re at a fascinating juncture here in the markets.

Stocks have sold off hard for a little over a year now but have rallied once again in the short run. The result is that the S&P 500 Index has formed a fairly tight coil or pennant pattern over the past several months. And, as my friend Peter Atwater points out, this coil is merely a visual representation of a fierce battle going on in the markets.”

 

3:10 pm

VIX has extended its Master Cycle to day 270 today in a very confusing, corrective formation.  However, it, along with the SPX, has also completed a 12.9-month Cycle today.  There are multiple major indices at the point of reversal today.  This is no time to “short vol” behavior.  Goldman’s biggest bear has capitulated.

ZeroHedge comments, “The “Buy Any Semblance of a Dip” mentality across markets is so evident right now as “risk” is being re-deployed to start 2023, after a year’s worth of de-positioning in Assets and hiding in Cash, following the global central bank “FCI Tightening” macro regime of 2022 instructed you to do just that.

Last night’s EPFR Fund Flows report captures that “re-risking”, where we see an impulsive 92-93%ile rank almost across the board INFLOW in Global Equities, Global Bonds and Global IG Credit…alongside an actual (nascent) Money Markets OUTFLOW, following a +$222.5B of MM INFLOW over the past 1Y period as “Cash became an actual alternative”…

 

7:20 am

Good Morning!

I thought it would be appropriate to give a panoramic view of the markets, since they are approaching an important Pivot point.  SPX is approaching its 12.9-month Cycle Pivot point, technically due at the end of January.  Given the lateness in the month, We may safely infer that a major reversal may be made at any time, especially since Wave (C) of Primary Wave [2] is approaching the minimum requirement of making a higher high above 4100.96.  Looking at the chart, we can see that the 50% Fibonacci retracement may be reached at 4142.02 and the Weekly mid-Cycle resistance is just above it at 4162.60.  Should SPX continue its rally, either of these points may be the final reversal point.  However, once 4100.00 is reached, all bets are off.

 

Likewise, the VIX may have reached its 12.9-month pivotal low on January 13.  There is a lot of energy stored in the 12.9-month Triangle formation with a result of a target not seen since March 2020, a Cyclical 34-month (34.4) duration.  VIX has literally put market watchers asleep.  The message that there is no risk in the market is being swallowed hook, line and sinker.  The Cycles Model suggests trending strength may reappear early next week.

Note:  I am out of the office for the duration of the morning.  I will attempt to add short-term commentary later this afternoon.

 

 

 

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January 26, 2023

10:30 am

NDX is nearing its down-trend line near 12100.00 this morning on day 251 of the Master Cycle, reaching a morning high at 12018.41 thus far.  We are just a week away from the scheduled top, but may come early when certain targets are met.  This may be one of them.  Note that NDX did not reach the trendline in December, so this may be its last chance to test the downtrend.  Those not following the Cycles patterns think a breakout is possible with clear skies above.  However, many NASDAQ companies have been hollowed out by debt and own few tangible assets.  Should interest rates rise, they may find it impossible to weather the storm.

ZeroHedge notes, “The current move higher in stocks has all the hallmarks of being a bear-market rally and thus fated to end in disappointment.

Equities have bounced as much as 14% off their October lows, the third +10% bounce in this bear market. But as Wednesday’s disappointing earnings from Microsoft highlight, the market is vulnerable to abrupt reversals. A Federal Reserve still in tightening mode, elevated financial conditions and an inverted yield curve show why it will remain so. This is not an advance to buy and close your eyes.

Bear-market rallies are a microcosm of manias, from tulips to crypto. Their power comes from convincing even the most hardened skeptic. A rapid rise in prices creates its own good-news force-field, drawing in the final, few remaining non-believers. It is only then they deliver their cataclysmic finale.”

 

8:00 am

Good Morning!

SPX futures are now above the descending trendline, making a new high at 4041.00.  Yesterday’s fake-out challenged the 200-day Moving Average at 2961.61, then bounced to the trendline at the close.  The Cycles Model calls for up to another possible week in the current Master Cycle.  Should the rally find its legs, it may go as high as the Cycle Top currently at 4252.08.  However, keep in mind that there are two resistance levels (not shown) prior to that, at 4065.00 and 4100.00.  Finally Germany admitted they are at war with Russia.  What comes after that?  The weekend looks very volatile.

In today’s op-ex, Maximum Pain for options investors is at 3995.00, while 4000.00 is hotly contested by both puts and calls.  Long gamma may begin at 4050.00, while short gamma starts at 3950.00.  While short gamma was contested yesterday, it appears that long gamma may have its turn today.

ZeroHedge reports, “In a mirror image of Tuesday’s action, when MSFT earnings hammered stocks (after first headfaking them higher) only to see the selloff reverse completely during the course of Wednesday trading, on Thursday US equity futures and tech stocks were set to gain after an upbeat earnings report from Tesla reinforced optimism about the health of Corporate America. As of 7:30am, Nasdaq 100 futures were up 0.7% while S&P 500 futures rose 0.3%. Tesla jumped about 8% in premarket trading after the electric-car maker reported better-than-expected profit and said it was on track to deliver about 1.8 million vehicles this year. Risk sentiment was boosted by news that US energy giant Chevron had authorized a massive $75 billion stock buyback, representing 22% of its outstanding shares, helping elevate energy stocks around the globe. Asia stocks jumped to 9-month highs as Hong Kong returned from break and European stocks rose by 0.4%. Meanwhile, the dollar continued to weaken as speculation continued to mount that the Fed is drawing closer to the end of its rate-hiking cycle, and would follow in the footsteps of first Canada and then Indonesia, both of which have officially paused. Bonds and gold edged lower.”

 

 

VIX futures consolidated in a very narrow range between 19.02 and 19.28.  It has been two weeks since the Master Cycle low.  The Cycles Model suggests that the new trend may strengthen next week.  Analysts have watched the VIX trending sideways-to-lower for an entire year.  Unfortunately, many have drawn straight lines from that to suggest a continuing downtrend.

 

TNX is consolidating with a slight upward tilt.  Unfortunately, TNX has up to two weeks left in its Master Cycle with the most likely outcome being a decline to its 200-day Moving Average currently at 33.36 n as little as a week’s time.  The Cycles Model shows strength returning just as the reversal is due.

ZeroHedge reports, ” After yesterday’s blowout 2Y auction which printed barely above 4%, and showed just how little faith the bond market has in Powell’s “higher for longer”, moments ago we got an even more impressive 5Y auction which not only showed relentless buyside demand but blew away several records.

Printing at a high yield of 3.530%, this was not only the 5th consecutively lower 5Y yield, and some 70bps below the September high of 4.228%, but it was a whopping 44bps below December’s high yield of 3.973% and also stopped through the When Issued 3.554% by a whopping 2.4bps, which was the second highest stop through on record going back to Jan 2016 (only Oct 21’s 2.5bps was bigger).”

 

USD futures have declined to 101.30 and threaten to make new lows.  The Cycles Model shows today may be a day of strength with the possibility of extending the Master Cycle low on day 273.  It also implies a possibly strong reversal just as seen in the SPX yesterday.  The Cycles Model suggests a “tidal wave” rally out of this low that may last through the month of February as both domestic and foreign investors pile in to the USD as a safe haven.

 

Gold reversed this morning down to 1932.20, testing the Cycle Top support at 1924.63.  A breakdown beneath that level gives us a sell signal.  If so, gold is due for a possible 60-day decline.  The outcome is still tentative, but be aware of the possibility.  Remember, gold is not a currency.  It is a commodity, subject to market rules.

ZeroHedge highlights the thinking of the gold bugs:

“Gold is enough, Beautiful gold, Lovable gold, Spendable gold..….”

Gold – can’t eat it, can’t use it, but its everything crypto never was: tangible, exchangeable, a store of value, and a kitty for when things get tough. In uncertain markets…. Don’t forget the yellow stuff.”

 

 

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January 25, 2023

9:57 am

SPX declined through the 200-day Moving Average at 3961.00 (not shown), giving a sell signal.  The next level of support is the 50-day Moving Average at 3935.00.  Mid-Cycle support lies at 3920.00.  Intermediate-term support at 3910.00.  SPX has crossed a huge put wall at 3975.00, which may accelerate the decline much further.  Today is a trending strength day and it has appeared in spades.  The NYSE is blaming the decline on “manual error.”

ZeroHedge reports, “In a brief two line explanation, the New York Stock Exchange said a “manual error” caused wild price swings and trading halts for hundreds of company stocks when the market opened on Tuesday. It wasn’t clear just how easy it is to trigger such an error or who was responsible for the rollercoaster trades which sparked shock and outrage across Wall Street.

According to an updated statement on its website, the New Jersey-based exchange which doubles as a TV studio in New York said that the root cause of the issue, which the exchange operator says has been resolved, was tied to the company’s so-called “disaster recovery configuration” at the start of the day. Over 1,300 trades and some 84 stocks were impacted and marked as “aberrant.”

 

8:10 am

Good Morning!

SPX futures declined to a morning low of 3980.90, testing short gamma.   Today is day 250 in the current Master Cycle.  With a little more than a week to go, SPX is still caught in the downtrend.  Today the trending strength ramps up.  We may finally have an insight about the true trend by the end of the day.  Cyclically, the 200-day Moving Average at 3964.03 and the mid-Cycle support at 3931.06 defines the trend.  The trendline at 4018.00 defines resistance, but not trend.

Today’s op-ex shows Maximum Pain for options investors appears at 3995.00.  Long gamma starts at 4020.00 while short gamma goes into high gear at 3975.00.  This is the nexus of an epic battle for control of the markets.

ZeroHedge reports, “US equity futures slumped on Wednesday after Microsoft started off the tech giants’ earnings parade by pulling off the old pump and dump, first jumping on Azure/Cloud results which beat estimates, but then erasing all gains and slumping during the company’s conference call after the company’s guidance disappointed, forecasting slower earnings and weaker demand (separately, hours later customers reported difficulties across multiple regions in accessing Microsoft 365 services, which the company attributed to networking issues). Earnings reports from companies such 3M, Boeing and chipmaker Texas Instruments also reinforced concerns about the health of corporate America and added to investors’ jitters as they await updates from the likes of Tesla and IBM. Fears also grew that a decision to send German and US tanks to Ukraine would provoke an escalation in the war.

As a result, contracts on the tech-heavy Nasdaq fell 1.3% at 7:15 a.m. ET while S&P 500 futures dropped 0.8%, and traded right around 4,000. The Bloomberg Dollar Spot Index was little changed, leading to mixed trading in Group-of-10 currencies. Treasuries edged higher, mirroring gains in most UK and German government bonds. Brent crude was little changed, while gold and Bitcoin fell.

 

 

VIX futures rose to a morning high of 20.15 thus far, still within yesterday’s trading range.  A rally above 20.50 snaps it out of its short-term downtrend while the trendline and 50-day Moving Average lie at 21.61 gives us a buy signal.

In today’s options chain, Max Pain is at 21.00.  Short gamma is weakening but prevails beneath 19.00.  Long gamma begins at 22.00 with weakening conviction at 35.00.

 

TNX has been losing ground beneath Intermediate-term resistance at 35.89 and may be due to retest the 200-day Moving Average at 33.23.  Alternatively, there are potentially two more weeks in the current Master Cycle which may allow TNX to reverse course.  The reason is that the uptrend defined by the mid-Cycle support and 200-day Moving Average as not broken.  This allows the rally to continue, preferably above the trendline.  Note the dealer takedown in the following article.  Rising interest rates may increase the dealer takedown beyond their capability to absorb the excess after the Directs and Indirects take their share.

ZeroHedge reports, “Back in November, when the 2Y auction hit a cycle high of 4.513%, markets knowingly nodded muttering that the bond market was agreeing with the hawkish Fed. Since then however, things haven’t gone according to plan with each auction printing at an lower and lower yield, culminating with today’s sale of 2Y paper which priced at just 4.139%, down from 4.390% in December, and the lowest since August. It also stopped through the When Issued 4.152% by 1.3bps, the third consecutive stop through which prior to December had tailed 3 of the past 5 times.

The Bid to Cover confirmed the stellar demand, jumping from 2.713 to 2.944, the highest going back all the way to the flight to safety bond market chaos of April 2020.

Finally, the internals were also phenomenal, with Indirects – or foreign buyers – awarded a whopping 65.0%, the third highest on record, and well above the recent average of 57.4%. And with Directs taking down 18.7%, it meant that Dealers were left holding on to just 16.3% which was also one of the lowest on record.”

 

USD futures continue to consolidate in a narrow trading range.  That may not last, as the USD trending strength may be about to explode higher.  The emergence of trending strength, especially on the weekends, suggest a non-economic event, such as war, is about to be revealed.

 

Gold futures fell from their Master Cycle high at 1943.80 yesterday precisely to its Cycle Top support at 1920.75 this morning.  A sell signal lies beneath that level.  The Cycles Model also shows some disturbance starting this weekend.

 

 

 

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January 24, 2023

11:05 am

BKX, our liquidity proxy, may have made its Master Cycle high yesterday , on day 255.  There is still a possibility of exceeding its November 11 high at 110.57 in the next few days.  If I were a banker, I would be selling all of my bank shares as a crisis is looming.  It’s not just rising interest rates and nonpayment of loans leading to losses.  The growing US government budget threatens to exceed the banks’ capabilities of servicing the national debt.  The current arrangement requires the Primary Dealers to assume all debt not sold in public auctions.  This may exceed the banks’ balance sheets in very short order.

ZeroHedge reports, “A group of 43 Democrats want to completely eliminate the debt ceiling, which they say Republicans have ‘weaponized’ – which would give the government a blank check to borrow without any limit from Congress.”

Ed. Congress is the home of idiots.

 

10:17 am

SPX may have made a reversal at the descending trendline at 4022.00.  It may come back to retest the resistance at that level.  However, it has tested short gamma at 3990.00 and a decline may accelerate beneath that level.  The market has halted several times which may either be a technical break or a natural halt as several mega-caps have declined more than 10% at the open.

ZeroHedge reports,”Update 2 (11:15am ET): The NYSE says it is continuing to investigate issues with today’s opening auction and “impacted members may consider filing for Clearly Erroneous or Rule 18 claims.” The NYSE adds that “In a subset of symbols, opening auctions did not occur”

* * *

Update (9:52am ET). According to the NYSE, as of 9:48am, all systems are back to normal, although that is an understatement in a market where nobody knows what the correct opening price is! We are still waiting for the NYSE to give a detailed explanation of what caused this latest “broken markets” episode.

While it is still unclear what was the “technical glitch” that sent the world’s biggest companies into a multi-trillion market cap rollercoaster, Bloomberg reports that “a wave of sell orders targeting financial services stocks swept across American equity exchanges at the open of trading Tuesday, sending companies including Wells Fargo & Co. and Morgan Stanley to brief but sharp plunges from which they mostly quickly recovered.”

 

7:30 am

Good Morning!

NDX futures made a morning low at 11812.00.  A decline beneath yesterday’s low at 11800.00 confirms the decline.  A decline beneath the 50-day Moving Average at 11415.00 confirms the resumption of the downtrend.  The mid-Cycle line at 11901.00 provides overhead resistance.  The downtrend line is at 12000.00 may provide the last resistance, should NDX rally further.  The end of January marks the end of a 12.9-month Cycle from the all-time market high.  Whether the markets go higher or lower in the next two weeks, what comes after may offer a whole new dimension to the decline.  Futures have paused as major tech giants Microsoft and Texas Instruments report earnings today.

Today’s op-ex shows Maximum Pain for options investors at 11830.00.  Long gamma stats at 11850.00 while short gamma begins at 11800.00.

ZeroHedge remarks, “Over the weekend, we reminded readers that on Thursday, JPM’s trading desk – despite turning increasingly bearish in recent days – cautioned against shorting the rally because as Matt Reiner on the Cash Trading Desk warned, “something I’m noticing in Tech, and don’t think many are talking about it – LO’s are quietly adding in Mega names, and consistently too – The demand has been on and off the desk now since Jan 2 this year, but the numbers are starting to adding up – I bet the demand in the near term continues (GOOGL, AAPL, META, AMZN).” As he further explained “If we see the MegaCaps rally, that will likely drag the index higher given the recent increase in market breadth.”

We followed up with statistics from Goldman’s Prime desk, which confirmed that indeed there had been a dramatic reversal in sentiment when it comes to giga-tech market “generals” as “hedge funds net bought US Info Tech stocks for a second straight week led by Semis & Semi Equip names (after being sold in 10 of the 11 prior weeks).”

 

US30  futures have declined beneath the 50-day Moving Average at 33570.00.  I show this as a contrast to the NDX, since the decline may already be underway for the DJIA.

 

SPX futures made a morning low at 4006.10.  Critical short-term support is at 4000.00, while overhead resistance is at 4022.00, a very narrow trading range.  The breakout tells us the direction of equities (especially SPX and NDX) over the next two weeks.  The daily tracing bands are narrowing, suggesting a powerful breakout is possible at those levels.

Today’s op-ex shows Max Pain at 3995.00.  Long gamma reigns above 4000.00, while short gamma takes over beneath 3975.00.  Dealers and hedge funds are grossing up on longs.  A decline from hers may be disastrous.

ZeroHedge reports, ” The rally in US tech stocks and European markets paused on Tuesday as investors prepared for earnings updates from industry giants, including Microsoft and Texas Instruments. US equity futures fell after the tech-heavy Nasdaq 100 posted its best two-day gain since November, as traders braced for the worst tech earnings slump since 2016. Europe’s region’s Stoxx 600 Index erased an early advance to fall into the red. At 7:30am ET, S&P 500 futures were 0.2% lower and Nasdaq futures were down 0.3%; the tech-heavy benchmark is up8.5% in January, on pace for its best month since July even as profit estimates are declining and as Federal Reserve officials advocate for more policy tightening to combat inflation if at a slower, 25bps pace. The USD rose; Treasuries were unchanged while commodities were mixed with strength in natgas, nickel, oil and precious metals.

 

 

VIX futures remain neutral, consolidating within the mid-range of yesterday’s trading.  The Master Cycle low on January 12 is only 10 days from a 12.9-month Cycle in the VIX.  What this means is that the VIX has begun a new 12.9-month Cycle with a bullish bias.  The next Master Cycle high may be near the end of February.

 

USD futures are hovering in place.  The Cycles Model indicates a change in trending strength starting as early as tomorrow.  The following two weeks may show strength upon strength as tje Master Cycle continues to rise through the end of February.

TheEpochTimes reports, “A recent report by the Congressional Budget Office (CBO) projects that two major Social Security funds in the United States will dry out in the coming decades, with one of them running out within the next 10 years as younger members in the programs are set to lose more than older members.

“If the gap between the trust funds’ outlays and income occurs as CBO projects, then the balance in the trust funds will decline to zero in 2033 and the Social Security Administration will no longer be able to pay full benefits when they are due,” the CBO stated in its report, published in December (pdf).

The Old-Age and Survivors Insurance Trust Fund will be exhausted in 2033 and the Disability Insurance Trust Fund will be exhausted in 2048, the agency said. If the trust funds are combined, the money will be gone by 2033.”

 

Gold futures made an overnight high of 1943.70, stretching the Master Cycle peak to day 277.  Gold is trading as an inverse of the USD.  As USD gains strength, gold May decline, gaining strength to the downside.  he new Mster Cycle also lasts until the end of February.

 

TNX ix rising but may be stopped by Intermediate-term resistance at 35.96.  Should that be the case, TNX may have another two weeks of decline to retest the mid-Cycle support at 33.64.  Another possible target may be the 200-day Moving Average at 33.22.

 

 

 

 

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January 23,2023

11:24 am

SPX is challenging the downtrend line at 4025.00.  A close above that implies a potential extension of the rally for as much as 2 more weeks in a panic rally driven by long gamma.  However, it is also at a critical Cycle Pivot point.  Should SPX reverse in the next couple of hours it may relapse back into a panic decline that may last two more weeks.  This is a very critical juncture.

ZeroHedge warns, “Just as we warned last weekthe short squeeze is back again, perhaps as traders relished the start of the Fed blackout period (ahead of the Feb 1 FOMC) and the coming start of buybacks, with buyback blackout ending next weekend.

…and adding to this re-reversal in sentiment, is the latest note from Goldman prime (also available to pro subs), according to which there has been a notable shift in market sentiment as “hedge funds net bought US Info Tech stocks for a second straight week led by Semis & Semi Equip names (after being sold in 10 of the 11 prior weeks).”

 

8:00 am

Good Morning!

SPX futures have been treading in a narrow band from 3963.00 to 3978.00 over the weekend.  The 200-day Moving Average is at 3969.00 and appears to be hindering the retracement.  The trendline defining the decline appears at 4025.00 and has thus far been unbroken.  Trending strength reappears this week and may last for the next two weeks, ending in a probable Master Cycle low.

Today’s op-ex shows Maximum Pain for options investors at 3970.00.  Calls prevail above 3980.00 and long gamma above 4000.00.  Short gamma begins at 3950.00.  However, the sentiment for puts is not as strong as for calls.

ZeroHedge reports, “US equity futures were little changed, trading in a narrow ten point range during a muted overnight session on Monday as investors braced for a moderation in Fed rate increases after the Fed mouthpiece suggested a 25bps hike is now the baseline (coming at a time when the Fed is now in a quiet period until the Feb 1 FOMC meeting), while bracing for a busy week of earnings. S&P 500 and Nasdaq futures each rose 0.1% at 7:45 a.m. ET after both underlying benchmarks rallied on Friday. The tech-heavy Nasdaq 100 Index has posted three weeks of gains, the longest winning streak since mid-August. 10Y TSY yield rose 2bps to 3.50%, while the dollar rebounded from nine-month lows against the euro and a group of other currencies, after a slew of Federal Reserve officials laid out the case for a downshift in the Fed’s rate-tightening campaign. China and most Asian markets were closed for the Lunar New Year holiday.’

 

 

VIX futures have consolidated between 19.99 and 20.33.   Volatility may stagnate until next week when trending strength comes back.

 

TNX is rising, but has not broken through overhead resistance.  It is on an aggressive buy signal due to the Master Cycle reversal off the mid-Cycle support at 33.61.

 

 

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January 20, 2023

1:09 pm

SPX has met its 38.2% Fibonacci resistance and daily mid-Cycle resistance (not shown) at 3935.00 and appears to be pulling back. The 50% retracement value is 3950.61.  It has met the required Cyclical time period of three days from the high at 4015.39.  Dealers want to avoid long gamma, so we may anticipate a decline back beneath the 50-day Moving Average at 3922.00.  I wouldn’t be surprised to see SPX close near 3900.00 since that level is so hotly contested.

ZeroHedge remarks, “By now everyone, of course, knows that the Fed has broken what was once called “the market” beyond repair. Add to that zero liquidity, a still healthy army of HFT bots and the explosion in 0DTE option trading…

… and what you have is a market that looks like this on a daily basis.

Nowhere is this brutal swing more visible than in the furious ebb and flow of shorting and squeezing activity. ”

 

9:38 am

BKX opened at the 50% retracement value of its 2-day decline.  Resistance is at mid-Cycle resistance at 105.37 and the 200-day Moving Average at 106.35.  The Cycles Model suggests the decline may intensify next week.  The trigger for the Head & Shoulders formation is at 96.50.  Rising rates, rising USD and mass layoffs are setting up a potential crisis in the banking sector.  The FTX implosion is creating a significant headwind.

ZeroHedge notes, “One week ago we looked at the latest consumer credit data where we found not one but two flashing red alerts:

  • First, the total amount of credit card debt hit a new all time high, which however was to be expected from one of the most consistently increasing series across all US economic data, and one which predictably is correlated to the US savings rate which is at all time lows.

  • Second, thanks to the Fed’s crusade to spark a great recession, the average rate across US credit cards just rose to an all time high 19%+”

 

 

7:40 am

Good Morning!

SPX futures have been consolidating between 3895.00 and 3915.00 in the overnight session.  Both the 50-day and Intermediate-term resistance are at 3918.00.  The mid-Cycle resistance is at 3934.50.  Final support is the 100-day Moving Average at 3865.27.  All the technical indicators point downward.  Whether the decline starts today or after op-ex remains to be seen.

Today’s op-ex shows 3900.00 being hotly contested by both 37,610 puts and 34,364 calls this morning.  Long gamma starts at 3950.00, while short gamma may begin at 3850.00 .  There may be intense pressure to keep SPX in its narrow range.  A breakout out of the current range may reinvigorate gamma in the prevailing direction.  Otherwise gamma falls off after today’s expiration.  Nomura warns today is “Gonna Be Spicy.”

ZeroHedge reports, “S&P futures are modestly higher this morning trading in a narrow range, with tech stocks leading on the back of solid earnings by Netflix. Contracts on the S&P 500 Index rose 0.3% while those on Nasdaq 100 were 0.6% higher even as the underlying gauges were poised for the biggest weekly losses since before Christmas.

Today will be the last day before Fed’s blackout period before the Feb 1 FOMC; today is also the largest non-quarterly option expiration day on record for indexes: according to Goldman, $797bn of single stock options will expire today, the largest since Jan-2022 and the fourth largest on record. From an index perspective, $1.3trn of options will roll today, the largest non-quarterly expiry on record.”

 

VIX futures remain in a tight consolidation between 20.28 and 20.63.  The Cycles Model suggests a rising trend through the month of February.

The January 25 op-ex shows Max Pain at 21.00.  Puts volume has fallen off, while Calls volume is rising.  Long gamma begins at 26.00.

ZeroHedge remarks, “Yesterday saw a notable dynamic play out as VIX trended lower in the face of equity index weakness, which suggested that traders were ‘less bearish’ than the previous day…

In fact, as SpotGamma detailed with their HIRO tool – measuring the real-time impact of options hedging – as the day progressed, traders bought the dip primarily through call options (i.e., bought call options)…”

 

USD futures are also consolidating after Wednesday’s Master Cycle low on day 265.  The Cycles Model shows gathering strength by next week with a potential (new) high by the end of February.  A confirmation of the buy signal lies above the trendline at 103.50.  The next move has all the earmarks of a crisis in-the-making.  Many foreign governments and corporations have issued debt in USD.  Rising interest rates and USD may crush foreign economies, including Japan and Europe.

 

TNX appears to be rising sharply out of its Master Cycle low yesterday.  The Cycles Model suggested this move today and also infers a very strong three-week rally out of the low.  The reversal from mid-Cycle support at 33.56 gives us an aggressive buy signal (UST sell).  Confirmation comes above Intermediate-term resistance at 35.93.

 

 

 

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