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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September 27, 2021

7:30 am

Good Morning!

SPX futures have lingered near the top of its retracement, suggesting more to come.  The next resistance is at the top of Wave B at 4486.87. Shoould SPX decline beneath 4430.00, it may be an indicator of the resumption of the decline.

Today completes market day 17 (17.2) of the Master Cycle which topped out on September 2.  Wave (C) may be equal to Waves (A) and (B) in time, stretching the decline to October 21-22.  Most analysts and hedge funds are still positive, viewing the surge of new money as a positive sign, rather than as lemmings racing toward the cliff.

The NYSE Hi-Lo Index closed at 34.00 on Friday.  It may go higher today in a Trading Cycle high but a reversal may be right around the corner.

ZeroHedge reports, “US index futures, European markets and Asian stocks all turned negative during the overnight session, surrendering earlier gains as investors turned increasingly concerned about China’s looming slowdown – and outright contraction – amid a global stagflationary energy crunch, which sent 10Y TSY yields just shy of 1.50% this morning following a Goldman upgrade in its Brent price target to $90 late on Sunday. At 745 a.m. ET, S&P 500 e-minis were down 4.75 points, or 0.1% after rising as much as 0.6%, Nasdaq 100 e-minis were down 83 points, or 0.54% and Dow e-minis were up 80 points, or 0.23%. The euro slipped as Germany looked set for months of complex coalition talks.”

 

VIX futures are higher this morning, reaching a high of 19.08.  It may be aiming for the mid-Cycle resistance at 19.76 as it prepares for much higher levels.

 

TNX is challenging the 15.00 level this morning.  The next resistance is the Cycle Top at 17.99, giving ample room to move higher.  The next Master Cycle high may occur during the week of October 11.

ZeroHedge observes, “Following the hotter than expected durable goods headline data, 30Y Yields briefly spiked up to almost 2.05%, but fell back on the core data – although they are still holding above 2.00%

Source: Bloomberg

This has been a key level to watch in recent months…”

 

USD futures are higher this morning, but beneath the Master Cycle high at 93.53.  Should there be a breakout, we may see USD make a considerable advance.  Resistance lies at the Cycle Toop at 93.78.

 

 

 

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September 24, 2021 Pray for our Country

12;00 PM

For those of your who may not be aware, the La Palma Volcano has intensified its eruptions and opened up yet another vent.  The threat of a tsunami intensifies, although the NOAA?National Weather Service has not recognized it as a threat.  I have informed family members on the East Coast to seek higher ground.   Should a collapse occur, we would only have 6-9 hours warning.

I am leaving town for the weekend.  Be back on Monday morning.

 

8:15 am

Good Morning!

SPX futures are down over .5% already.  Welcome to the second half of the decline (in time).  The retracement is showing Wave (2) behavior, so I will leave the current labels.  This Master Cycle is scheduled to land on October 15, but that day being options expiration, may extend several more days due to the bearish gamma.  The list of catalysts has not gone away, although China is rising to the forefront.

9:44 am Note that SPX may yet rise to its Wave B high at 4486.87 as liquidity is still being poured into the markets.  Should new lows be made beneath the 50-day Moving Average at 4437.30  in the next hour, that event goes away.

ZeroHedge observes, “US futures and European stocks fell amid ongoing nerves over the Evergrande default, while cryptocurrency-linked stocks tumbled after the Chinese central bank said such transactions are illegal. Sovereign bond yields fluctuated after an earlier selloff fueled by the prospect of tighter monetary policy. At 745am ET, S&P 500 e-minis were down 19.5 points, or 0.43%, Nasdaq 100 e-minis were down 88.75 points, or 0.58% and Dow e-minis were down 112 points, or 0.33%.”

 

VIX futures rose to a mornig high of 20.37, challenging the trendline and promises more to come.

Nomura notes that the rally carried big volumes, “Yet despite the return of such scattered bullish flows, McElligott notes that there remains much angst in the Vol space (Skew still roofed as downside demand remaining extreme), versus still “pervasive skepticism” towards broad Equities upside index / ETF / sectors / industries (Call Skew still nuked).”

 

The NYSE Hi-Lo closed beneath its 50-day Moving Average at 77.68, leaving some doubt about the “RECOVERY.”  Today’s (and future) action may show the real weakness in the NYSE.  Monday’s low was day 256 of the old Master Cycle.  The new Master Cycle is due to bottom on October 15.

 

TNX gapped above bot the 100-day and mid-Cycle resistance at 14.07, putting it on a buy signal and launching a new rally that may reach the Cycle Top in Wave (A) and 20.00 or higher in Wave (C) of [5].  The spike in volatility today may be a delayed reaction to the rising yields as noted yeterday.

The Cycles Model clearly marked the bottom of Wave [4] on September 15 even though I missed it due to a truncation in which Wave 5 was higher than Wave 3.  The chart is now corrected.

ZeroHedge notes, “While the US 10 year put in a huge candle yesterday, breaking above big resistance levels, bond vol (MOVE) was steady.

The early year squeeze in yields was accompanied with surging bond vol (which Fed dislikes).

The move in yields is so far just one day, but let’s see how bond vol reacts should we get a continuation of the squeeze move.

Source: Refinitiv

A rapid spike in yields was previously considered a market risk

SPX had its first >+1% day since July 23. A confluence of factors contributed to the risk-on behavior. VIX falling below 20 also helped. Inflation L/S best factor, 6M Momo worst. Cyclicals over Defensives. SVX beat SGX by 47bps but Barra Growth outperformed Value. The 10Y closed at 1.423% vs. 1.301% yesterday; the large move in bonds was not met with increased Equity Vol. A rapid spike in yields was previously considered a market risk.”

 

USD futures appear to be consolidating beneath yesterday’s Master Cycle high.  Although Wave (C) is roughly equivalent to Wave (A),  the correction can go considerably higher, from 98.30, the 61.8% retracemment value, to as high as the Weekly Cycle Top near 100.00.  But  first, there should be a retracementat least down to mid-Cycle support at 91.51.

 

GKX crossed above its mid-Cycle support/resistance at 407.56 and is testing its 50-day Moving Average at 412.09.  A rally above that level puts i into a buy signal that may last through mid-December.  You can see that Wave [2] appears to be in a modified running correction, where Wave (C) ends higher than Wave (A).  This is very bullish,  since the technicals imply a possible doubling in food prices.  It may also cause a lot of suffering among low income families, who are already having trouble putting food on the table.

ZeroHedge reports, “UK politicians are in utter panic as similarities to the 1970s-style “winter of discontent” of shortages and socio-economic distress could rear its ugly head in the coming months, according to Reuters.

A significant driver in what could very well be a hellacious winter for Brits is soaring natural gas and electricity prices that have already disrupted segments of the UK economy and sent shockwaves through energy markets, chemical producers, and the food industry, among others. Compound this all with labor shortages thanks to Brexit, and the dire situation may worsen.

Some Brits who remember the past worry a winter of discontent could be imminent. Many are facing extraordinary high power bills and sharp food inflation that are eating away at wages, along with shortages of goods at supermarkets.”

Closer to home, ZeroHedge observes, “Beef, pork, and chicken in US cold storage warehouses have yet to recover from pandemic lows and could continue to support higher prices.

New United States Department of Agriculture (USDA) data shows beef reserves dropped 7.7% from a year ago in August, poultry supplies fell 20%, and pork plunged 44% to their lowest levels since 2017, according to Bloomberg.

Jim Sullivan, commercial director for Stable USA, said low meat inventories would suggest meat prices will stay elevated.

“Prices remain very elevated compared to seasonal expectations,” Sullivan said. “

 

 

 

 

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September 23, 2021, Pray for Our Country

10:45 am

I had originally labelled the Waves at 1-2-3.  However, the overlap and dimensions suggest otherwise.  I have concluded that we are either in a (1)-(2) or (A)-(B) formation in a Leading Diagonal Wave (1).  The rally is now approaching the 61.8% Fib retracement of a Wave (1) at 4454.91 and the mid-Cycle resistance at 4466.67.  Should it go higher, I would be inclined to re-label this as an (A)-(B) of a Primary Cycle Ending Diagnal Wave [1].  It may be complete in the next hour in the first example.  Otherwise,  it may not finish until the end of the day.

ZeroHedge observes, “A sudden wave of panic-buying took over the stonk markets this morning after they faded overnight gains.

This sent the majors up to critical technical levels.

The S&P is back at its 50DMA (having bounced off its 100DMA)…

 

7:50 am

SPX futures have receded back down to the 61.8% Fibonacci retracement level at 4417.74 after testing the 50-day Moving Average at 4433.92 overnight.  It appears that the gap may remain open in the cash market.  SPX has just completed 14 days of what may be a 30 (market) day decline.  All of the components for a panic decline are in place.  1) SPX has tested and failed the 50-day Moving Average.  2)  There is a potential for a government shutdown and default by the end of October.  3)  Evergrande may meet its demise in the next few days.  4)  Investors are losing faith in the Fed.  5) Nuclear sabre rattling by China.  And…6) The LaPalma Volcano has become ashier with an SO2 clound hovering over southern Europe and North Africa.  While the media downplays the probability of a megatsunami, the opening of new vents suggest a possible increase of volcanic activity.

ZeroHedge reports, “US index futures jumped overnight even as the Fed confirmed that a November tapering was now guaranteed and would be completed by mid-2022 with one rate hike now on deck, while maintaining the possibility to extend stimulus if necessitated by the economy. Sentiment got an additional boost from a strong showing of Evergrande stock – which closed up 17% – during the Chinese session, which peaked just after Bloomberg reported that China told Evergrande to avoid a near-term dollar bond default and which suggested that the “government wants to avoid an imminent collapse of the developer” however that quickly reversed when the WSJ reported, just one hour later, that China was making preparations for Evergrande’s demise, and although that hammered stocks, the report explicitly noted that a worst-case scenario for Evergrande would mean a partial or full nationalization as “local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion.”

In other words, both reports are bullish: either foreign creditors are made whole (no default) as per BBG or the situation deteriorates and Evergrande is nationalized (“SOEs step in”) as per WSJ.”

 

VIX futures dove to 19.06 this morning, as it develops the right shoulder of a revised Head & Shoulders pattern.  The Cycles Model suggests a probable turnaround in today’s activities.

 

Wednesday’s NYSE Hi-Lo Index remained beneath the 50-day Moving Average despite the ramp.  The NYSE is weak, with less than 1.5% of its companies making new 52-week highs.  The Cycles Model suggests something dramatic may be happening in the Hi-Lo Index in the next two days.

 

TNX remains above the 50-day Moving Average at 12.92 but beneath the mis-Cycle resistance at 14.04.   TNX is in a “trading band squeeze” which indicates a probable test of the Cycle Bottom at 10.02 (Wave [4]) before a dramatic rally above the trading bands in Wave [5].  The test of the Cycle Bottom may occur by mid-October.

 

 

 

 

 

 

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September 22, 2021

8:05 am

Good Morning!

SPX futures rose to an overnight high of 4388.50, cchallenging the Cycle Bottom resistance at 4376.39, but staying beneath yesterday’s high of 4394.87.  This is meant to work off the oversold condition so that Stochastics reach 50.00 before going back down.  Yesterday’s gap is likely to remain unfilled.

ZeroHedge reports, “Despite today’s looming hawkish FOMC meeting in which Powell is widely expected to unveil that tapering is set to begin as soon as November and where the Fed’s dot plot may signal one rate hike in 2022, futures climbed as investor concerns over China’s Evergrande eased after the property developer negotiated a domestic bond payment deal. Commodities rallied while the dollar was steady.

Contracts on the S&P 500 and Nasdaq 100 flipped from losses to gains as China’s central bank boosted liquidity when it injected a gross 120BN in yuan, the most since January…

… and investors mulled a vaguely-worded statement from the troubled developer about an interest payment.  S&P 500 E-minis were up 23.0 points, or 0.53%, at 7:30 a.m. ET. Dow E-minis were up 199 points, or 0.60%, and Nasdaq 100 E-minis were up 44.00 points, or 0.29%.”

 

VIX futures declined to 22.66, still within yesterday’s trading range.  The Cycles Model suggests a double spike in strength starting today and lasting through the weekend.  In addition, there appears to be another double spike during the week of October 4.  This week’s spike appears capable of meeting or exceeding the Head & Shoulders minimum target of 36.08.

 

The NYSE Hi-Lo Index closed at -8.00 yesterday, maintaining the sell signal.  Today is day 258 in the Master Cycle, so there is a possibility of an attempt to ramp the number of new 52-week highs.   However, the probability of the VIX ramping by the end of the week suggests otherwise.

 

TNX appears slightly positive this morning, especially since it is above the 50-day Moving Average at 12.52.  However, a break of that support may send TNX down to the Cycle Bottom at 9.94 in the next three weeks.

ZeroHedge reports, “As expected, in a surprisingly close, 220-211 vote, the Democratic-controlled House passed a bill that would suspend the U.S. debt ceiling into December 2022 and provide the government funding to operate past Sept, 30 if it passes the Senate which it most likely won’t because Senate Republicans, even RINOs such as Mitt Romney, have vowed to block it over the debt limit provision which Democrats purposefully included in the provision.”

ZeroHedge remarks, “Senate Minority Leader Mitch McConnell (R-Ky.) and Sen. Richard Shelby (R-Ala.) on Sept. 21 offered a competing short-term government funding bill, just as House Democrats passed a stopgap measure that also suspends the debt limit until after the 2022 election.

The bill from McConnell and Shelby does not include a debt ceiling suspension, as Republicans have urged Democrats—the majority party—to raise the $28.4 trillion debt ceiling themselves through reconciliation, a special parliamentary procedure that would expedite the passage of a budgetary measure through the Senate.

[ZH: The introduction of the bill likely increases the probability of no Senate deal, and for now, the market is tending to agree as debt ceiling anxiety has not eased at all]”

 

USD futures consolidated in range during the overnight session.  From a Cycles vantage, this week appears to be calm, but next week may be a barn burner as the decline gets underway.  The Cycles Model suggests the decline may last through mid-November before any relief appears.

 

The Hang Seng (Hong Kong) Index rallied last night on news of the Evergrande repieve.  But the decline may not be over, despite the bounce.  The Cycles Model suggests the decline may continue until October 10, over two weeks from now.  Undoubtedly, there will be more bounces along the way as the index is oversold.  However, the recovery may not take place until the Master Cycle is complete.

ZeroHedge observes, “After two anxiety-filled days during which China was on holiday and traders hammered Hong Kong trader property stocks, contagion fears arising from China Evergrande Group’s debt crisis moderated overnight with mainland stocks declining less than expected on Wednesday as they resumed trading, after Evergrande’s onshore unit unveiled vaguely worded plans to pay interest due Thursday on a yuan bond, while leaving the fate of a $83.5 million offshore bond coupon payment in limbo.

As we noted earlier, in its filing to the Shenzhen Stock Exchange, the Evergrande unit said that it reached an agreement with yuan bondholders on an interest payment due Sept. 23. It, “has been resolved via negotiations off the clearing house,” but didn’t specify how much or when it will pay the 232m yuan coupon at stake.

The language is potentially ominous because under normal circumstances, Chinese bond issuers would simply transfer money to a clearing house to complete payments. The “off-the-clearing house” approach usually means direct but delayed, or partial payment to bondholders. There could even be a lower interest rate involved. In short: it’s one way to avoid being called a defaulter.

As Bloomberg’s Shen Hong wrote, “Evergrande may have secured bondholders’ agreement with a payment extension or at least succeeded in asking them not to act until compromise is reached, even as it misses the payment due Thursday.”

ZeroHedge further comments, ““If that’s true, we are very close to the China Syndrome ”

Evergrande’s imminent default is rocking markets – but few believe the collapse of a Chinese property developer could trigger a global financial crisis. What if Evergrande is just a symptom of a deeper malaise within the Chinese economy and its political/business structures? Maybe there is more at stake than we realise? What if Emperor Xi decides he needs a distraction?

Amid this week’s market turbulence, and the overnight headlines, Evergrande dominates thinking this morning. The early headlines say the risk is “easing”. Don’t be fooled. S&P are on the wires saying it’s on the brink of default and is unlikely to get govt support. It’s Asia’s largest junk-bond issuer. Anyone for the last few choc-ices then?

The market view on the coming Evergrande “event” is mixed. Some analysts are dismissing it as an internal “China event”, others reckon there may be some systemic risk but one Government can easily address. There is some speculation about “lessons” to be learnt… There are even China supporters who reckon its proof of robust China capitalism – the right to fail is a positive!

I’ve got a darker perspective.

The massive shifts we’ve seen in China’s political/business public persona over the past few years have been variously ascribed: a reaction to Trump’s protectionism, China taking its place as a leading nation, Xi flexing his military muscle, and now a clampdown on divisive wealthy businesses to promote common prosperity.”

 

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September 21, 2021

10:05 am

SPX rallied to the 50% Fib retracement level at 4396.49 in the first hour, a bit higher than expected.  The Cycles Model suggests the decline resumes this morning with the largest panic-selling episode just ahead.  While we may see yet another attempt at 4400.00, the worst of the retracement may be over.

ZeroHedge observes, “A dramatic rebound in stocks – off the S&P’s 100DMA – has prompted many commission-rakers and asset-gatherers today to call the end of the Evergrande event and signal the all-clear to new highs.

So what happened? What changed?

Nomura’s Charlie McElligott explains that there is simply no way to overstate the power of the “reflexive vol sellers” into another spike, as this “sell the rip (in vol)” = “buy the dip (in stocks),” particularly as it related Put sellers either directionally shorting “rich” vols yday…and “long sellers” who monetized their downside hedges by the close (a lot of that being 1d SPY Puts from Retail “day traders” which doesn’t show in OI), creating $Delta to buy and again self-fulfilling yet another “turnaround Tuesday”

Critically, that Delta buying in the late day was hugely important then in reducing the absolute $ of systematic deleveraging “accelerant” flows, because only closing down -170bps in SPX then meant a much more manageable -$24.7B of Vol Control de-allocation in coming days, as opposed to what would have been a much more challenging -$62.9B to digest which we estimate would have been triggered off of a “-3% close”…while similarly, Leveraged ETFs only needed to rebalance -$5.9B at EOD, as opposed to a hypothetical -$8.9B assumed at the low of the day.”

(Please read the whole article.)

 

9:45 am

The S&P GSCI Ag Index took a brief pause in its ascent.  The Cycles Model infers a continued rally through mid-December as food prices skyrocket.   There are no bullish formations to speak of, but should Wave [3] be equal to Wave [1], the target would be 670.00.  Wave [3] may be the strongest of the series, so that would be a minimum.  Since this is a Primary Wave [3], it suggests a potential target between 850.00 and 1000.00.

ZeroHedge reports, “Robusta coffee prices continued to soar to record-highs this week as concerns deepen over the outlook from Brazil, the world’s top producer.

“Cheaper robusta-coffee beans, used widely in instant-coffee beverages such as Nestle SA’s Nescafe brands, are sold out in Brazil. After drought and frost ruined crops of the higher-end arabica variety favored by cafes like Starbucks Corp., local roasters are racing for robusta replacements and driving prices to new records each day,” Bloomberg wrote.

Spot prices for Brazil robusta Espirito Santo have nearly doubled this year, up 356 reais per 60-kg bag, or about 87% to 769 reais.”

 

8:20 am

Good Morning!

SPX futures rose to 4406.40 before being repelled by the gap left at 4402.95.  The 50% Fibonacci retracement level is at 4396.39 and futures have slid beneath that level.  The 38.2 Fib level is at 4375.04 which I proposed to be the top of the retracement yesterday.  It may yet open at or beneath that level.  That is why I suggested that no action may be needed to take profits.  The Cycles Model proposes the decline may resume in the first hour of the cash market.

ZeroHedge reports, “Even though China was closed for a second day, and even though the Evergrande drama is nowhere closer to a resolution with a bond default imminent and with Beijing mute on how it will resolve the potential “Lehman moment” even as rating agency S&P chimed in saying a default is likely and it does not expect China’s government “to provide any direct support” to the privately owned developer, overnight the BTFD crew emerged in full force, and ramped futures amid growing speculation that Beijing will rescue the troubled developer…

… pushing spoos almost 100 points higher from their Monday lows, and European stock were solidly in the green – despite Asian stocks hitting a one-month low – as investors tried to shake off fears of contagion from a potential collapse of China’s Evergrande, although gains were capped by concerns the Federal Reserve could set out a timeline to taper its stimulus at its meeting tomorrow. The dollar dropped from a one-month high, Treasury yields rose and cryptos rebounded from yesterday’s rout.”

 

The NYSE Hi-Lo Index closed at -73 yesterday, giving the final confirmation of the sell signal.  The interesting item is that the Hi-Lo is due for a Master Cycle low as early as tomorrow, but no agreement with the SPX and VIX.  This is odd, since there is another Master Cycle low in mid-October which syncs with the SPX.  This suggests to me that there may be some  event that may panic and close the markets, since the SPX and VIX are in mid-Cycle.  The two main events that could possibly affect the markets are a government shutdown, Evergrande and the Canary Island Volcano.

 

VIX futures pulled back to 22.36 this morning before resuming their ascent.  A move back aboe 25.00 may induce hedge funds and CTSs to resume selling, as this is considered gamma negative.

 

TNX is testing Intermediate-term support at 13.02 witht he 50-day Moving Average just beneath it.   Should it break beneath, it may be a signal for more decline to come.  The proposed Master Cycle terminus in mid-October may be the Cycle Bottom support, near 10.00.  Old habits die hard and a panic sell-off in stocks may drive investors into treasuries.

ZeroHedge observes, “In a risky move inviting a showdown with Republican lawmakers, House Democrats are linking a suspension of the US debt ceiling to a must-pass spending bill required to keep the government operating past September.

If it works, the debt ceiling – which GOP leaders have balked at raising – would be suspended through December 2022.

If nothing is done, the federal government will shut down and default on payments as soon as next month – a prospect which already has anxiety through the roof as measured by the spread between Oct and Nov T-bill yields.

 

USD futures are lower this morning, suggesting the anticipated Master Cycle may have ended yesterday, day 257 of the Master Cycle.  This appears to go hand-in-hand with treasury yields.  The USD may take a real beating as it is in a multi-year Orthodox Broadening Top and is targeted to land near 85.00 in the current decline.

 

 

 

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September 20, 2021, Pray for Our Country

2:45 pm

SPX bounced at Nomura’s final support (before oblivion) at 4310.00, having gone past the 100-day at 4328.00.  Whether it holds or not is still in question.  A decline beneath 4300.00 introduces the concept of a running correction, that is, a corection that may not be able to even make the lowest (25%) Fibonacci retracement, currently at  4353.00.  This is no time to take short profits.  There’s much more to come.

ZeroHedge comments, “US equity markets crashed through several technical levels, with S&P finding some support (for now) at its 100DMA…

As the spike in volatility (VIX is back up near 28)…

prompted forced sellers in size, Nomura’s Charlie McElligott – who correctly called this post-opex plunge – notes some remarkable flows going-through earlier this morning in response to the initial “vol squeeze” risk-off, as we witnessed brave vol sellers not waiting for the market purge- or Fed event risk- to clear, and instead, actively attempted to harvest “rich” index vol & skew / shorted it, while others monetized downside hedge gains (because the back-test on vol spikes tells you that you have under 1 day before the rally in spot, LOL)…”

 

12:15 pm

VIX has risen above the neckline and is testing the Cycle Top resistance at 26.95.  While the SPX Master Cycle is scheduled to end on October 15, the VIX Master Cycle is not due to terminate until October 26, 11 days later.  There are other anomalies among the Cycles that suggest that what is happening ths October may not be normal.  This suggests such possibilities as a market closure.

ZeroHedge comments, “The last seven times that the S&P 500 has traded down to its 50-day moving-average, it has rebounded rapidly and aggressively.

This time – for now – is different, as Friday saw the S&P cash close back below the 50DMA and futures indicate a serious move below it at the open…

And things could escalate, as. following the extinction of a serious chunk of options on Friday, we start today with a sharply negative gamma position.

This negative gamma position doesn’t flip positive unless markets recover the 4425 area. For today we look to 4415 as resistance, with support at 4360 and 4310.”

 

8:15 am

SPX futures are down over 80 points as I write, crossing beneath the 50-day Moving Average and approaching the 43-week Moving Average at 4308.00.  The combination run-off from options expiration and Evergrande now at its lowest point ever, soon to be insolvent.

I am highlighting the weekly SPX chart to show the three-year Orthodox Broadening Top with a throw-over lasting a year.  Normally the throw-over of this height and duration may disqualify the Broadening Top, but a decline beneath 3900.00 may re-instate the Broadening Top and result in a quick decline to 2100.00.

ZeroHedge reports, “In retrospect, China, Japan, South Korea and Taiwan picked a great day to take a holiday, which as we noted last night hammered Hong Kong stocks more than 3%, slamming the Hong Kong property sector and sending Evergrande – which is expected to default within hours to a bank loan due Monday while crucial interest payment deadline on its offshore bonds looms on Thursday – to its lowest market cap ever (it closed down 10.2% just off the worst levels of the day) before the rout spread to European bourses and US equity futures as Evergrande’s escalating liquidity – and now solvency – crisis spread beyond the sector.

At 24,099 points, Hong Kong’s broader Hang Seng index has closed at its lowest level since October 2020.

“Evergrande is just the tip of the iceberg,” said Louis Tse, managing director at Wealthy Securities, a Hong Kong-based brokerage. Chinese developers were under substantial repayment pressure on dollar-denominated bonds, he added, while markets had become nervous that Beijing would push listed real estate groups to cut the costs of housing in mainland China and Hong Kong.

“That affects the banks as well — if you have lower property prices what happens to their mortgages?” Tse said. “It has a chain effect.”

But there may be yet another risk that is being summarily dismissed by the mainstream media.  Newsweek reports, “volcano has erupted on the Spanish Canary Island of La Palma, prompting unfounded fears that a so-called mega-tsunami could be headed to the East Coast of the United States.

The Cumbre Vieja volcano began erupting at around 3.12 p.m. local time (10:12 a.m. EDT) on Sunday, according to officials. It forced the evacuation of around 5,000 people from their homes in villages in the area, Canary Islands president, Angel Victor Torres, said in a press conference on Sunday. It marked the volcano’s first eruption since 1971.”

For those living on the East Coast, it may be advisable to monitor www.tsunami.gov for updates.  Should El Cumbre Vieja collapse, the espimated time to landfall in the United States would be 6-9 hours.

 

VIX futures have reached a new high at 26.75, crossing the Head & Shoulders neckline.  VIX has 3-4 weeks left in its Master Cycle, giving it time to go well past the Head & Shoulders target of 36.08.

ZeroHedge notes, “The last seven times that the S&P 500 has traded down to its 50-day moving-average, it has rebounded rapidly and aggressively.

This time – for now – is different, as Friday saw the S&P cash close back below the 50DMA and futures indicate a serious move below it at the open…

And things could escalate, as. following the extinction of a serious chunk of options on Friday, we start today with a sharply negative gamma position.”

 

The NYSE Hi-Lo Index opened at -28.00 and declined from there.  This is the final confirmation of the decline and SPX sell signal.

ZeroHedge remarks, “As futures indicated, the US cash equity open was greeted by an avalanche of selling, breaking the S&P back below its 50DMA…

This was the second largest sell-program in history with TICK crashing to -2067 (record low as -2069 on 5/11/21)…

…which means that we were off by just 2 stocks from the biggest selling-wave in history.

A sea of red in stonks…”

 

TNX appears to have made a Master Cycle high last Friday at 13.86.  This may allow a decline to the next Master Cycle(low) due in three weeks.  Today’s action is indicative on money flows into treasuries and out of stocks.  We may expect the next Master Cycle to reach its low at or near the Cycle Bottom, currently at 9.79.

 

 

 

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September 17, 2021

12:38 pm

SPY may be on the verge of a gamma meltdown as there are 17,000 more put contracs than calls at 446.00.  At 445.00 there are 33,500 more puts than calls.  At 444.00 there are 28,000 more puts than calls.  SPY has already tested the 50-day Moving Average at 441.37.  Once beneath it, there may be no stopping the decline.

QQQ is in a similar position ar 374.50.  Puts begin accumulating at 378.00 and lower.

 

12:05 pm

SPX declined impulsively to the 50-day Moving Average at 431.95 and bounced.  The 38.2% Fib retracement is at 4453.85 while the 50% Fib retracement is at 4459.98.  A quikk bounce to one of these levels may ensue before a resumption of the decline.  Tere is a high probability that the retracement may not make either of these targets.  A decline beneath 4433.99 tells us SPX is in failure mode.

ZeroHedge observes, “That’s the message from the options market as ~30% of SPX gamma will expire at 9:30AM ET (and 60% of SPY, 35% of QQQ, and a very large set of stock options expiring on the close).

SpotGamma warns that 4500SPX/450SPY is still the biggest overhead level, with another heavy concentration of gamma at the 4475 area (and 4450 is the Put Wall)

The visual below on this expiration is well framed by this gamma table wherein light grey depicts the gamma expiring today.

As you can see the “board” will be reset for next week, just ahead of the 9/22 FOMC.”

 

8:00 am

Good Morning!

SPX futures are lower, having reached a low of 4458.20.  This is likely to be the Max Pain zone for SPX options due to the fact that puts have a slight edge over calls at 4460.00 and below.  SPY (close: 447.17) otions are also in the Max Pain zone.  However, open interest in 446.00 put contractss are 25,500 more than calls.  Moreover, 445.00 put contracts are 33,000 more than calls.  You get the picture.

ZeroHedge reports, “Quad-witching opex Friday has arrived, bringing with it the usual drama of gigantic gamma expiration, including $1.5trillion of SPX index,
$310bln of options on ES futs, $220bln of SPY options, $610bln of other index…

… a surge in market volumes, spike in volatility and now expected rebound in risk assetsWith over a third of market gamma set to expire today – specifically some 35% of SPX, 50% SPY, and 35% of QQQ gamma according to SpotGamma – brace for a bump ride as the absolutely gargantuan S&P pin at 4,500 is about to get much smaller, drastically reducing the market’s downside buffer.”

 

VIX futures ranged up to 19.60 this morning as tensions rise going into Quad Witching day.  Should SPY decline bebeath 445.00 we may see the VIX spike to the neckline at 24.50.  While today’s trending strength is neutral, next week appears to be another story.  We may see a breakout above the neckline by Wednesday, at the latest.

 

The NYSE Hi-Lo closed at 45.00, admittedly higher than Wednesday’s close, but in the danger zone nonetheless.  Trending strength (in the decline) is building with a possible Master Cycle low by mid-Week.  That may be followed by another Master Cycle low in mid-October.

 

TNX is rising into its Master Cycle (high) next week.  Thus far the behavior is stunted, since the minimal Wave (A) of [5] should reach 14.00.  Either my analysis is wrong (go figure!) or something dramatic is about to happen in the next few days.

 

Gold futures declined to 1752.05 this morning.  GLD options are hovering just above 163.00 with over 9,000 net put contracts.  Should that level be breached today, GLD may go into a tailspin as it anticipates a Master Cycle low by the end of next week.

 

The GSCI Ag Index rallied above its 50-day Moving Average at 410.15 and may challenge its Intermediate-term resistance at 414.60 in the next few days.  The Cycles Model says that GKX has clear sailing higher through mid-December.  The minimal target may be near 600.00, but could go considerably higher.  The secular uptrend may last another 5 years or longer.

 

 

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September 16, 2021

3:46 pm

SPX appears to have completed its retracement (Wave 2).  Time to sell.  The retracement was comparatively weak, lesss than the 50% expected at 4490.52.  This market is going down.

 

7:30 am

Good Morning!

SPX futures are lower this morning after doing a double tap on the trendline yesterday.  Today may be a down day, as it appears that despite the panic rally from the low, the index is breathing fumes.  As the decline hasn’t quited taken hold this morning, there may be another attempt at the trendline that may fail.  The trendline and the 50% Fibonacci retracement are at 4490.78.  The ensuing decline may challenge the 50-day Moving Average at 4425.00.

Tomorrow’s Quad-Witching Options expiration shows calls are marginally higher at 4500.00 and above, while puts gain the upper hand at 4400.00 and below.  This may allow a wide-ranging day that would affect volatility and allow a possible failure beneath 4400.00.

ZeroHedge reports, “US equity futures slid, fading Wednesday’s torried one-day rally, as investors awaited data on jobless claims and retail sales which are expected to show another decline as US consumers retrench.  European markets were solidly in the green while Asian stocks fell after the ongoing debt crisis at Evergrande – which halted all bond trades for the day – and China’s latest push to rein in private industries hurt sentiment. The dollar gained as Treasuries dipped while Bitcoin was little changed as gold and oil fell. S&P 500 E-minis were down 8.75 points, or 0.19% at 730 am ET, Dow E-minis were down 14 points, or 0.04%, while Nasdaq 100 E-minis were down 34.25 points, or 0.22%.”

 

The NYSE Hi-Lo Index closed at 26 out of over 3300 listings.  New highs show active participation while new lows indicate liquidation.

ZeroHedge reports, “The last time retail participation in the market dried up, was back in May when three months after retail investors took the stock market by storm sparking a series of historic short squeezes in meme stonks such as GME and AMC, the money from various stimmies dried up and retail enthusiasm for stocks suddenly faded.

We discussed this on May 9 when we said “Retail Participation In Stock Trading Has Collapsed“, and pointed to the plunge in call option volumes, which had emerged as the preferred investment vehicle for millions of GenZ and Millennial investors.

Perhaps coincidentally, our warning that day marked the top for the market for the next few weeks, with the S&P sliding some 200 points in just the next four days.

We bring this up because at a time when retail investors have become instrumental in propping up the market and buying each and every dip, this time around retail enthusiasm is once again fading.

 

VIX futures rose off their low, reaching a morning high at 19.09.  The correction appears to be complete, with a near 61.8% retracement.

 

NDX futures declined to 15444.70 after closing very near Short-term support at 15500.09.  The trendline is near 15350.00 this morning, which confirms the sell signal.  The NDX Hi-Lo Index closed at -15.00, adding yet another confirmation to the mix.  The final sell signal confirmation comes beneath the 50-day Moving Average at 15102.29.  Tne NDX may come under the influence of the tech-heavy Shanghai Composite Index.

While the NDX options don’t reveal a lot of information due to the large size, the QQQs (Price:378.05) reveal overwhelming open interest in puts at 378.00 and below, while open interest in calls dominate at 379.00 and higher.  IT may only take a wobble of a decline from yesterday’s close to set off a self-reinforcing decline in QQQs/NDX.

 

The Shanghai Composite Index tumbled to a new daily low as liquidity is withdrawn from the market.  While Evergrande is no a tech company, techs have had their share of troubles as well.   This may force the NDX into a tailspin that it may not recover from.

ZeroHedge reports, “Earlier today we pointed out that in what can (obviously) only be a remarkable coincidence, China’s largest, and most systematically important real estate developer, China Evergrande (and its $300+ billion in debt), collapsed on the 13th anniversary of Lehman’s bankruptcy filing, when Beijing told Evergrande’s creditor banks that the insolvent company, which recently hired Houlihan Lokey as bankruptcy advisor, would not pay interest on its debt next week, nor would it repay principal, in effect blessing the coming default.

And yet there was some trace of hope, because as Forte Securities trader Keith Temperton said “The Asian banks will get hit hard if there’s a default, but then there will be a 10-year recovery process. The market’s getting a hang of it. The way they’ve managed the news flow seems quite clever. They haven’t let a swathe of bad news at once” giving investors and creditors some hope that the money could still miraculously reappear.”

 

TNX soared above the 50-day Moving Average at 12.92 this morning and on a buy signal.  This may be confirmation that the August 4 low at 11.29 could be the terminus for Wave 5 of (C) of [4] as well as the Master Cycle low.  Note that I pointed out that particularly strong trends may have shorter Cycles and possible corrective truncations, or both.

 

Gold futures plumetted to 1758.75 this morning on liquidity issues.  The Retail sales report didn’t help.  The Cycles Model suggests may last until next mid-week, declining in strength.  It appears that the Head & Shoulder neckline may be broken.

 

 

 

 

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September 15, 2021

1:24 pm

SPX  has retraced most of the way to its trendline near 4485.00.  The 50% retracement value is 4490.78.  Currently it has gone to 4479.91, just above the 38.2% Fib retracement at 4477.72 in a Wave [a] of 2.  Wave [b] of 2 may be quite deep, with a floor near 4400.00.  The final surge may be on Friday, where it may revisit the trendline as it rises to +/- 4490.00.  We may see volatility go through the roof should the decline go beneath the 50-day Moving Average.

ZeroHedge comments, “This morning’s chaotic trading in stocks could be indicative of the pull and push that Nomura’s Charlie McElligott sees playing out over the next week or so.

Specifically, Nomura’s SPX sentiment index is cratering and at 38.7%ile, back near lows of the year.

Forward returns backtest to show sideways for the next 1m with negative excess return.

But it is the ultra-short-term which is most interesting…”

 

7:30 am

Good Morning!

SPX futures remained within a 16-point range of yesterday’s cloose.  This afternoon we may see an 8.6-day decline completed near the 50-day Moving Average at 4425.04, followed by a bounce into options expiration.  A 50% retracement of this decline will put SPX back up to 4485.00, near the trendline.

Today’s expiring options are heavily weighted with puts at 4450.00 and beneath.   The maximum pain level is 4465.00, suggesting a possible close in that area.  Friday’s optiosn expiration shows a wide neutral stance with puts dominating at 4400.00 and below, calls domination at 4500.00 and higher.  A gamma-induced sell-off to 4400.00 is possible today, but may still bounce back toward the trendline by Friday.

ZeroHedge reports, “While Microsoft did everything it could to halt the recent market drop which has dragged stocks lower on 6 of the past 7 days with its surprising announcement of a record, $60 billion stock buyback, the latest dismal data from China which missed across the board with retail sales, industrial production, fixed investment, property sales and investment all came in worse than expected, with retail sales growing at the slowest pace since August 2020 while industrial output also rose at a weaker pace from July…

… left a sour taste in the market, and left futures trading just barely in the green, higher by 0.1%, while Asia stocks dropped as weak Chinese economic data reinforced worries about slowing growth globally as well as in the world’s second-biggest economy amid fraught nerves over a still-dominant pandemic and tapering of central banks’ stimulus; European markets lacked direction. S&P 500 E-minis were up 5 points, or 0.11% at 07:20 am ET, Dow E-minis were down 16 points, or 0.04%, while Nasdaq 100 E-minis were up 28 points, or 0.18%. The dollar was steady and oil gained.”

 

VIX futures have remained neutral in the overnight session.  VIX may decline to the 50-day Moving Average in the next couple of days.  Today is monthly options expiration for the VIX and I would expect most of the decline to happen before the close. In today’s options expiration, puts dominate at 21.00 and lower, while calls dominate from 24.00 and higher.  A negative usrprise to the market may spike VIX to 25.00.

 

NDX futures rose to 15438.00 in th eovernight session, but have come down since.  NDX options are very light, but the QQQ (Price: 375.26) options chain shows puts d0minating at 376.00 and lower.  The decline in the NDX is incomplete and negative gamma may induce a further sell-off to the mid-Cycle support at 15259.50 or possibly lower.  The 50-day Moving Average stands at 15086.06.  This may induce a sell off in the SPX as well…an accident waiting to happen.

ZeroHedge observes, “Now that stocks have emerged from their 5-day losing streak, narrowly averting 6 consecutive days of declines which would have been the longest such streak since the February 2020 depths of the covid crisis, attention shifts to the market’s technicals and especially Friday’s upcoming quad-witch which sees some $1.5 trillion in SPX option expirations, as well as $1.4tln in options across underlyings expiring on Friday afternoon, including the 2nd largest expiration for single stocks outside of a January.

Courtesy of Goldman, here Four observations on option positioning ahead of Friday’s quarterly maturity:

1. Option volumes have been continuing to grow relative to delta-one volumes. Both index and single stock option markets have shown volume growth in Q3, while delta-one volumes (futures and shares) have fallen. Having traditionally traded well below 100%, SPX options notional volumes are now double the volume of futures traded.”

 

TNX declined this morning and may be on its way to 11.00 by Monday.  That move may sent UST to 135.00 at the same time.   Friday’s options chains for TLT (Price: 151.11) shows it is heavily dominated by calls and positive gamma may take over with today’s move sending treasuries higher.

 

The GSCI Agricultural Index may have made its Master Cycle low on Friday, September 10 (day 249).  This Master Cycle shows relative strength as it is ready to move to new heights instead of new lows (in stocks), as it bounces off the 43-week Moving Average (not shown).  The new Cycle may last until mid-December.  In the meantime, we may expect food prices to possibly double by the end of the year.

ZeroHedge warns, “An executive of Kroger, one of the largest supermarket chains in the United States, warned grocery prices are about to become even higher this year as inflation sets in.

Inflation is running hotter than previously anticipated, and prices are slated to rise an additional 2 to 3 percent over the second half of 2021, Kroger CFO Gary Millerchip said during a call with reporters.

Kroger will be “passing along higher cost to the customer where it makes sense to do so,” he said on Sept. 10.”

ZeroHedge further notes, “Spot prices for nitrogen fertilizer on the US Gulf Coast skyrocketed to a near-decade high on a report the world’s largest nitrogen manufacturing plant declared force majeure.

CF Industries Holdings Inc. in Donaldsonville, Louisiana, closed its massive complex ahead of Hurricane Ida. The complex has 19 plants, including six ammonia and five urea facilities, producing nitrogen-based products for agricultural and industrial markets.

According to the letter seen by Bloomberg, CF Industries said, “due to these circumstances, CF Industries Sales, LLC has declared an event of force majeure affecting the production and shipment of product from the CF Donaldsonville, LA nitrogen complex.” 

The letter was dated Sept. 3, and at that time, the facility remained closed. This stoked fears of production declines at a time when supplies are already tight.

As a result of the force majeure, US Gulf urea nitrogen fertilizer spot prices spiked 16.5%, according to Green Markets data.”

 

The Shanghai Composite Index plunged beneath the Cycle Top resistance, giving it a sell signal.  The Bank of China has been giving the market ample liquidity to the point of nearly overtaking the previous high at 3731.69, missing by only 9 points on Friday.  Now we know why there appears to be a sudden liquidity drain 12.9 years after Lehman.

ZeroHedge observes, ” Yesterday, when covering the non-stop drama surrounding China’s most insolvent property developer, Evergrande, we said that it would be remarkably ironic if Evergrande were to announce a default – which everyone knows is coming – today, on the 13th anniversary of Lehman’s bankruptcy filing on Sept 15, 2008.

Well, in this delightfully absurd world we live in, that’s just what happened only instead of Evergrande making the announcement, it was the entity that will soon control the massively overlevered property developer that made it for them: the Chinese government.

According to Bloomberg, Chinese authorities told major lenders to China Evergrande Group not to expect interest payments due next week on bank loans, which takes the cash-strapped developer a step closer the nation’s largest modern-day restructurings, and guarantees that China’s “Lehman Moment” is now just a matter of days, if not hours.”

 

 

 

 

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September 14, 2021

1:23 pm

I finally figured that the problem with my charts originated at Google.  However, the new search engine doesn’t work the same.  It will take some getting used to.  As you can see, the SPX is on a chart sell signal.  The VIX supports the SPX sell signal, while the NYSE Hi-Lo Index opened at 13.00 and rose to 76.00.  We may get a better reading after the close.

7:53 am

Good Morning!

My webmaster is tring to find why my charts are being blocked at WordPress.  I hope to have an answer later today.

SPX futures have turned negative this morning after testing the underside of the Ending Diagonal trendline overnight.  We have a sell signal hat is confirmed by the trendline and VIX, but not the NYSE Hi-Lo Index, which closed at 52.00 after ramping to 103.00 earlier in the day.   The 50-day Moving Average is at 4421.93.

Tomorrow’s options expiration is weighted toward calls at 4500.00 and above, while puts dominate at 4450.00 and below.  Tomorrow’s options expiration is not heavily populated, as if speculators are taking a “wait and see” attitude.  Friday’s (monthly) options expiration is an enigma, with equal weighting of puts and calls all the way down to 4350.00.

ZeroHedge reports, “Having come dangerously close to dropping 6 days in a row, the longest streak since Feb 2020, US stock-index futures and European stocks hugged the unchanged line on Tuesday after rebounding furiously in the last hour of trading on Monday ahead of key CPI data that is expected to show a fourth month of U.S. inflation at 5% or more, and which will shape investor expectations about the likely timing of the Fed taper. S&P 500 E-minis were up 2 points, or 0.04%, at 07:15 am ET. Dow E-minis were up 10 points, or 0.03%, while Nasdaq 100 E-minis were down 2.75 points, or 0.02%. Treasury yields and the dollar were steady.”

At 8:37 ZeroHedge observes, “As anxiety over the timing of the taper (not the if but the when) rise, all eyes are anchored on this morning’s CPI (which was expected to rise MoM again but drop marginally on a YoY basis). Both headline (+0.3% MoM vs +0.4% MoM exp) and core (+0.1% MoM vs +0.3% MoM exp) CPI printed below expectations but on a YoY basis headline CPI rose 5.3% – as expected.

Source: Bloomberg

That is the 15th straight monthly rise in consumer prices and the fourth straight month above 5% on a YoY basis. On a side note, this is the first time MoM CPI printed below expectations since November 2020.

Core CPI slowed from +4.3% YoY to +4.0% YoY (well below the +4.2% YoY exp)…”

 

I must rescue a dame in distress (my daughter) this morning.  I hope my webmaster will find a solution to m problem.

 

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