The Practical Investor

9:45 am

BKX has declined beneath the combined Intermediate/50-day supports at 111.42-111.46.  The sell signal may now be confirmed.  A weak Master Cycle high was made last Friday, September 27.  A cross beneath the 50-day confirms the Cycle Pivot.  The Cycles Model suggests the decline may last a total of 55-60 days.  The next support may lie at the lower trendline at 104.50.  Should the decline last as long as the Cycles Model implies, the Head & Shoulders neckline at 72.50 may be the ultimate target.

ZeroHedge remarks, “Bank of America customers on Wednesday reported having problems accessing their bank accounts or that their account balances currently show $0.

The outage started at around 12:30 p.m. E.T. on Wednesday, according to the tracking website Downdetector.”

Note:  Bank of America Headquarters is in Charlotte, North Carolina

7:45 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures declined to 19652.30, then bounced.  It did not take out the weekly low at 19622. 29.   Should the NDX break down, the next level of support is the Intermediate level at 19503.82.  The 50-day Moving Average lies at 19259.26.  A confirmed sell signal may lie beneath either of the two prior supports.  There is a deluge of information to be reported in the next 24-36 hors that may alter the course of the markets.

Today’s options chain shows Max Pain at 19825.00.  Long gamma may begin at 19850.00 while short gamma may begin beneath 19800.00.A substantial “collar” may mature tomorrow that could allow the options to move more freely.

SPX futures declined to 5676.40 before a bounce this morning.  It has not exceeded Monday’s low at 5674.00.  Today may be the last day the SPX may remain above 5700.00.  An expanded flat correction has the capability to rise to 5732.00.  Once accomplished, the wheels may fall off.  SPX has made an aggressive sell signal that remains in force, especially beneath 5700.00.  Here are some definitions:

• An aggressive sell signal may be found after a Cycle top (all-time high) is made).  It suggests that longs should be reduced or eliminated.  Shorts may be “layered in” beneath this level.  Expect rising volatility.  This move takes patience.
• A confirmed sell signal  may be found beneath Intermediate support and/or the 50-day Moving Average.  While no signal carries an absolute guarantee, each successive signal carries a higher degree of certainty.
• Trading channel (red rising) trendlines, when broken, offer the potential that the trend may be broken with the potential of a complete retracement.
• Super-Cycle trendlines, such as the 1987 trendline, offer the insight of a much greater decline that may take multiple years.

Today’s options chain shows Max Pain at 5715.00.  Long gamma may stat at 5745.00 while short gamma may lie beneath 5700.00.  This options market is also tightly collared until tomorrow’s expiration.

ZeroHedge reports, “US stock futures are lower, but off session lows, in line with declines seen across Europe and Asia, while yields, the dollar and oil rise as the risk of escalating conflict in the Middle East damps risk appetite. As of 8:00am ET, S&P futures are down 0.1% after closing up 0.01% on Wednesday; Nasdaq futures slide 0.3% with MegaCap Tech mixed: NVDA is up +0.7%, while TSLA extends yesterday selloff and is down -1.6% pre-market. Bloomberg’s dollar index gained for a fourth day, bolstered by a rise in Treasury yields; market snapshot: RTY -70bps // UST10yr +2.5bps @ 3.80bps // WTI +2% @ $71.50 // Bitcoin unch @ $60,900 as global equities trade mixed with escalating geopolitical tensions/ the awaiting of the size/scale Israel’s response to Iran weighs on markets, which has pushed oil prices up another 1.9% this morning; elsewhere in commodities base metals are also higher, while precious metals and ags are lower: Jobless claims, factory orders and the ISM services reading (est 51.7, Last 51.5) are all on the slate as traders prepare for Friday’s jobs report, while the Federal Reserve’s Jeff Schmid, Neel Kashkari and Raphael Bostic are all scheduled to speak.”

VIX futures are positive this morning, rising to 20.32.    It may be due for a pullback, should the SPX remain above 5700.00.  However, once the pullback is complete< the upward trend may continue on a secular rise.  Note that the VIX is now above the levels that occurred prior to the August 5 debacle.  A breakout may elevate the VIX to levels above the August 5 high.

A look at the October 9 options chain shows Max Pain at 20.00.  Short gamma inhabits 16.00 to 19.00.  Long gamma is very scarce.  Very larrge moves may occur when investors are wrong-sided.

TNX futures rose to 38.27 this morning, breaking out above the trading channel lower trendline.  TNX is on a buy signal, UST (10-year treasuries are on a sell signal).  The Cycles Model calls this a day of strength, which may carry over into next week after a brief pullback.  The 50-day Moving Average lies at 38.52.  The Fed easing may be backfiring, as the excess liquidity appears to be going nowhere.  The point is, the excess cash may be hoarded, rather than deployed to the markets.

Japanese Yen futures hit a morning low at 68.00, creating a possible Master Cycle pivot.  The 50-day Moving Average lies at 68.50.  A move above that level creates a probable buy signal.  Today is day 254 of the Master Cycle, so there is a possibility of a marginally new low in the next few days.  Time is running out to unwind the Yen carry trade, contrary to popular opinion..

ZeroHedge remarks, “In the past two months, reports of the yen carry trade death have been greatly exaggerated, largely as a result of market whiplash to Japan’s schizophrenic approach toward the currency.”

8:15 am   2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures have declined to 19677.90 this morning despite excess liquidity near all-time 50-year highs.  The Nasdaq Hi-Lo Index dipped to -23 yesterday for the first time since September 11, suggesting that it is not responding to all of the excess liquidity in the system.  NDX is currently on an aggressive sell signal.  However, a confirmed sell signal lies beneath Intermediate support at 19480.88.  Whispers of an impending crisis are in circulation, while our leaders remain tight-lipped.

Today’s options chain shows Max Pain at 19770.00.  Long gamma may start at 19800.00 while short gamma may begin beneath 19725.00.

SPX futures dropped to 5684.10 this morning, currently giving an aggressive sell signal.  Intermediate support lies at 5611.57, beneath this we may find a confirmed sell signal.  The 50-day Moving Average lies at 5538.22, commonly recognized as a confirmed sell signal.  The decline may become more pronounced as the week progresses.  Trending strength begins to appear next week, indicating possible panic conditions.

Today’s options chain shows Max Pain at 5705.00.  Long gamma may begin above 5715.00 while short gamma resides beneath 5700.00.

ZeroHedge reports, “US equity futures are weaker with small caps underperforming while Treasuries erased some of the previous day’s gains as escalating tensions in the Middle East spooked traders and sent oil sharply higher for a second day after Iran fired about 200 ballistic missiles at Israel, drawing a vow of retaliation from Prime Minister Benjamin Netanyahu and further raising the risks to crude supplies from the region. As of 8:00am ET S&P futures were down 0.2% but off the worst levels of the session following yesterday’s flight to safety; as shown in the chart below the cash index has been largely flat for the past 2 weeks. ”

VIX futures are consolidating after the last two days of upside moves.  VIX has awakened and on a buy signal above the 50-day Moving Average at 18.36.  The next couple of days may experience a sideways consolidation as it acclimates to its newfound strength.  The Cycles Model suggests a possible breakout above the Cycle Top in the next week.

Today is options expiration for the VIX.  Next Wednesday’s op-ex shows the Shorts regaining some of their courage beneath 18.00 while the longs appear to have fallen asleep.  This may lend itself to a possible explosive situation as investors’ and dealers’ guard is down.

TNX futures have risen to 38.26 this morning, while the cash market has risen to 38.00.  A breakout may occur, as Friday’s high may be exceeded.  This may be followed by a newfound trending strength through the rest of this week.

Japanese Yen futures have fallen to 68.89 this morning, breaking beneath Intermediate support at 69.41 and possibly targeting the 50-day Moving Average at 68.41.  The average retracement (50%) may lie near 66.68.  The retracement could easily be complete by the end of this week, according to the Cycles Model.  Time is running out to unwind the Yen carry trade.

Crude oil futures may be completing its retracement at the 50-day Moving Average at 73.16 today, as it has risen this morning to 72.48 thus far.  The reversal to a new low may take about three weeks.  The neckline of the Head & Shoulders formation warns that, once beneath it, there are no visible supports until the H&S target may be reached.  Hedge funds and speculators are short oil.  Do they know something we don’t?

11:25 am

BKX bounced rom its 50-day Moving Average at 111.50.  Beneath that level is a confirmed sell signal.  The Cycles Model suggests an alarming development.  There may be a Master Cycle low by the end of the week.  The possibilities are staggering, given the increased volatility in the VIX and in the Banking Model itself.

The perfect storm may be brewing.  With liquidity conditions already favorable, the central banks have unleashed a torrent of…more liquidity.  Most analysts welcome the gushing increase in money supply, thinking only of the prospects of a rising equities and real estate market.  The more sober view is, that with the PE of most equities indices over 20, what rot lies beneath the surface that causes the authorities to boost liquidity?  The Cycles Model suggests we may know the answer shortly.

10:30 am

SPX has declined beneath 5700.00, our demarcation line.  It is now on an aggressive sell signal.  One should not be long here.

8:15 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures rose to 5767.20 this morning, short of the all-time high at 5767.37.  Thursday’s high remains intact after yesterday’s closing stick-save.  Volatility may now rise to break the SPX  out of its range.  5700.00 is where an aggressive sell may take place.  Once underway, the declining Master Cycle may last to late November.  One may deduce the reason for this decline.

Today’s options chain shows Max Pain at 5730.00 Long gamma may begin at 5745.00 while short gamma may start beneath 5700.00.

ZeroHedge reports, “US equity futures are down a touch as we enter Q4 after trading overnight in a narrow range, with NDX leading and RTY lagging, a familiar pattern from the first half of the year. So far in 2024, S&P is +20.8%, NDX +19.2%, and RTY +10.0% (a full YTS performance return in a latter post). As of 8:00am ET,. S&P futures are down 0.1% after the index notched a fresh record Monday, the 43rd of the year,  following a third-quarter rally that capped the longest such winning stretch since 2021; Nasdaq futs are unchanged with Mag7 names mixed as Semis hold a slight bid. FTSE +35bps, CAC -20bps, DAX +30bps, Nikkei +1.93%, the record China market juggernaut (Hang Seng/Shanghai) is closed for the next week due to holidays. Bond yields are lower as the yield curve bull steepens, and USD is higher. Commodities are mixed with Ags/Energy under pressure and Precious Metals are leading Base metals. Overnight news focused on Israel “targeted ground raids” into Lebanon (Israeli security official said a wider operation into Beirut is not on the table) and the US Dockworkers strike starting on the East Coast with economic costs estimated to be up to $5bn/day; hurricane recovery continues in the Southeast. Today’s macro data focus is on ISM-Mfg, JOLTS, Construction Spending, and Vehicle Sales. There are five Fed speakers today.”

VIX futures consolidated this morning, but may be waiting for a burst of energy to kickstart the new Master Cycle.  Both the Cycle and the structure appear complete, or nearly so.  The Cycles Model shows the new Master Cycle going higher through the end of October.  However, a resurgence of a new Cycle may carry the VIX higher into December.  The entire 4th quarter may be chaotic.

Tomorrow’s op-ex shows Max Pain at 16.00.  Short gamma resides at 14.50-15.00 wile long gamma may begin at 17.00 and remains strong to 35.00.

TNX is pulling back, gathering strength for th enext probe higher.  Trending strength may be rising through the end of the week, as well.  With it may come the realization that yields are going higher..  Investors have become complacent, expecting the wind (yields) at their back.  Stormy weather ahead.

ZeroHedge remarks, “Stocks and bonds took a hit today around 1400ET when Powell said that he “doesn’t feel like The Fed is in a hurry to cut quickly.”

Additionally, Powell said “sometimes people pay too much attention to The Fed’s SEP [Dot Plot],” noting that the SEP shows two more 25bps cuts this year (less than the market).

That sent rate-cut expectations lower (hawkishly), with less than 3 cuts now priced in for 2024…”

The Shanghai Composite futures stopped going higher for the first time in nearly two weeks after carrying out the shorts on stretchers.  The message from the PBOC is clear.  Speculating on the short side is not allowed.  In doing so, the SSEC has become extremely overbought just as liquidity from short covering runs out.  What becomes more evident is that the only liquidity to propel the Shanghai higher may have come from short covering.  Monday’s high at 3358.59 may have become the end of the Master Cycle.  The new Master Cycle now suggests all of the short-covering gains may disappear, as the move was artificially induced.  Beneath this year’s low is a potential neckline of a Head & Shoulders structure with a minimum target of 15000.00.  The Cycles Model suggests the SSEC may be testing that neckline by the end of October.

2:38 pm

SPX has broken its short-term trendline, putting us on high alert that the reversal may have been made.  It bounced off round number support at 5700.00 and that level may serve to demark an aggressive sell signal.  The SPX high was already a week later than average, so a decline beneath 5700.00 may serve to guide us to reduce longs and begin layering in short positions.

8:45 am     2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!  We are back again as hurricane Helene took down a critical internet relay in Atlanta on Friday morning.  My blog was cut off before being able to save my work.

SPX futures chopped lower to 5719.20 this morning on day 269 of its old Master Cycle (day 4 of the new Master Cycle), leaving Thursday’s high at 5767.37 as its all-time high.  An aggressive sell signal lies beneath round number support at 5700.00.   Intermediate support lies at 5591.20, beneath which the sell signal becomes confirmed.  To most market watchers, the uptrend is still intact.  The 50-day Moving Average at 5531.72 may be the final arbiter for the uptrend.

Today’s options chain shows Max Pain at 5735.00-5740.00.  Long gamma may begin at 5750.00 while short gamma may start at 5725.00.

ZeroHedge reports, “US equity futures reversed earlier gains and are now down at session lows, tracking European market weakness as we close the quarter even as Chinese stocks have their best day since Sept 19, 2008. As of 8:00am, S&P futures are down 0.2% after last week’s record highs on Wall Street, while both Nasdaq (-0.4%) and Russell (-0.6%) underperform pre-market with Mag7 names lower ex-AAPL and TSLA, and semis weaker with NVDA -1.8% as traders look forward to Friday’s jobs data and its impact on Federal Reserve interest-rate cuts. Treasury yields climbed 2-4bps, led by the policy-sensitive two-year note, the USD is weaker though. Commodities are mixed with base metals the standout, moving higher on the China trade while oil tumbles as the usual (record) shorters emerge in force despite epic chaos in the Middle East. This heavy data week kicks off with regional indicators and 2x Fed speakers. As JPM notes, economic strength with a Fed tailwind pushed markets to shrug off both negative seasonality and JPY carry unwind. But given the reflationary China growth reboot, can positive US data push this trend into Oct/Nov, or do we see Election uncertainty/vol spike create another downdraft before rallying into year-end as concerns emerge about the Fed’s easing cycle when overlaid on China’s historic stimulus bazooka? This week’s data may help answer those questions, but the medium-term trend appears to be higher.”

VIX futures are edging higher to a morning high at 17.37 after making its Master Cycle low on Thursday.  The Cycles Model calls for a new high by the end of October.  This may afford the last chance to hedge the equities market.

Wednesday’s options chain shows Max Pain at 16.00.  Long gamma begins strongly at 17.00 and is well populated to 35.00.  Short gamma resides at 14.50-15.00 but tapers off quickly.

The Shanghai Composite rocketed to a morning high at 3358.59, above its Cycle Top at 3188.83.  It is also day 257 of its Master Cycle, suggesting a top in the making may be today.  This 24.8% rally in 8 market days is one for the records.  However, the Cycle Top has been exceeded and the current Master Cycle is about to end.  Should the reversal occur in the next couple of days, the ramifications may be world-wide.

ZeroHedge observes, ““We need to establish a strong benchmark for selecting and employing people, conscientiously implement the ‘three exemptions,’ and support those who take responsibility and get things done.” This statement from the extraordinary Politburo meeting left no doubt about the leadership’s intentions.”

TNX has reversed after reaching its trendline at 38.21 last week.   The trendline defines the throw-under that marks its oversold condition for the past month.  A rally above the trendline at 38.00 or the 50-day Mocving Average at 38.77 may give a confirmed buy signal for TNX.   The Cycles Model suggests the rally may continue through mid-October.  Volatility may pick up this Wednesday and Thursday.

The Japanese Yen rose to a morning high at 70.71 before reversing.  The Cycles Model gives the Yen about one more week of decline, with the mid-Cycle support at 66.19 as the potential target.

7:30 am 

  2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

7:45 am     2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures reached a new retracement high at 20278.40 this morning, approaching its Cycle Top resistance at 20476.65.  Achievement of that target is not guaranteed.   Today is day 265 of the Master Cycle which is stretched, but not abnormally so.  A deep dive into the Cycles Model suggests a reversal may occur this morning.  It may be no coincidence that the BEA offers its revised GDP numbers at 10:00.  The anticipated BEA’s downward revision of GDP  is about to erase a significant amount of the previously reported YTD growth in the economy.   This event, coupled with earnings warnings from highly recognized companies may pull the rug out from beneath the equities market.

Today’s options chain shows Max Pain between 19875.00 and 19900.00.  Long gamma may begin at 19925.00 while short gamma may reside beneath 19840.00.

SPX futures reached an overnight high at 5771.30.  A test of the Cycle Top resistance at 5782.25 is possible.  However, the Master Cycle  anticipates a probable reversal this morning, having fulfilled both time and price targets.  The GDP revision at 10:00 may be the triggering event for a reversal.

Today’s options chain shows Max Pain at 5705.00.  Long gamma may begin at 5710.00 while short gamma may lie beneath 5700.00.

ZeroHedge reports, “Global stocks are soaring after China pledged fiscal stimulus even as traders raised their bets on interest-rate cuts by major central banks (the two are contradictory but who cares). Futures on the S&P 500 climbed 0.8% as US-listed China stocks soared and Micron surged in premarket trading after the company reported stronger than expected earnings and guided higher. As of 8:00am ET, Nasdaq 100 futs jumped 1.5% and the Stoxx 600 index in Europe headed for a record close on the back of what is just shy of China’s “whatever it takes” moment. Treasury yields and the dollar edged lower while oil tumbled for a second day on a report from the FT (which is now doing Reuters’ price manipulation for it) according to which Saudi Arabia was reported to be weighing increasing output, and factions in Libya reached a deal that opens the way to the return of some crude production. Gold soared more than 1% to new all time highs as it prices in all the massive fiscal and monetary stimulus that are coming.”

VIX futures have probed to a new retracement low at 14.98,, testing the mid-Cycle support at 14.97 on day 259 of the Master Cycle.  This may end 10 months of low-to-low Cycles.   It may be time to buy hedges.

The Japanese Yen futures may be challenging  Intermediate support/resistance at 69.22 this morning.  However, it has a remaining week of decline ahead (in strength).  The next target msy be the 50-day Moving Average at 67.93.  The final target is likely to be the mid-Cycle support at 66.19.  It is now time to exit the Yen carry trade.

TNX is in a pullback after challenging Intermediate resistance at 37.82.  Short-term support lies at 37.00, where a resumption of the rally may be found.  The possible change in trend is unrecognized by most analysts.  However, a rally above the 50-day Moving Average may change their outlook.  Note the inverse relationship between the Yen and the TNX.

The Shanghai Composite vaulted to a new corrective high at 3000.65 today after being repelled by the mid-Cycle resistance at 2958.09.  There is a week left in the current Master Cycle, which may allow the Shanghai Composite to reach its Cycle Top at 3186.16.  Please note that this is a bear market bounce that may fade just as quickly as it emerged.

ZeroHedge observes, “Yesterday, when describing the latest round of monetary stimulus out of Beijing, we said that “China is not done stimulating” and boy were we right.

Global markets are sharply higher (again) on Thursday, fueled by hopes of more intervention just days after the central bank announced the biggest monetary stimulus since the pandemic, after China extended its stimulus barrage for the third day in a row, and vowed even more support including a pledge to intensify fiscal support for the world’s second-largest economy, as well as press speculation of 1 trillion renminbi of bank injections.

• *CHINA WEIGHS INJECTING $142 BILLION OF CAPITAL INTO TOP BANKS

China vowed to save the private economy, stabilize its property sector from further slumping, boost its stock markets and ensure necessary fiscal expenditures, according to the readout from a Politburo meeting on Thursday.”

Crude oil futures plunged beneath the Cycle Bottom support and the Head & Shoulders neckline at 68.75 in the overnight markets.  This appears as a triggering event that forecasts a further decline to the Head & Shoulders target listed on the chart.  This decline has been a long time in the making and many do not recognize the signs of what may be about to happen.  The Cycles Model suggests more than 3 weeks of decline may be ahead.

ZeroHedge comments, “Is there something about $70 WTI that ‘the powers that be’ are afraid of?

Source: Bloomberg

A month ago, Reuters reported, citing the usual anonymous sources, that OPEC+ was set to proceed with a production hike in October. That immediately sent oil prices lower, slamming WTI back below $70. A few days later, Reuters reported the exact opposite – that any October production cuts were likely to be delayed (again citing anonymous sources).”

After seeing the Ag Index flail near the bottom during the month of August, we can now see prices breaking out in a big way.  GKX has exceeded its mid-Cycle resistance at 371.93 and is on a confirmed buy signal.  Its target may be the Cycle Top at 405.62 since the current Master Cycle may continue through early November.

9:58 am

BKX is declining from its Cycle Top at 116.23, on its way to the 50-day Moving Average at 111.45.  It is currently on an aggressive sell signal with confirmation beneath the 50-day.  We have been given hints of distress from the Fed and the SEC.  The Cycles Model suggests that the situation may heat up in the next week, with possible panic through mid-October (earnings reports).

ZeroHedge remarks, “94-year-old Warren Buffett’s Berkshire Hathaway has been steadily offloading Bank of America shares over the past several months.

The latest data from Bloomberg reveals that Berkshire sold millions more in recent days, bringing its stake closer to the 10% regulatory threshold, after which it will no longer have to report sales.”

8:15 am   2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures remain in a very narrow range between 5717.00 and 5737.00.  Overhead resistance remains near 5735.00.  Should it break out, the next resistance lies at the Cycle Top at 5777.00.  There is no assurance that it may reach the upper limit.  Today is day 264 in the Cycles Model.  From the prospective of the Model, there are other forces at work influencing the equities Model at this time.  Should the SPX reach its Cycle Top, an aggressive sell signal may be introduced upon the reversal from that resistance.  Otherwise, the aggressive sell signal may be obtained beneath trendline support at 5680.00.

Today’s options chain show’s Max Pain at 5720.00.  Long gamma may begin at 5750.00 while short gamma appears strong beneath 5650.00.

ZeroHedge reports, “US futures are weaker but off overnight lows, as euphoria over China’s latest monetary bazooka stimulus fizzles with Asian shares paring gains into the close (traders now await the far more important fiscal bazooka) and as attention turns to the deteriorating US economy. As of 8:00am, S&P futures are down 0.1% after the index finished with its 41st record closing high on Tuesday, while Nasdaq futures drop 0.2% with weakness in Semis as US-listed Chinese tech stocks fell in premarket trading. Bond yields are mixed, and the USD has a slight bid as the yen trades just off a 3-week low. Commodities are mostly lower as it appears there is muted follow-through to China’s stimulus-induced buying. Today’s macro focus is on New Home Sales, Fed speakers scheduled Kugler at 4pm and Chair Powell (who is slated to make pre-recorded opening remarks at the 10th annual US Treasury Market Conference Thursday at 9:20am with a text release expected) and the 2Y and 5Y bond auctions.”

VIX futures are rising from their Master Cycle low made yesterday.  VIX options have been overwhelmed by short gamma the past month and today’s expiration may give equities a release fro the “tail wagging the dog” syndrome through the manipulation of VIX options.

Today’s options expiration shows Max Pain at 16.00.  Sort gamma is fading beneath 15.00 while long gamma is strong between 17.00 and 22.00.  There does nto seem to be an incentive to hedge under the current market conditions.

TNX is up against Intermediate resistance at 37.88 after challenging it yesterday.  The Cycles Model shows the uptrend being re-asserted.  We may expect to see Intermediate resistance and the trendline at 38.00 being overcome by the end of the week.  The Fed’s 50 basis point cut has amplified price and liquidity risks in the market, but also increases volatility and the threat of inflation making a comeback.

ZeroHedge remarks, “By dropping rates dramatically only a month and a half before an election, the Fed is playing with fire. The election, by all visuals, would seem to pit the establishment against an insurgent populist movement. Regardless of the countercyclical motives, it’s a move that has been widely seen as deeply political. And that invites resentment and retribution.”

The Shanghai Composite is approaching round number resistance at 2900.00 and may be likely to pull back to Intermediate support at 2814.94 before moving higher.  Yesterday was a short covering day with hedge funds and mutual funds making an appearance.    The SSEC has about a week to complete its retracement, which may ultimately reach the mid-Cycle resistance at 2958.28.  Should the Bank of China shoot its liquidity bazooka again, the retracement may go as high as the Cycle Top at 3186.20.

The Japanese Yen futures reached an overnight high at 70.15 before reversing down.  During the next week we may see the Yen decline to the 50-day Moving Average at 63.82, under normal circumstances.  However, the Cycles Model suggests a double dose of trending strength, which may propel the Yen down to the mid-Cycle support at 66.20.  Those in the carry trade should not ignore this move, since the uptrend may renew in about a week’s time.

7:50 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures made a marginal new high (not a new ATH) at 19953.20 this morning, then pulled back.  The surge of inflows may come from foreign sources, as many of the foreign equities markets are in decline.  Today is day 263 in the current Master Cycle as the MC extends.  Last Thursday’s high may be eclipsed in the cash market, but no new all-time high is indicated in the NDX.

Today’s options chain sows Max Pain at 19750.00.  Long gamma may dominate above 19800.00.  Short gamma may emerge beneath 19710.00.

ZeroHedge observes, “After last week’s chaotic dumps and pumps across various asset classes amid Powell’s comments, a giant ‘quad witch’ OpEx, and mean-reverting FedSpeak, today saw markets take a pause (of sorts) with stocks, bonds, the dollar, gold, and crypto all relatively flat close-to-close…

…with only crude oil showing any real action – monkeyhammered lower for no apparently good reason…

Source: Bloomberg

Today’s apparently calm demeanour perhaps reflects anxious traders gearing up for a pretty busy week of ‘hard’ and ‘soft’ data, including the Thursday’s durable goods report, Friday’s PCE inflation report, plus the Consumer Confidence survey and Richmond Fed survey tomorrow.”

SPX futures rose to a new all-time high of 5736.30 this morning.   The DJIA futures also rose to a marginal new high and may reach 43000.00 in the next few days.  The Cycles Model suggests a possible target at the Cycle Top at 5771.98.  It was August 15 when I estimated (with some disbelief) the SPX all-time high target near 5780.00 due during the week of September 16.  Interesting how the Model has been working with both price and time.   Time-wise the Cycle may be overdue but still has room to go in price.  Downside support is at 5680.00, giving an aggressive sell signal.

Today’s options chain shows Max Pain at 5695.00  Long gamma begins at 5700.00 while short gamma begins rising beneath 5690.00.

ZeroHedge reports, “US equity futures are higher, led by tech with small-caps underperforming, as European stocks jump near record high (even as Europe slides deeper into recession) and Asian markets surge after China’s announced a flurry of “stronger than expected” stimulus measures which aided China and Hong Kong equities to more than 4% gains. As of 8:00am, S&P and Nasdaq futures were up 0.1%, fluctuating between gains and losses, as traders were unsure if China’s massive stimulus would prove to be inflationary and thus crush the Fed’s hopes for an accelerated easing campaign. “

VIX futures declined 1 tick lower than yesterday’s low to 15.74 on day 257 of the current Master Cycle.  The Cycle is complete, or nearly so.  The Cycles Model calls for a probable rally to the end of October.

Tomorrow’s option chain shows Max Pain at 17.00.  Short gamma is strong at 16.00, but tapers off beneath it.  Long gamma begins to rise at 18.00 and strengthens to 60.00.  Expectations are set on a much higher VIX.

TNX  has risen to 38.10 this morning, above Intermediate support/resistance at 37.95.  This places TNX on a potential buy signal with confirmation above the trendline at 38.50.00.

ZeroHedge comments, “The Federal Reserve decided to cut rates by 50 basis points despite what Chairman Powell considers “no risk of a recession or downturn,” a “solid economy,” and a “strong job market.”

After ignoring the impact of monetary aggregates and the warning signs of inflation, the Federal Reserve has breached its price stability mandate for three consecutive years, preferring to prioritize liquidity injections, i.e., printing money, to the recovery of the currency’s purchasing power.”

The Shanghai Composite Index shot up to 2863.15, above its 50-day Moving Average at 2853.13.  This created a buy signal just 6 days after making its Master Cycle low.  The Cycles Model suggest this rally may venture back to its Cycle Top at 3186.12, then retest the February 5 low.  The swings may be wide-ranging and difficult to manage for those who have no experience.

ZeroHedge observes, “This morning, when we reported that a sudden – and extremely overdue – urgency appeared to grip Beijing’s top power echelons in fasttracking a bunch of new monetary stimulus measures, including a cut in the 14-day reverse repo tool, we said to expect much more during today’s impromptu briefing on the economy, attended by the country’s three top financial regulators, which had fueled speculation that China was about to unleash far more efforts to revive growth, among which further cuts to the country’s Reverse Repo rate, and LPR rate but also cuts to the RRR and various other monetary stimulus measures.”

The Japanese Yen continued to sink as currency traders abandoned their long positions.  As mentioned earlier, this provide some relief for those still in the Yen carry trade.  The next support is the 50-day Moving Average at 67.81.  The final support may be the mid-Cycle at 66.20 as the Yen has another week to the downside in the current Master Cycle.  Those in the Yen carry trade should consider exiting in the next week.

9:

BKX appears to be “stuck” just beneath its Cycle Top at 115.98.  It gives the impression of a continuous rally, but has not exceeded the July 31 high at 116.07.  The powers-that-be may be attempting to keep BKX elevated, but the Cycles Model suggests that a reversal may happen at any time in the next week.  Last week the Fed revealed massive portfolio losses.   Could it be that banks are also suffering those same kinds of losses?

ZeroHedge remarks, “Oops. Last week the SEC accidentally published internal commentary along with a speech by Chair Gary Gensler.

Here’s one of the comments which was mistakenly included.

I strongly recommend that a sentence be placed here (or somewhere [sic] in the first part of the speech) to reassure markets that you are not making the speech because you think there is an imminent crisis.”

8:00 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures rose  to 19928.50 this morning, but was unable to exceed Thursday’s high at 19951.79 (on day 258 of its Master Cycle).   The NDX top is extended, with the 50-day Moving Average at 19288.11.  Beneath that may lie a confirmed sell signal.  While NDX has not exceeded its July 11 ATH at 20672.10, investors continue to defy logic by piling onto the tech ETFs despite consistent hedge fund and smart money selling.  NDX has the appearance of the wheels ready to fall off.

Today’s options chain shows Max Pain in the vicinity of 19750.00.  Long gamma exists above 19800.00 while short gamma lies beneath 19700.00.

ZeroHedge observes, “A new chatbot-powered exchange-traded fund (ETF) aimed at replicating the investment prowess of Wall Street titans has been launched by Minneapolis-based Intelligent Alpha. The Intelligent Livermore ETF (LIVR) is built around portfolio decisions generated by three prominent large language models (LLMs); ChatGPT, Gemini, and Claude – dubbed the fund’s “investment committee.””

SPX futures rose to a weekend high at 5722.40 before pulling back.  It has not exceeded Thursday’s high at 5733.57.  The Master Cycle may be complete.  Earnings reports anticipate a slowdown.  FDX reports,  “the magnitude of the Fed rate cuts yesterday signals the weakness of the current environment.”  Should the SPX decline beneath the upper trendline at 5675.00, the first confirmation of a reversal may emerge, giving a potential aggressive sell signal.  The DJIA futures have barely made a new high this morning measured in ticks, so there may be some leeway in calling a top in the total equities market.

Today’s op-ex shows Max Pain at 5680.00.  Long gamma may lie above 5700.00 while short gamma may emerge beneath 5650.00.

ZeroHedge reports, “Futures are higher with both tech and small-caps outperforming as a record $9 billion surge in dealer gamma stabilizes markets and buoys the ongoing meltup despite the start of buyback blackout.

VIX futures rose this morning, but not exceeding the 50-day Moving Average at 18.07, where a buy signal may be found.  The Master Cycle low may have been made on Friday at 15.81.  The Cycles Model calls for increasing volatility during this week.  Trending strength may intensify at month-end.

The September 28 options chain shows short gamma most intensely at 16.00 with 9427 contracts while long gamma gains ascendancy at 18.00 and extends to 60.00.

TNX futures made a weekend high at 37.73, showing a resumption of the rally off the Master Cycle low made on September 17.    Intermediate support/resistance is at 37.99, just beneath the trendline at 38.30.  A breakout above the trendline may give TNX some recognition of its change in trend.  Some commentators are observing that rates volatility (MOVE) is very depressed, suggesting that may be good for the SPX.  However, MOVE may be in sync with the VIX, which has just made its Master Cycle low.  Never try to make projections with a ruler.  It may backfire.

ZeroHedge quotes Powell, “”Today, unemployment is up to 4.2 percent, inflation’s down to a few tenths above 2. So, we know that it is time to recalibrate our policy to something that is more appropriate given the progress on inflation, and on employment, moving to a more sustainable level, so the balance of risks are now even,” answered Chairman Powell. He had just cut interest rates by 50bps.

“The labor market is actually in solid condition. And our intention with our policy is to keep it there. You can say that about the whole economy. The US economy is in good shape. It’s growing at a solid pace, inflation is coming down, the labor market is in strong pace, we want to keep it there. That’s what we’re doing,” explained Jerome, the financial reporters gently tossing him the usual softballs.

Naturally no one asked him how he felt about initiating an easing cycle with the stock market at all-time highs .”

The Japanese Yen bounced from its Intermediate support at 69.17 on Friday and may make another run at its high.  This may be a shakeout period for those participating in the Yen carry trade.  The Cycles Model suggests that the decline may resume later this week (with strength).  The Master Cycle low is not due until the first week of October and may reach mid-Cycle support at 66.21.  Thereafter, XDN may rally to challenge the Head & Shoulders neckline.

1:05 pm

SPX bounced off the rising wedge trendline near/at 5675.00 in a throw-over.  A further decline beneath it may signal the end of the rally and offer an aggressive sell signal.

10:15 am

The upward progress of the BKX was halted yesterday at the Cycle Top resistance at 115.70.  This morning we may be watching the beginning of its reversal.  Since BKX turned at a lower high at resistance, we may take that as an aggressive sell signal.  For those more cautious, the next support is the 50-day Moving Average at 111.16.  Just as the Fed has experienced massive losses in its portfolio, so have the banks.  The lower TNX has put a bandage over a mortal wound.  However, the prospective rise in the 10-year treasury yield may expose the inadequacy of this move.  The Yen carry trade may be offering some temporary relief, (see the Japanese Yen below) but may make things worse should the banks choose not to exit that trade in a timely fashion.

8:30 am    2 Chronicles 7:14 

“If my people, which are called by my name, shall humble themselves, and pray, and seek  face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures have consolidated overnight, neither making new highs or new lows.  There are increasing comments of a melt-up until Christmas due to the oversized rate cut.  What is not being taken into account is that the Fed is suffering serious losses in its portfolio and may have a concern for bank losses, as well.  Today is day 259 of the current Master Cycle and may be the last.  The 50-day Moving Average lies at 19300.00, providing final support of this probe.  A decline beneath it provides a clear sell signal.  A further confirmation lies at Intermediate support at 19105.50.

SPX futures remained flat overnight after yesterday’s all-time high as $2.6 trillion SPX options expire at the open.  Investors may be unaware of the negative seasonality that may follow as the options are unwound.  The Cycles Model anticipates the end of the current Master Cycle and a strong reaction in the opposite direction.  The anticipation of a shortened negative seasonality may be crushed by the looming election.  The Cycles Model suggests a decline that may last through late November.

Today’s am options chain shows long gamma above 5600.00.  Traders will be taking their profits this morning.  The pm options are less clear and may be subject to 0DTE traders.

ZeroHedge reports, “After yesterday’s delayed (and technically-driven) post-rate cut meltup, futures are set to close the week on a downbeat note as they slide across the board, following European stocks lower, but still just shy of the all time high they hit yesterday. As of 8:00am S&P futures are down 0.3% as disappointing earnings (FDX cratered -13% after missing and cutting guidance, dragging UPS -2.4% and logistics names lower) tempered the euphoria around the trajectory for interest rates; Nasdaq futures were down 0.4% with most MegaCap Tech names lower: TSLA (-3.6%) is the top mover, followed by META (-1.8%) and AAPL (-1.7%). The yen plunged more than 1% after the BOJ announced no hike to its policy rate, in line with expectation, and further signaled the gradualist approach to its rate hikes. USDJPY +0.8% to 143.8; NKY +1.5%. PBOC left loan prime rates unchanged. Throwing a potential wrench in what may have been a quiet end to the week is that today brings the ninth option expiry of 2024, and the last “quad witch” before the US election, where a record for September $4.5 trillion in notional will expire between now and 4pm ($2.6 trillion of this is SPX Sep regular / the remaining is split across etf and single stock at end of day) potentially triggering volatility, although market implied vol is low enough to rent delta in either direction. Yields are mostly higher, and USD is largely unchanged; 5-, 10-yr yields are 5bp, 10bp higher. Commodities are mixed with oil and metals higher, while ags are mostly lower. There is nothing on the macro calendar.”

VIX futures re down to a morning low of 16.06 on day 253 of the current Master Cycle.  This may be the low of the season.  A buy signal lies above the 50-day Moving Average at 18.00.

The September 25 options chain shows Max Pain at 17.00.  Short gamma is building at 14.00-16.00.  Long gamma begins at 17.00-18.00 and runs strong to 60.00.  Equities options may have a gamma flip on Monday, reinforcing long gamma in the VIX.

TNX is consolidating this morning, digesting its gains.  The Cycles Model suggests trending strength may arrive this weekend as it prepares for multiple breakouts on its way to the 50-day Moving Average at 39.28., signaling the end of the massive throw-under.  It may have been this throw-under that influenced the Fed into the jumbo rate cut.

ZeroHedge notes, “The last time the Fed cut by 0.5% was in October 8, 2008, three weeks after the collapse of the venerable investment bank Lehman Brothers. This was the time when panic was gripping the markets with the Great Financial Crisis (GFC) surfacing with the failure of Lehman Brothers (the crisis had been brewing under the surface since September 2007).

Make no mistake. 50bps cut, is a panic cut. So, why did the Fed panic?

Most likely, there were four reasons:

1. The Fed is racking up massive losses.
2. Political pressure to not crash the markets before the Presidential elections on November 5 (last FOMC meeting before).
3. The Federal Reserve is genuinely worried about the economy, but especially about debt levels.
4. Banking sector fragility.”

Japanese Yen futures continue to correct to a morning low of 69.44.  This may produce a sigh of relief within the Yen carry trade, but the decline may be merely a correction of the new uptrend.   A normal Wave (2) correction may decline to the mid-Cycle support at 66.22.  However, should the trend be strong, the correction may find support at the 50-day Moving Average at 67.39.  ZeroHedge offers an extensive explanation of the Yen carry trade.

ZeroHedge comments this morning, “After a week full of central bank fireworks, at least there were no surprises from the Bank of Japan last night, which was in focus as it kept policy unchanged, as expected However, after initially rising, the yen tumbled more than 1% after Governor Kazuo Ueda proved less hawkish than many traders expected, especially after his dramatic hawkish pivot back in July when he not only hike rates but signaled an aggressive tightening campaign, crushing the yen carry trade in the process and sparking the biggest Japanese stock market crash since Black Monday. Ueda signaled little urgency to hike rates, and said that upside risks to inflation are easing, pushing the likelihood of an October rate hike further to the sidelines Friday with a cautious message that pointed to ongoing concern over the market meltdown that followed July’s rate increase.”

Crude oil futures have reversed this morning to resume its decline, targeting the Cycle Bottom at 68.95.  Just beneath it is the Head & Shoulders neckline, beneath which confirms its target near 40.00.  The Cycles Model sees this decline extending to late October, giving ample time for this destructive phase.  The decline may pick up momentum in early October, giving way to a possible panic.