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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June 14, 2021

10:30 am

That resolved quickly.  VIX made a new Master Cycle low this morning at 15.04 and quickly reversed on a belated day 271 of its Master Cycle.  While SPX and NDX haven’t made any sizeable moves yet, the VIX appears to be moving with strength out of its low.

 

8:00 am

Good Morning!

SPX futures remain elevated, but there is some evidence that Thursday’s high may be the top.  The squiggles on the chart are almost too painful to count, since 34.4 days had elapsed from the previous high with only a 11.7 point gain.  Unfortunately, this week is FOMC week, so the indices may remain flat until Wednesday.

But the uncertainty of the Fed Taper may be an explosive (implosive?) factor in the current Master Cycle, which may decline over the next two weeks.

ZeroHedge reports, “S&P futures hit a record high on Monday in a muted session which saw several Asian countries on holiday (China, Hong Kong and Taiwan are enjoying an extended weekend for the Dragon Boat Festival) as focus shifted to the Federal Reserve’s meeting this week, where the central bank is expected to maintain its accommodative stance on monetary policy although there is some debate whether the Fed will hint at tapering and/or hike its administered rates (IOER/RRP). At 730 a.m. ET, Dow e-minis were down 14 points, or 0.04%, S&P 500 e-minis were up 3 points, or 0.07%, to 4,239 and Nasdaq 100 e-minis were up 45 points, or 0.33%. 10Y yield rose as the rally in bonds lost steam while the dollar was flat, and the VIX traded below 16. Bitcoin traded near $40,000 after Musk tweeted over the weekend that Tesla had not sold more of the crypto.”

 

NDX futures are marginally higher, having made a high of 14043.25.  It is likely that a new high may be near the Cycle Top at 14145.61.  Today is day 248 in the current Master Cycle.  This week (options week) may be a good time for a Cycle high.

RealInvestmentAdvice notes, “Over the last couple of months, the Fed started its campaign to prepare markets for a “taper” of its asset purchases.

Michael Lebowitz noted that Jerome Powell repeatedly affirmed the Fed “isn’t even thinking about thinking about tapering.”

“As Chairman of the Fed, his opinions take precedence over those from other Fed members. Regardless, other Fed members are not entirely on the same page as Powell.” – Lebowitz

As CNBC noted, the voices of other Fed members are becoming more prominent.

“Comments by Fed officials in the past several weeks suggest the issue of tapering looks likely to be discussed as soon as the Federal Open Markets Committee meeting next week. The Fed may be on track to begin asset reductions later this year or early next year.”

 

 

VIX futures are higher this morning after having made a matching low to the previous low on June 8.  Remember, a Wave 2 may go to, but not exceed, the Wave 1 low.  It appears to be the case, which gives warning that fear levels may be rising.  This is especially explosive during options expiration.  In addition, the Cycles Model suggests rising strength this week  in the VIX.

 

TNX ix higher this morning after a potential Master Cycle low on Friday at day 255.  IT is too early to tell if that is indeed the low.  A rally above the 100-day Moving Average at 14.99 is a likely indicator that the low is in.

ZeroHedge comments, “Just one “Markets” topic today, but an important issue so it needs our full attention:

What if everyone is wrong about US inflation’s impact on interest rates? I (Nick) have never seen a stronger consensus around a macroeconomic topic in my +30-year career in finance. Fed money printing plus fiscal stimulus/debt issuance plus economic reopening is supposed to equal high and likely lasting inflation. The 10-year Treasury will go to at least 2 percent and maybe 3 percent or higher. And you can’t swing the proverbial dead cat without hitting even direr warnings …”

 

USD futures ae pulling back after a sizeable move on Friday.  It may be pulling back to Intermediate-term support at 90.33 before moving higher.  Should it break higher, there is a crowded short position that may be taken out this week.

 

 

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June 11, 2021

7:30 pm

TNX may have made its Master Cycle low today at day 255 in the Cycle.  The Elliott Wave structure also appears complete.  While there may be a small probability of a further low on Monday,  the highest probability points to a strong, complacency busting reversal.  As mentioned previously, the target for this rally may be 19.71, which would more than compensate for the 3.5 point (current) negative divergence between the CPI and TNX.

ZeroHedge comments, “Even though US CPI smashed expectations again, Deustche Bank’s chief credit strategist Jim Reid correctly points out that “the data isn’t going to change anyone’s mind of whether inflation is transitory or not.”

Still, as an aside for those who still care about fundamentals, he notes that the current gap between 10yr US yields (c.1.5%) and US CPI (5.0%) is a whopping 3.5%, the highest since 1980. In fact, the gap has only been more negative for 10 months in the last 70 years, all of which were in 1974, 1975 or 1980.

Another way of visualizing the unprecedented divergence between core inflation and 10Y yields is the following scattergram from Longview economics:”

ZeroHedge further comments, “One day before the “most important CPI print in history”, we showed the latest JPM Treasury Client survey and pointed out that “there were virtually no traders left to short Treasurys, with all bears already on board” as net short interest had hit an all time high. As a result, even a red hot CPI had been fully priced in by now, and the result would be sharply lower yields as we got another massive short squeeze, this time in rates.

Well, with 10Y yields tumbling to March lows and breakevens in freefall over the past 48 hours, that’s precisely what happened, and since not even yesterday’s scorching inflation print managed to spark some bearish rate sentiment, the market was promptly overrun with speculation that the reflation trade is now largely finished as “inflation has peaked”, an argument which was further bolstered by today’s drop in UMich 1Yr and 5-10Yr inflation expectations.

Commenting on this shift in market sentiment, Nomura’s Charlie McElligott writes that the liquidation of “Reflation” and “Hawkish Fed” trades clearly accelerated into crescendo yesterday, “as despite another really strong US Core CPI print yesterday, the “transitory” nature of a large part of the gains (“Used Vehicles” being 1/3 of the seasonally-adjusted increase, and as a function of supply-chain and semiconductor shortage issues), as well as still-stagnant Wages (AHE YoY cratering with MoM utterly sideways) and most critically, an incredibly disappointing Labor market, all lends further credibility to the Fed’s “slow-play” stance and forces a positioning-cleanse of insanely crowded “Short UST” positioning—which critically, hasn’t been returning for months now.

 

 

7:30 am

Good Morning!

I have an appointment soon, so I will do what I can this morning.

NDX futures have risen to 13997.62 at this point.  Since today is a potential day of strength, I wouldn’t be surprised to see it make a new all-time high.  Note that this Cycle took 258 days from low-to-high.

 

SPX futures have come very close to another new all-time high this morning.  Today’s Cyclical strength may propel it to that new high, as well.

ZeroHedge reports, “S&P futures – which overnight rolled from the ESM (June) to the ESU (Sept) contract – extended gains on Friday further into record territory as inflation fears receded into the background calming concerns over a possible long-term spike in rising prices, with investors now turning focus to next week’s Federal Reserve meeting for more cues on monetary policy. Treasuries were steady, trading at 1.44% – just above the lowest level since March – amid growing (if wrong, according to BofA and DB) confidence inflation will prove transitory, leaving scope for continued central-bank support. S&P 500 E-minis were up 7.25 points, or 0.17 at 06:36 a.m. ET. Dow E-minis were up 77 points, or 0.22%, while Nasdaq 100 E-minis were up 30.25 points, or 0.22%.

After seeing fresh all-time highs on Thursday, US equity futures have largely been traversing sideways, in wake of Thursday’s dovish ECB confab, and surging US inflation, which has not given too much concern to equity or bond investors ahead of next week’s FOMC, since the Fed is likely to look through what it sees as ‘transitory’ price pressures; some analysts disagree, arguing that there is building evidence of more sticky prices, but whether or not this inflation proves to be transitory will only really be resolved in Q3/Q4, so for now, markets are taking the Fed at its word. BofA reported that US equities have seen the first weekly outflows since March, with more outflows out of growth styles than value styles; by sector, inflows were seen in financials, materials, real estate, energy and health care, while outflows were seen in utilities, communications, consumer sectors, and tech.”

 

VIX futures record another ow of 15.15 this morning, still within the parameters of a retracement rather than a new low.

 

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June 10, 2021

9:45 am

Back in April I had posted a target for the SPX at 4250.00.  Then I forgot about it as The May 7 high rolled by.  Well, it was resurrected this morning.

ZeroHedge proclaims, “Traders bid up US equity futures ahead of the bell after a hotter than expected inflation print this morning…

The soaring CPI sent yields higher too…

Billionaire fund manager Stan Druckenmiller clarified the farce…”The market is not speaking right now on May’s CPI data and will not until the Fed stops cancelling market signals and at that point we will know.

 

 

7:35 am

Good Morning!

NDX futures are in decline.  Yesterday’s failure to make a new high gave us a clue that all is not well in the tech market.  Futures rose to 13839.50 at midnight, then have steadily declined since then.  As mentioned yesterday, the Cycles Model suggests a 12.9-day collapse from yesterday’s high.

 

After making a retracement high at 4237.02 yesterday, SPX futures languished, but did not decline beneath Short-term support at 4209.89 in the overnight session thus far.  A break of that level puts us on high alert of a gamma crash below 4200.00.  The Cycles Model gives us confirmation of that beneath mid-Cycle support at 4182.64.   The 50-day Moving Average and Broadening Wedge trendline are both near 4150, which triggers a minimum decline to 3344.00.  But that would only Primary Wave [3] of Cycle Wave I.  Primary Wave {5] must venture beneath the 2020 low at 2191.00.

ZeroHedge reports, “Welcome to Super Thursday when in a double whammy of market-moving events we will first find out how the ECB intends to adjust monetary policy as Europe brings the pandemic under control (we expect no material changes), and we will also get to see whether the startling jump in April’s U.S. inflation numbers persisted or even accelerated in May, perhaps rising by the most on record. Needless to say, markets could move substantially on any surprises and yet, listless futures are trading as if nothing notable will take place and with both the ECB announcement and a sharply higher CPI already priced in, they may be right.

In a session that was anything but exciting, S&P futures traded in yet another narrow range ahead of the ECB and CPI data, which is expected to show that the consumer price index increased 0.5% last month after surging 0.8% in April, the largest gain since June 2009, as speedy vaccinations helped re-open the economy. Oil edged higher while the dollar was unchanged. S&P 500 E-minis were up 2.5  points, or 0.07% at 07:15 a.m. ET. Dow E-minis were up 63 points, or 0.18%, while Nasdaq 100 E-minis were down 32 points, or 0.22%.”

 

 

VIX futures remain suppressed, but may bounce at the open as options settlement is completed for yesterday’s options expiration.  The 5-Wave decline and lower low tells us that Tuesday’s low was the end of not only th e Master Cycle but also the declining trend outline by the bullish Wedge.

 

TNX is back above the 100-day Moving Average at 14.91 after testing it yesterday on day 253 of the Master Cycle.  There is a probability of another probe lower before the master Cycle is complete.    The strength of that probe may depend on the CPI report given later today.

ZeroHedge observes, “Yields on 10-year Treasuries dipped below 1.50% today for the first time since early March amid a furious short squeeze discussed earlier

… and as post-pandemic inflation concerns appear to be waning as quickly as they flared up.

This is a point we first brought up last month when observing the collapse in China’s credit impulse, arguably the most important variable for the entire global reflationary narrative (see “China’s Credit Impulse Just Turned Negative, Unleashing Global Deflationary Shockwave“)…

 

USD futures rose to 90.28 in the overnight session, still beneath Intermediate-term resistance at 90.38.  however, note the breakout last week, giving fair warning of a higher USD.  The Cycles Model alerts us to growing strength through the end of the week.

ZeroHedge reports, “With the world’s eyes having moved on from China’s rip-roaring PPI (and post-data decision to unleash price controls), this morning’s CPI print has been heralded as the arbiter of “is it transitory or not” with some (BofA) even suggesting we are nearing a period of “transitory hyperinflation.” The answer for now is – inflation’s still accelerating as headline CPI soared 5.0% YoY (hotter than the +4.7% expected). That is the highest level of inflatuion since Aug 2008.

Source: Bloomberg

But it is core CPI that is the huge outlier, soaring 3.8% YoY – the hottest level of inflation since 1992…”

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June 9, 2021

2:59 pm

TNX swept past the 100-day Moving Average at 14.87, then bounced back for a retest.  There may be another probe lower before the retracement is over.   Today’s 10-year Treasury auction benefitted from this move.  How will those buyers feel when the yield goes to 2.00%?

ZeroHedge reports, “Having seen yields in the secondary market plunge to 3-month lows during the morning, Treasuries were sold ahead of the $38 billion reopening 10-year sale (backup to a When Issued yield of 1.507% – from 1.4705% intraday lows).  The Fed may have had a direct hand in lowering prices because they do not need pressure to raise rates in their repo facility…an accident waiting to happen?

Demand was stellar with the bid-to-cover (2.58x) surging to its highest since July 2020…

Source: Bloomberg

Today’s high yield was 1.497% (almost 20bps below the 1.684% at the last auction), trading through the WI yield by a very significant 1bps”

Zerohede further reports, “With usage of the Fed’s overnight reverse repo facility again hitting a new record high on Tuesday, rising to an all-time high of $497.4 billion…

… rates traders are trying to decide if the Fed will tweak the rate on either the IOER (Interest on Excess Reserves) or the Reverse Repo Facility, collectively the Fed’s “administered rates” in order to ease the liquidity congestion that has parked half a trillion dollars at the Fed where it is sitting inert, doing nothing.

One strategist who believes there is a “small chance” the Fed will adjust its IOER/RRP rate is Deutsche Bank’s Steven Zeng, who also cited concern about the quarter-end balance sheet squeeze, which is less than the futures market is currently pricing.”

 

10:15 am

This is very interesting.  The Cycle from the March 7 high to this morning’s high is exactly 21.5 market days , top-to-top, completing the daily Cycle.  Should this be the last of the retracement, this morning’s high also pinpoints the potential Master Cycle low (Wave 3 or (3) of Wave [1]) on June 25 in what may be a 12.9-market-day scorching decline.

Another surprise is that the NDX failed to make a new retracement high this morning after a 30-market-day Cycle completed.  Something is brewing…

 

7:20 am

Good Morning!

NDX futures are consolidating beneath yesterday’s high, within a range of 13804.38 to 13860.38.  It appears to be in an irregular correction that may require yet another probe higher.  A decline beneath the 50-day Moving Average at 13568.88 would negate that move higher.  However, NDX has yet another potential period of strength on Friday that may not be shared with the SPX.  That strikingly corresponds with a potential period of weakness in the TNX, which ends over the weekend.

ZeroHedge observes, “Several assets are working on the range break out, although in slow motion. US 10 year at 1.51% is a new “thing”. We have not seen yields close here or lower since early March. Note the 100 day slightly lower at the big 1.5% level.

Source; Refinitiv

With yields down, the obvious question is whether or not NASDAQ will start to catch more solid bids. Note the most recent short term divergence between yields and NASDAQ.”

 

The Shanghai Composite appears to be due for a Master Cycle high early next week as well,  which also corresponds closely with a possible high in the NDX and a potential low in the TNX.  Should it go higher, the target appears to be the Cycle Top resistance at 3655.15.

ZeroHedge reports, “Update 10:00pm ET: moments after reporting a red hot PPI which was the highest since Lehman, China effectively launched price controls, with China’s economic planning agency vowing to increase supply of key consumer goods to stabilize prices, according to a statement on NDRC website on a national video meeting Tuesday.

  • *CHINA VOWS TO CONTROL CORN, WHEAT, PORK PRICES AFTER PPI SURGE
  • *CHINA TO KEEP PRICES OF GOODS LINKED TO LIVELIHOOD STABLE: NDRC”

 

SPX futures are consolidating in a narrow range between 4222.62 and 4232.12.  The correction of the May 12 decline appears to be complete.  This Friday’s open interest in the options market shows net puts outpace calls at 4200.00 by 2800 contracts, while calls outpace puts at 4225.00 (by 2700 net calls) to 4250.00 with over 10,000 net call contracts.  Max pain lies in the 4200.00 to 4225.00 range.  All of this is in a period of strength that ends on the weekend.

ZeroHedge reports, “S&P futures traded in a narrow 8 point range near all-time highs as a lack of clear catalysts kept trading slow, with investors awaiting fresh cues from inflation data this week and an upcoming Federal Reserve meeting. 10Y TSY yields dropped below 1.50% for the first time since May 7 amid a plunge in odds that Biden’s reflationary infrastructure program will pass, and easing fears that tomorrow’s CPI print will smook markets. At 07:15 a.m. ET, S&P 500 E-minis were up 3.25 points, or 0.08%, Dow E-minis were down 37 points, or 0.1%, while Nasdaq 100 E-minis were up 40 points, or 0.29%. The dollar dropped against all of its G10 peers.

 

On Tuesday, U.S. stocks closed within a hair’s breadth of a record high and Treasuries rose as investors debated the impact of resurgent inflation on monetary policy. “Investors are likely to be in a wait-and-see mode,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management. “People will want to check how market expectations over the Fed’s policies change and how yields, whose upside has been capped recently, move following the U.S. CPI data.”

 

VIX futures appear to be consolidating in a range from 16.04 to 17.37.  VIX options expiring today have a Max Pain range from 16.00 (puts prevail) to 20.00 (calls prevail),  It is likely that the VIX may remain range-bound today.  Next Wednesday’s VIX options show the puts have it over the calls by over a million contracts spread between 15.00 and 22.00.  This is begging for an accident to happen.  At the very least, it suggests that at next week’s expiration on the VIX is likely to be near 22.00 or possibly higher, since the number of net calls is miniscule.

 

TNX made a morning low testing the 100-day Moving Average at 14.87 on day 253 of the Master Cycle.  Monday is day 258, which is likely to end the decline.  The only obvious target is the mid-Cycle support at 11.99.  However, treasury shorts are all in, so the risk of a short squeeze grows exponentially.

ZeroHedge comments, “With the recent JPMorgan Treasury Client Survey showing that self-reported Treasury net longs were at record lows (and by extension, shorts were all time high) understandably perhaps ahead of an inflation print that is expected to be among the highest on record, there were virtually no traders left to short Treasurys, with all bears already on board.

This meant that as a result of a massive position imbalance, the risk was for a raging short squeeze on even a whiff of deflationary news, and that’s precisely what we have seen in recent days, starting with last Friday’s disappointing payrolls report which sent 10Y yields lower by 8 bps, and continued with the collapsing odds that a Biden infrastructure plan will pass, amid a breakdown in GOP talks and opposition by centrists such as Manchin.

 

USD futures tested yesterday’s low at 89.84 in the morning session.  This is near the 61.8% Fib retracement level.  That may be the extent of the correction, since the Cycles Model shows a double dose of strength by Friday.

 

 

 

 

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June 8, 2021

11:10 am

BKX has broken its 8.6-month trendline near 135.00 and may be considered on a sell signal.  Intermediate-term support is at 130.40 and the 50-day Moving Average is at 127.66 for those seeking more confirmation.  BKX is the proxy for liquidity in the markets.  Declining liquidity suggest available money is moving into cash.

 

7:50 am

Good Morning!

NDX futures have made a morning high of 13874.38, exceeding the estimated target of 13841.00.  FOMO (fear of missing out) appears to be the driver of this rally as the NDX approaches 14000.00.  The Cycles Model suggests not.  The period of strength that was discussed yesterday may run out very quickly, as it appears to be a one day affair.  On the other hand, the Cycles Model shows increasing weakness leading into a Master Cycle low following options expiration.

ZeroHedge comments, “While stocks remain rangebound ahead of Thursday’s CPI print which according to Deutsche is “the most closely watched data release so far this year“, the real action remains below the surface where the continuation of last week’s big story in Equities is the acute underperformance of Longs relative to the Squeeze in Short Books led by the Retail “Meme,” SPAC and Bankruptcy plays. As Nomura’s Charlie McElligott shows, this appeared in risk-premium HF Crowding Factor which dropped -1.3% on the week, along with Size Factor (Large over Small) -1.3%, Growth Factor -1.6% and 1m Reversal -2.2%

Yet while the return of the short-squeeze is a closely watched if transitory phase, the big picture “renormalization reflation” narrative remains alive and well, with the 3 month Value inflow now surging to $44.5 billion (99.9%-ile since 2003) compared to a 3-month outflow from Growth stocks of -$20.8BN (2.7%-ile).”

 

SPX futures made an overnight high of 4234.62, potentially making a new retracement high, but not a new all-time high.  This topping process has been going on for two months with no resolution neither up nor down.  Interestingly, the gamma bear puts are building up at 4200.00 and 4150.00, where the  Broadening Wedge trendline may be triggered.  Most analysts view the shallow decline thus far as an indicator of a mild decline to follow.  There is no relationship that justifies that conclusion.

ZeroHedge reports,”US equity futures suffered a violent airpocket shortly after 6am, sliding 20 points in minutes after news that a Fastly outage had sent many media and government websites offline in a repeat of last year’s Cloudflare fiasco, pushing traders to buy safe assets, but then rebounded just as quickly rising to session highs even as the dollar and Treasuries also rose. Nasdaq 100 contracts rebounded. The 10-year yield fell back to 1.55% area with focus turning toward Thursday’s blistering CPI report that may offer clues on how far the Fed can postpone a tapering of stimulus.”

 

VIX futures spiked to 17.52 at 6:00 am on the news of the internet outage.  It has since settled back to a flat line from yesterday’s close.

 

TNX continues its decline, indicating a potential second (lower) Master Cycle low in Minor Wave 4.   The Cycles Model calls for a further decline through this week and early next, culminating in a potential Master Cycle low before a rally in strength emerges.  This may give some solace to the equity bulls, but it may turn out to be a trap for the unaware.

ZeroHedge comments, “A week ago, none other than Larry Fink poured an illiberal amount of cold water on the current inflationary narrative being spewed by Powell, Yellen, and their lackeys in academia.

The Blackrock CEO – who happens to manage more than The Fed at last check – countered soothing talk that soaring prices are here and gone tomorrow, and said that investors may be underestimating the potential for a spike in inflation.

“Most people haven’t had a forty-plus year career, and they’ve only seen declining inflation over the last 30-plus years. So this is going to be a pretty big shock”, Fink said, his warning falling on deaf ears.

Alas, unlike the Fed, Fink actually know what he is talking about: he began his career at First Boston Corp. in 1976, in during runaway US inflation, with the Consumer Price Index hitting a high of 14.8% in March 1980, and forcing Volcker to hike rates as high as 20%.

Treasury Secretary Yellen was quick to dismiss this fearmongering malarkey by claiming that while she may, possibly, kinda, sorta see higher prices, it will be transitory (because The Fed is awesome) and besides, America… it’s all good!

“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen said in an interview with Bloomberg. And yes, she really said that.”

 

 

USD futures appear to be consolidation beneath Intermediate-term resistance at 90.44.   This consolidation may end soon, as USD is in line for a double dose of strength by the weekend.  The short USD trade is crowded, so a liftoff may result in massive short covering.

 

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June 7, 2021

3:40 pm

The GSCI Ag Index appears to be in a correction that may take it down to the 50-day Moving Average at 423.70.  This may be a fake-out, as speculators are accumulating these shares.  The Master Cycle may have been on June 1 at day 256.  However, today is day 260 and a brief decline would fill the bullish pattern more appropriately.

ZeroHedge reports, “Reuters reports money managers boosted their net long position in Chicago Board of Trade (CBOT) corn futures and options last week after slumping to a five-month low. New weather models forecast hot and dry conditions in the Corn Belt to persist through mid-month.

The western half of the US is facing a megadrought while a heat wave last week swept across the West Coast to East Coast by the weekend.

ZeroHedge further comments, “California and Nevada are 100% in drought.

Direct from Drought.gov:

After two water years of dry conditions, both California and Nevada are now 100% in drought. And with dire drought conditions, rapidly decreasing snowpack, and low reservoir levels, concern for wildfire season is growing.

This is a dry spell not seen since the Great Depression and the Dust Bowl days. Because of the drought, Americans very likely will experience a shocking food shortage very soon.”

 

3:32 pm

NDX did make a new retracement high, but nowhere near its target limit of 13841.  The pattern appears complete, or nearly so.   Prepare for a 2-3 week decline.

 

7:15 am

Good Morning!

While NDX futures remained beneath Friday’s close for most of the weekend, it has not ventured down far enough to be considered bearish.  More recently this morning it has been recovering its losses and poses a probability of a new retracement high approaching 13841.00, should Wave [c] need completion.  The Cycles Model poses today as a day of potential strength before the equities fall into the abyss.

 

SPX futures likewise spent most of the weekend in negative territory but now is approaching breakeven.  Today’s proposed period of strength is a concern, as another probe higher may meet the Cycle Top resistance at 4247.20.

ZeroHedge reports, “US equity futures rebounded from a mild dip in the overnight session, rising back to just shy of all time high at 4,228 as of 7:45 am on Monday, shaking off Yellen’s Sunday comments that the US Tsy Secretary welcomes higher rates (i.e., inflation) which would be “good for the Fed and US society.”  World shares were range bound on Monday as markets digested Friday’s disappointing yet “Goldilock” jobs report and a global tax deal between the G7 group of countries, while also looking ahead to critical CPI data due Thursday. The dollar was steady while the 10-year rate added two basis points after Janet Yellen said on Sunday a slightly higher interest-rate environment would be “a plus” for society. WTI slipped after rising to $70 per barrel as short-term demand worries continued.”

 

VIX futures spiked to a weekend high of 17.32 before easing back, but remaining above the trendline.  Having made its Master Cycle low last Tuesday, it may be poised for a strong move higher in the immediate future.

 

USD futures are making new highs, topping at 90.63 over the weekend.  It appears to be on a buy signal and the Cycles Model suggests a gain in strength as the week progresses.

 

TNX may have a faulty data feed this morning.  While the chart shows it has risen to 15.81, the price indicator shows a decline to 16.23!  Today is day 251 of the Master Cycle.  While it is possible to make and new low, it is more likely that a new high may be made in the next week or so.

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June 4, 2021

7:45 am

A globally Synchronized Crash is looming

Wave 3 of Intermediate Wave (1) has just begun in the Shanghai Composite Index.  The minimum decline in Wave (1) appears to be point 6.  It may go lower.  China and the US have the two strongest markets, as you will see.  While it peaked on February 18th, it was able to hold off the decline until now.

ZeroHedge reports, “Good economic news is bad news for markets now.

A better-than-expected ADP jobs report sent the dollar and bond yields higher and stocks lower Thursday. A strong payroll report Friday would give more ammunition for folks calling for earlier QE tapering. In a sense, policy normalization has already started after the Fed announced plans to wind down its emergency corporate-credit facility. From that perspective, the peak of liquidity is near.

In China, the authorities are already mopping up the dollar liquidity awash in its domestic market. On Thursday, two Chinese policy banks, China Development Bank and the Export-Import Bank of China, announced selling of dollar notes in the onshore market, the first such sales in years. It followed a move Monday when the PBOC required lenders to hold more foreign currencies in reserve.

Both aim to reduce the dollar supply and ease pressure for yuan appreciation. As a result, one-year yuan swap points dropped to the lowest since January, reflecting higher dollar funding costs. The yuan rally has also stalled.”

 

The Nikkei 225 Index peaked on February 16, but try as it might, it could not recover.  An attempted Wave (5) on May 10 truncated in a failed rally that normally have made a new high.

 

SPX futures are dead in the water, waiting for the May employment survey.    The EW structure calls for another probe to 4215.00 to 4220.00 in a possible flat correction.  A Minute Wave [ii] may go as high as 4234.00, but no higher.  I will update this commentary as things develop.

ZeroHedge reports, “US stock index futures fluctuated listlessly in a narrow range on Friday as investors braced for a crucial report that is likely to show jobs growth accelerated last month, possibly fanning fears over inflation and easing of the Federal Reserve’s support. At 7:30am emini were down 11 points, or 0.03%, S&P 500 e-minis were up 3 points, or 0.08%, and Nasdaq 100 e-minis were up 22 points, or 0.16%. The meme mania was dormant this morning with reddit stocks all lower after peaking two days ago.  Treasuries were steady and the dollar rose modestly to fresh 3-week highs. Gold dropped and bitcoin slumped after a Elon Musk tweet trolled cryptos.”

8:40 am – A big miss…futures rally.

ZeroHedge reports, “With so much of the recent labor market discourse focusing on widespread shortages resulting from Uncle Sam’s generous unemployment benefits (15 million people still collecting some form of weekly unemployment benefit), today’s jobs report which is expected to show a substantial rebound from April’s big miss, was set to be defining: another big miss and the shortage narrative would dominate for a long time, a big beat would meanwhile spark renewed reflation worries.

Well, it appears that “shortages” won out in the end because moments ago the BLS reported that in April just 559K jobs were added, which while a big improvement to April’s upward revised 278K, was another big miss compared to the 674K expectations.”

 

TNX moved above the 50-day Moving Average at 16.24 on the jobs report.  The Cycles Model suggests a strong rally over the next two weeks or more.  It is now on a buy signal.

 

USD futures rose to 90.63, challenging Intermediate-term resistance at 90.51.  This triggers a buy signal.  The Cycles Model suggests a rally through the July 4 holiday.

 

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June 3, 2021

8:00 am

Good Morning!

SPX futures have tumbled o a low of 4171.88, challenging both Short-term support and mid-Cycle support at 4173.28.  This is the next level from which an aggressive sell signal is given.  The signal is finally confirmed beneath 4150.00, where the lower Broadening Wedge trendline lies.  Gamma may be turning negative this morning, forcing the dealers and hedge funds to sell/short the SPX.

ZeroHedge reports, “Futures were already looking a shaky when they took a hit lower after news that Russia would cut the dollar from its sovereign wealth fund, shifting to euros, yuan and gold instead in an attempt to reduce exposure to U.S. assets amid threats of sanctions.  . They then slumped even more on the perfectly predictable news that AMC would offer 11.55mm shares in an At The Market offering, with the Emini sliding 0.6% to 4,175 after trading around 4,210 for much of the overnight session. Nasdaq futures were hit even harder, dropping 1% even though the broader risk-off mood did not help TSY yields which rose modestly, while the dollar barely dipped from its upward trajectory even as Bitcoin rose again, approaching $40,000.

Despite the hit to AMC following news of the equity offering, the stock still remains green on the day after soaring 95% the previous day, and although we saw a tremendous meme stock rally, it is now fading fast.”

 

NDX futures are down a whopping 142 points to 13517.50, testing the 50-day Moving Average at 13514.86 as I write.  It has given an aggressive sell signal by declining beneath its mid-Cycle support at 13645.70.  The signal is confirmed beneath the 50-day.

 

VIX futures rose to a high of 19.27, surpassing the 50-day Moving Average at 18.77 this morning.  There may be a retest of the 50-day before moving higher.  However, the urge to “buy protection” in the VIX may make a retest short-lived.

 

TNX is testing Intermediate-term resistance at 16.07 this morning with the 50-day Moving Average at 16.25.  Once above those levels, TNX may rise to 19.71, the next level of resistance.

 

USD futures rose to a n overnight high of 90.25 as it is poised for a potential breakout above Intermediate-term resistance at 90.55.  An aggressive buy signal is confirmed above that level.

ZeroHedge reports, “he number of Americans filing for first time jobless benefits fell to 385k last week – the lowest since the start of the government-policy-driven lockdowns last year (below 400k for the first time since March 2020)…

Source: Bloomberg

Pennsylvania, Illinois, and California saw the biggest jumps in initial claims while Texas, Florida, and Oregon saw the biggest drops…

 

 

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June 2, 2021

7:10 am

Good Morning!

The S&P GSCI Ag Index is climbing higher after touching its Head & Shoulders neckline at the 61.8% retracement level last week.  The Cycles Model suggests that this uptrend may last until mid-July and that the Head & Shoulders target may be an understatement.  This Cycle is based on real supply and demand, not liquidity-induced mania.  However, the mania will come in spades to anything related to food.

ZeroHedge reports, “We’ve documented (read here & here) this spring of a “megadrought” sweeping through the western half of the country and could be one of the worst in decades. This is troubling news because major water reservoirs have already dropped to dangerously low levels, cutting off access to farmers.

The latest US Drought Monitor map shows nearly the entire western half of the nation is experiencing some level of drought at this moment. Parts of the Southwest could be undergoing their second Dust Bowl as conditions continue to deteriorate. ”

You can see that the entire upper Midwest, including Michigan, is being affected.  Farmers and ranchers are culling their herds for lack of feedstock.  That is why (at least in the Midwest) meat prices have been low.  Not any more.  A highly suspicious cyber attack on the largest meat processor in the world may cut off supply and raise prices dramatically.

ZeroHedge informs us, “Update (2002 ET): The USDA has released an important update about the Biden administration’s steps to mitigate potential supply constraints and price surges following JBS’ ransomware attack.

As noted earlier today by the White House, USDA is aware of the ransomware attack against JBS, which is affecting the company’s operations, including its facilities in the United States. USDA continues to work closely with the White House, Department of Homeland Security, JBS USA and others to monitor this situation closely and offer help and assistance to mitigate any potential supply or price issues. As part of that effort, USDA has reached out to several major meat processors in the United States to ensure they are aware of the situation, encouraging them to accommodate additional capacity where possible, and to stress the importance of keeping supply moving.

USDA has also been in contact with several food, agriculture and retail organizations to underscore the importance of maintaining close communication and working together to ensure a stable, plentiful food supply. USDA will continue to encourage food and agriculture companies with operations in the United States to take necessary steps to protect their IT and supply chain infrastructure so that it is more durable, distributed and better able to withstand modern challenges, including cybersecurity threats and disruptions.”

 

SPX futures are hugging round number support this morning as dealers are loath to see it decline any further due to a large negative gamma strike due on Friday at 4200.00.  Weekly options expirations are now being utilized due to crowding at the monthly expirations on the third Friday of every month.

ZeroHedge reports, “One day after a concurrent ramp (then reversal) in stocks and the VIX prompted some confusion on trading desks, on Wednesday e-mini futs were stuck at the 4200 gamma pin…

… while European stocks rose and Asian markets fell as the tussle between economic optimism and inflation concern continues to play out in markets. Bitcoin and the dollar ticked up, oil and treasuries were mostly flat.”

 

NDX futures are likewise hugging the mid-Cycle support/resistance at 13652.00, another level where options sentiment change from positive to negative.

ZeroHedge notes, “Major indexes have continued to trade inside their respective ranges for the past months. We have seen a few “shake outs”, but markets have reverted back to the range, frustrating momentum chasers.

Interesting to note is that several of more risky assets have decided to move sharply higher over past sessions. We have seen notable squeezes in EEM, EWZ, CQQQ. These are all “exotic” risks and show a lot of the risk willingness among investors, especially as SPX remains rather dull here (our most recent logic on EEM here, Brazil here and Asian tech here).”

 

VIX futures are also consolidating beneath the 50-day Moving Average at 18.85.  Yesterday may have been the Master Cycle low at 15.68 precisely on day 258.  To see a trendline break such as this after the end of a trend is highly unusual.  The short vol trade is obviously involved, but this also reeks of Fed and big bank meddling.  The question of the day is, will the VIX stay beneath the 50-day until weekly expiration?

 

USD futures consolidated near their Master Cycle low overnight.  The shorts have had a field day, so the trade has become very crowded.  The Cycles Model suggests a rally into early July with strength beginning to build next week.

 

TNX appears to be consolidating between 15.99 and 16.22 this morning.  The 50-day Moving Average is at 16.26, at which point TNX offers a buy signal.  The current Master Cycle extends through mid-June and possibly through options expiration on June 16.  The current target is 19.71 for Primary Wave [3].  However, Primary Wave [5] may extend to 32.48, the high last seen in October 2018.

ZeroHedge observes, “As we approach the second half of 2021, many countries around the world are beginning to relax their COVID-19 restrictions.

And while this signals a return to normalcy for much of the global economy, Visual Capitalist’s Marcus Lu notes that there’s one subject that’s likely to remain controversial: government debt.

To see how each country is faring in the aftermath of an unprecedented global borrowing spree, this graphic from HowMuch.net visualizes debt-to-GDP ratios using April 2021 data from the International Monetary Fund (IMF).

 

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June 1, 2021

10:55 am

After rising within 4 points of its all-time high, SPX had a mini-flash crash, erasing all its gains.  This was expected and may be used as an aggressive sell signal.  The first confirmation of the sell signal comes beneath mid-Cycle support at 4171.56.

VIX rallied to 18.40 but has not crossed the 50-day Moving Average at 18.86, as yet.  NDX has the largest losses and is leading the decline, as anticipated.

ZeroHedge reports, “…the most liquid stock market in the world?

Just prior to the open, VIX did another of its now infamous mini-flash-crashes (no that’s not a fat finger)…

And while stocks were higher from Friday’s close, they puked shortly after the better than expected Manufacturing survey data signaled stagflation. Nasdaq is leading the drop but all the majors are tumbling…

Bear in mind that SpotGamma warns that gamma may flip around the 4200.. exacerbating any drop from there…

Get back to work Mr.Powell (even if you are cornered).”

 

 

7:55 am

Good Morning!

NDX futures rose to 13755.88 this morning, suggesting a possible extension of Wave [c] of 2.   The Cycles Model showed strength over the weekend which should wind down after the open.  The Elliott Wave structure shows it to be minimally complete, so the NDX may go either way.  Wave [c] will have completed 8.6 days by mid-morning.

 

SPX futures made a new retracement high this morning at 4228.12 this morning, extending Wave [c] of 2.  The May 7 high remains as the all-time high.

ZeroHedge reports, “It turns out that Monday’s dip in futures was a low-volume headfake, and on Tuesday global markets hit a new record high as U.S. equity futures jumped, with spoos also approaching all time highs after markets shrugged off concerns about rising inflation and looked ahead to U.S. employment data later in the week. Brent rose above $70 to the highest since October 2018 as OPEC+ forecast a tightening global market before members meet to discuss production output today. At 715am, Emini futs were 4,226 up 24 points ot 0.58%; Dow futs were up 212 to 0.61% while Nasdaq futs rose 52 pts, up 0.38%.”

 

 

VIX futures rose above the trendlines yesterday to a weekend high of 17.24 and appear to maintain their elevation a I write this commentary.  This may be the first sign that something may be afoot.

 

TNX is challenging the 50-day Moving Average at 16.30 this morning.  Today is day 257 of the current Master Cycle.  The correction appears to be complete at 61.8%.  This leave the possibility of an extension higher, especially since the Model shows strength this coming week.

 

USD futures made a weekend low of 89.86, suggesting that the rally out of the Master Cycle low is correcting.  Futures may linger near the lows this week, as trending strength does not appear until next week.

ZeroHedge reports, ”

The Market Ear Picture

Source: Haver Analytics

Over the week ending May 25, non-commercial traders net sold $1.4bn USD, increasing their net short Dollar positions for the sixth consecutive week.”
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