November 24, 2020
The DJIA has hit 30000.00. The global liquidity surge has concentrated on the Dow, the most respected equities index in the world. This may end up inverting the current Master Cycle, due to turn on December 7. Note the momentum indicators (RSI and Slow Stochastics) are not confirming the new all-time high. However, that does not stop it from going higher. The SPX and NDX may diverge from the Dow with lower highs.
ZeroHedge remarks, “Mission Accomplished?
This may be the last Hurrah for the banking index. The retracement had a target of 92.5, which it exceeded and the Wave structure appears complete. The Cycles Model suggests a decline through the week of December 7. It appears that month-end selling may begin shortly.
ZeroHedge comments, “The post-election plunge in fear and surge in greed has not gone unnoticed by Nomura’s Charlie McElligott:
…the speed by which implied vols have continued to collapse since then (with the latest risk boost from the announcement of Janet Yellen as Treasury Secretary – more on that later) has simply escalated beyond anything I could have anticipated…”
SPX futures are cautiously moving above 3600.00 where resistance lies. It made a high of 3607.62 thus far. In the cash market, Wave C equals Wave A at 3598.00.
ZeroHedge observes, “As Crypto soars, non-digital-gold is plunging, with futures breaking below $1800 for the first time since July. Since the election and vaccine news, gold futures have crashed from $1960 to $1798…
VIX futures made a new Master Cycle low at 20.81 on day 253.00 of its current Cycle. While there appears to be a reluctance by professionals to own the SPX above 3600.00, retail investors appear to be piling on to the short volatility trade. This may not end well.
NDX futures have stalled just short of 12000.00 (at 11977.00) and have receded back to 11950.00. Today may be the last day for a breakout before the Thanksgiving holiday. The Cycle appears to be headed lower until the week of December 7.
TNX is heading higher after its Master Cycle low on November 20 (day 256) as it bounced off Intermediate-term support. It appears that the subsequent rally may last until the first week of January.
ZeroHedge reports, “90 minutes after the Treasury sold a record amount in 2Y paper, moments ago in the day’s twofer special, another $57BN in 5 year paper was sold to less than eager buyers, because while the morning’s 2Y sale was mostly solid, the 5Y auction left quite a bit to be desired, starting with the high yield, which at 0.397%, tailed the WI 0.390% by 0.7bps unlike the stop through in the earlier auction of 2% which stopped through comfortably.
On the other hand, and like the earlier 2Y sale, the 5Y auction was also record big and at $57BN it was $2BN more than October’s total, and well over 50% greater than the average auction size in the past decade.
CNBC reports, “U.S. Treasury yields advanced on Tuesday after President Donald Trump accepted that President-elect Joe Biden’s transition into the White House must begin.
USD futures appear to be consolidating above their Master Cycle low at 92.00 this morning. USD appears to be preparing for a rally that my go to mid-Cycle resistance by the end of the year.
DailyFX observes, “The US Dollar inked a huge intraday reversal during Monday’s trading session. USD price action declined a notable -0.4% as measured by the broad-based US Dollar Index early on, but following the release of an impressive US PMI report, the Greenback subsequently staged an eye-popping rally to finish the day up about 0.2% on balance. The influx of US Dollar strength also appears to coincide with a rebound off a critical technical support level as bulls continue to defend the 92.00-handle on the DXY Index.”
Gold futures broke support at 1851.00 and mid-Cycle support at 1813.95 to make a low at 1798.45. It is set up for a bounce as the current Master Cycle is due (day 260). The target for the bounce appears to be the 50-day Moving Average at 1903.10.
ZeroHedge observes, “As Crypto soars, non-digital-gold is plunging, with futures breaking below $1800 for the first time since July. Since the election and vaccine news, gold futures have crashed from $1960 to $1798…
November 23, 2020
SPX futures are higher this morning, reaching an overnight high of 3579.88. This move may have completed the retracement bounce, preparing for further decline. The Cycles Model calls for extreme weakness this week and next.
ZeroHedge reports, “US equity futures, global stock and oil prices rose on Monday while the dollar and Treasuriss fell amid renewed hopes for economic revival on coronavirus vaccines, even as the world contended with surging case numbers and delays to fresh U.S. stimulus. Shortly after 2am ET, futures spiked to session highs, after AstraZeneca become the latest major drugmaker to say its vaccine for the virus could be around 90% effective, joining Pfizer and Moderna.
NDX futures reached an overnight high of 11975.62, but appear to be in retreat this morning. Friday’s close was near gamma neutrality, but this may change due to month-end rebalancing.
ZeroHedge observes, “Earlier this week we reported that with month-end fast approaching, banks are starting to publish their estimates of what upcoming pension rebalancings will mean for stock and bond flows.
The first such forecast came from Goldman Sachs, whose month-end pension rebalancing published on Wednesday estimated that a net $36BN of equities to sell following a month of substantial outperformance of stocks vs bonds. Notably, according to Goldman, this is the fourth largest sell estimate on record going back to 2000, and ranks in the 96th percentile among all buy and sell estimates in absolute dollar-value.”
VIX futures retreated within Friday’s trading range, but have since recovered somewhat. The Cycles Model infers that the VIX may be on a multi-month secular upswing that may dwarf the March rally. Preliminary estimates put the final value on the VIX well above 100.00 in the next three months.
Meanwhile, MotleyFool suggests we can ignore the VIX if we are “long-term” investors.
TNX appears to have had its Master Cycle low on Friday. It revisited that low over the weekend, but has since rallied above it. The Cycles Model suggests the rally may last until early January.
USD futures appear to be making an extended Master Cycle low this morning on day 277 at 92.02. The rally from here may last through the end of the year, according to the Cycles Model.
November 20, 2020
SPX futures have been trading in a range between 3551.88 and 3582.38 overnight, having broken the potential long gamma storm above 3600.00 on Wednesday. However, nothing stays in equilibrium. The potential for a sell-off beneath Short-term support at 3542.93 invokes another potential problem of forced selling that may carry over into next week.
The Cycles Model suggests a potential panic selling week next week with another potential panic episode the first week of December. The next Master Cycle low is due during the week of December 7. The probable target may be beneath 2100.00.
NDX futures have been hovering near 12000.00 during the overnight session.
November 19, 2020
The NYSE Hi-Lo opened much lower this morning and is on a provisionary sell signal, pending a close beneath the 50-day Moving Average at 59.56.
BKX appears to be challenging its Cycle Top at 88.40 this morning. A close beneath it activates a sell signal. Intermediate Wave (1) may be due to challenge the Head & shoulders neckline by the first week of December.
The Fed has lost its appetite for further bailouts. They know what is coming. Read MartinArmstrong’s “Google Eyes Consumer Banking Market With Checking Account.”
SPX futures explored a new low at 3542.50 this morning before a bounce. The next support lies at 3522.55 where the 17-day line lies. A drop beneath that may trigger short gamma covering by the dealers going into options expiration. This may be a very volatile mix. SPX is on an aggressive sell signal, to be confirmed by the VIX and the Hi-Lo Index.
ZeroHedge reports, “Yesterday we joked that, now that all the “good” covid vaccine news have been priced in, if stocks are to go up then the vaccine makers must keep their mouth shut for the next few weeks:
NDX futures visited Short-term support at 11803.82 this morning before a bounce recovered some of the losses. The NDX Hi-Lo Index shows a gain of 213 net new highs, but the small caps cannot keep up with the large caps for volume. Thus, the NDX trades lower .
VIX futures traded overnight to a high at 24.52 while the equities futures were making their lows. They have since pulled back into negative territory as short gamma wears off after yesterday’s Master Cycle low. The new Master Cycle is set to begin with a life expectancy of up to three months. The media hasn’t caught on yet. They are projecting straight lines beyond yesterday’s low.
TNX appears to be consolidating near yesterday’s low. Today is day 255 in the current Master Cycle, so we should be aware that a change may be afoot.
CNBC reports, “U.S. Treasury yields fell on Thursday after jobless claims came in higher than expected amid a worsening coronavirus pandemic.
USD futures also consolidates, making a low of 92.43 overnight. As long as USD remains above its Master Cycle low at 92.12, the new trend is up. It may remain so until the end of the year.
FinancialTimes reports that the Vaccine arrival may trigger a USD slump in 2021. That may be so, but there is a need for a retracement to the Broadening Wedge trendline before that may happen.
November 18, 2020
The Banking Index just surpassed its June high and presented a complex, double zigzag Cycle Wave IV, just 240 days after completing Cycle Wave III. The Cycles Model presents us with a potential 60-day decline, should it follow the Summer Cycle.
Not only does the banking index have to worry about the election, but also must face up to the rent/mortgage moratorium phasing out at the end of the year. Government bonds are also at risk, especially in Europe, where a default is imminent. European banks may be the first to go.
VIX may be having an early Master Cycle low of its current Cycle. Today is option expiration for the VIX Index (not the ETFs). It has been 247 days from its MC high on March 16, which occurred on day 235 of the prior Master Cycle. Note that it wasn’t until 81 days later that the next Master Cycle low came in. Likewise, we may not see the new Master Cycle high (or low) until mid-February, with particular strength through the month of January.
ZeroHedge reports, “Now that the biggest year-end “tail risk” – the Nov 3 election – is in the rearview mirror, the November VIX term structure “kink” is gone, with the Nov contract having collapsed from 29 a month ago to 22, a level that’s even below the latest spot.
SPX futures attempted a test on Friday’s high, but was able to achieve an overnight high of 3623.12. Futures are easing down, but are capable of a retest over the next two days, or until resolved to the downside. DJIA futures also retested its all-time high of 29960.00, but was only able to achieve a high of 29896.00.
ZeroHedge reports, “After yesterday’s modest selloff as covid optimism fizzled amid fresh daily record numbers of new cases, on Wednesday futures contracts on three major U.S. equities indexes rebounded sharply as vaccine optimism made a triumphal comeback after Pfizer Inc. said a final analysis of clinical-trial data showed its Covid-19 vaccine was 95% effective, paving the way for the company to apply for the first U.S. regulatory authorization for a coronavirus shot within days. The news propelled S&P 500 futures as much as 0.4% higher, erasing earlier decline of as much as 0.6% as the reflation trade appeared back in vogue, while futures on the Nasdaq 100 and Dow Jones rose 0.2% and 0.5%, respectively, as of 7am ET, while Russell 2000 index futures rose 0.6% as the small cap outperformance was set to continue.
NDX futures made a weaker high at 12021.50 this morning. It is interesting to see what the index may do with the onset of options week and the Gamma-weary dealers attempting to hold back the rally so as not to get caught wrong-sided in a very overbought market.
VIX futures plumbed new lows as it was beaten down to a new low at 21.66. Today is options expiration for the VIX index, which may be a reason for the beat-down. This also has the ability to pull the Master Cycle forward, as today is day 247 of the current Cycle. This time it is a Master Cycle low while the March 16 Master Cycle was a high (also pulled forward to day 235).
YahooFinance relays this info, “(Bloomberg) — The world’s largest volatility ETF is seeing a frenzy of activity as traders across Wall Street bet on enduring calm in the stock market.
Even as the ProShares Ultra VIX Short-Term Futures exchange-traded fund (UVXY) — which protects against swings in U.S. equities — slumps 34% in the election aftermath, it’s on pace for the biggest monthly inflow since July.
The unlikely state of affairs may be explained by surging options activity and a rising number of shares out on loan in the $1.2 billion product. That points to investors betting against it on expectations the Cboe Volatility Index will keep falling into year-end.”
TNX continues its slide into its Master Cycle low, due early next week. The preliminary target is Intermediate-term support at 8.16, but may be pushed down to the 50-day at 7.67.
CNBC reports, “U.S. Treasury yields were little changed on Wednesday, as disappointing U.S. retail sales dampened optimism on recent news of two effective coronavirus vaccines.
DBA (Agriculture Fund) continues its rise, breaking out above its Cycle Top. The rally may continue through the end of November with strength as it progresses in the Cycle. The outlook for agricultural commodities is quite strong.
By comparison, CBoT soybean futures were trading around $9.40 per bushel when the U.S.-China Phase 1 trade deal was signed in mid-January.
Moe Agostino, the chief commodity strategist with Farms.com Risk Management, said, “no one in the US thought we could even get to $10/bu, and now here we are (almost at $12/bu).”
Saturday’s event was the “largest-ever” food giveaway as described by NTFB. As shown below, aerial photos reveal vehicle lines stretched miles down the street.
USD futures appear to be probing the lows , looking for support. Thus far, the November 9 Master Cycle low has held support. The Cycles Model suggests that USD strength may begin this weekend and continue for the next two weeks with a high probability of USD strength through the end of the year.
(Reuters) – The widespread distribution of vaccines to combat the coronavirus pandemic and ongoing monetary easing could cause the U.S. dollar =USD to weaken as much as 20% next year, Citibank said on Monday.
“When viable, widely distributed vaccines hit the market, we believe that this will catalyze the next leg lower in the structural USD downtrend we expect,” the U.S. bank said in a research note.
“Given this set-up, there is the potential for the dollar’s losses to be front-loaded, with the USD potentially falling by as much as 20% in 2021.”
Moderna Inc said on Monday its experimental vaccine was 94.5% effective in preventing COVID-19 based on interim data from a late-stage clinical trial, becoming the second U.S. company in a week to report results that far exceed expectations.
Citi’s bearish dollar view is also premised on bets that the U.S. central bank will continue to keep policy settings easy even if inflation expectations rise with an economy recovery, thus allowing the U.S. yield curve to steepen.
November 17, 2020
“Sell The Vaccine.”
ZeroHedge comments, “Last Friday we reported that after looking at the wave of euphoric bullishness sweeping across on Wall Street sparked by a combination of a (newly) bullish lack of a blue wave coupled with imminent vaccine hopes, BofA’s Chief Investment Officer stood out amid the crowd of Wall Street cheerleaders and urged the bank’s clients to “Sell the Vaccine“, to wit:
“we are sellers-into-strength into vaccine in coming months…peak positioning, peak policy, peak profits likely coming months; best analog is 2018 when US tax cuts caused peak positioning, policy, profits early that year; 2021 (vaccine) sees early peak in asset prices on higher interest rates; watch XHB, RPAR, HYG, DXY for signs rate rise becoming disruptive.”
SPX declined to 3588.68 in the first hour of trading, then bounced. Overhead resistance is at 3610.00. A decline back beneath 3600.00 may be construed as an aggressive sell signal.
ZeroHedge observes, “Small Caps just joined the rest of the US majors in the red post-Moderna headlines…
BKX has fallen beneath its Cycle Top support at 88.59 this morning. This comes after the Master Cycle high on November 16. The Cycles Model suggests a decline may be underway that could last through mid-January.
DBA broke out above the Head & Shoulders neckline yesterday while this morning it rose above its Cycle Top at 15.20. DBA had its Master Cycle low on October 29. The Current Master Cycle may run until the end of November. Lockdown 2.0 is destroying the distribution channels for food. Should this turn into the Great Reset, shortages will develop.
ArmstrongEconomics presents “The Interview on the Great Reset.”
After a day of testing the Cycle Top at 3630.53, SPX futures sold off to a low of 3599.12. where it currently lies, testing round number support. A breakdown beneath 3600.00 gets the bears growling. However, this morning offers a few hours of Cyclical strength that may allow a probe as high as 3675.00 (as mentioned yesterday) in an Ending Diagonal formation, a slight variation of the current structure. Dealers are looking for a catalyst to sell this rally, as they do not want to be trapped (long) in a very extended market.
The rationale is that the DJIA made a new all-time high yesterday and may not have completed its rally. The NYSE Hi-Lo Index closed at 195.00 after making an intra-day high of 297.00. This rally just does not want to give up the ghost, but the downside of this may be a real panic.
ZeroHedge reports, “Monday’s global stock rally unleashed by a 2nd round of covid vaccine hopes this time courtesy of Moderna, and which pushed the Dow and all major indexes to new record highs, fizzled on Tuesday as investors shifted focus back to the accelerated near-term spread of the virus and the creeping shutdowns which are certain to hammer the US economy. S&P futures dropped 0.5% or 20 points as New Jersey, California and Iowa imposed fresh restrictions as the number of new US cases hit a record, and threatened to worsen as the colder weather sets in. Nasdaq 100 futures were boosted by yet another reversal in the reflation trade, as well as a jump in Tesla on the prospect of the electric-car maker’s shares joining the S&P 500.
Curiously, the same 3,600 “gamma wall” level which we warned yesterday would complicate a major push higher in the S&P ahead of op-ex, is now serving as a buffer to the downside, and will limit losses. Sure enough, the Emini session low so far today has been… 3,600.
NDX futures hovered between 11991.62 and 12081.75 this morning as they forge higher. A probable target may be near 12106.00, its 78.6% Fibonacci retracement level.
ZeroHedge comments, “As mentioned in “Markets” today, we want to take a deep dive into Wall Street’s S&P 500 profit projections for 2021 in Data. Three points here, using FactSet’s weekly Earnings Insight report for the Street’s out-year expectations (link to their full report below).
#1: Analysts expect 2021 to be a record year for S&P 500 profitability, the fastest return to new-high earnings since at least the 1980s.
VIX futures remain range-bound as they consolidate near the lows. An audit of the Cycle structure shows the probability of a Head & Shoulders formation instead of a Cup with Handle. This allows an even higher target than the former formation.
TNX is lower, possibly heading for Intermediate-term support at 8.11 or the 50-day at 7.66. It may be that TNX is now on a decline into a Master Cycle low, due in a week. As you can see, the 50-day Moving Average has acted as a support since early September. What I hade interpreted earlier as strength going into a Cycle High may turn into panic in a Cycle Low.
ZeroHedge observes, “The shallow and fleeting spike in U.S. and German yields yesterday shows that these haven bond markets are more concerned about near-term pandemic challenges than the putative economic boost from a potential vaccine. Both markets reacted much less acutely to the Moderna news than the Pfizer announcement last week.
USD futures made a low at 92.27 this morning as it tests the Master Cycle bottom made on November 9th. Provided no new low is made, the rally may resume at any time.
November 16, 2020
Unlike the morning futures, the cash SPX was stopped by the Cycle Top at 3626.58 and pulled back impulsively. There may be another test of that resistance wit a resumption of the decline to follow. It appears that the Gamma resistance mentioned earlier by ZeroHedge is also holding. While there is not confirmation from the VIX or the NYSE Hi-Lo, the path to another 17.2-21.5 market day decline may be at hand.
SPX futures have hit a weekend high of 3634.38. It has exceeded the Cycle Top resistance at 3614.84 and has the ability to rally even further to 3675.00. The Cycles Model suggests two possible outcomes. The first is a quick resolution of the rally this morning beneath the prior high at 3645.99. The second may take another day to resolve at the higher level. The first option seems to be taking hold.
ZeroHedge observes, “Usually dealers are blamed when they are in a negative gamma position and are forced to sell down risk during sharp market drawdowns, thereby accelerating market drops. Well, this time it’s the opposite: with stocks attempting to stage a breakout above 3,600, it will be the dealers that hold the S&P back, due to a peak gamma position which our friends at SpotGamma calculate is at 3,600.
In their morning note, SpotGamma writes that its 3600 target appears to have been achieved as futures are markedly higher at 3615 on the back of the positive Moderna news.”
ZeroHedge reports, “Last night, when discussing the euphoric surge in Sunday markets, we said that the move is on expectations that the “Moderna covid vaccine may hit as early as tomorrow, and a favorable outcome would have a similar result to last Monday’s Pfizer surprise which sent the S&P as high as 3,668 before fading much of the losses.”
Well, we were right because just before 7am, Moderna picked up where Pfizer left off exactly one week ago last Monday, when the biotech company announced that Moderna’s Covid-19 vaccine was 94.5% effective in a preliminary analysis of a large late-stage clinical trial, or in other words even more effective than Pfizer’s vaccine which had shown 90% efficacy.”
NDX futures declined to a low of 11858.00 before a bounce. leaving it with a loss from Friday’s close. The Cycles Model tells me that last Monday’s high was the Master Cycle top and neither the SPX nor the NDX may have enough energy to overcome it.
ZeroHedge thought you should know, “First, it was a “technical issue” in Europe which back on July 1 caused European stock markets to suffer a 3 hour outage. Then, in August, New Zealand’s stock market was forced to halt trading over four days in August after distributed-denial-of-service attacks overwhelmed its website. Then on October 1, another “technical issue” hit the Tokyo Stock Exchange, which resulted in an unprecedented all-day trading halt. And just a few weeks later, in late October, trading in all stocks and derivatives on Euronext NV markets was shut down for three hours affecting activity in countries including France and Belgium. The problem was traced to due to a software issue.
Now, about a month later, the “glitching” rolling market blackout struck again, this time in Australia whose stock exchange opened for less than half an hour before a software issue forced it to close for the rest of Monday’s session, just as the country rolled out an “updated” trading system.
According to a statement from the exchange, the software issue was limited to the trading of multiple securities in a single order, or combination trading, and created inaccurate market data. Whatever the issue, the result was clear: no one could trade.”
VIX futures are rising, hitting a morning high of 23.88. This tells us that the SPX rally may be on tenderhooks this morning. VIX may be on course to resume its rally through the end of the month.
Bloomberg observes, “For a brief moment earlier this week, it looked like the volatility that’s gripped equity markets virtually all year was ready to recede. Four tumultuous days later, anxiety remains elevated, and traders are betting it’s going to stay that way.
Futures rose overnight into Monday after the presidential election was called for Joe Biden without much chaos at the polls. Then Pfizer Inc.’s vaccine trial data sparked a rally, sending the Cboe Volatility Index tumbling toward 20 — a level it last fell below in February. Late Thursday, the VIX was headed back toward 30. VIX futures are elevated, with the January contract the most expensive.”
TNX is on the rise this morning with a double dose of strength going into Thanksgiving week. Thus far, TNX’s rally has been muted. It now appears that the gloves are off.
USD futures are bouncing along above 92, which appears to be support for the next rally that may take it back to the Broadening Wedge trendline near 96.50. The rally may go considerably higher, as the Cycles Model suggests a rally through the end of the year.
November 13, 2020
The origin of Friday the 13th may have come from the action of Phillip the Fair, king of France, who owed an unpayable sum of money to the Knights Templar, a holy order originally charged with guarding pilgrims’ route to the Holy Land during the Crusades. The Knights prospered and set up a banking network, becoming very wealthy. Unfortunately, Phillip borrowed a very large sum from the Knights with no intention of paying it back. Does this sound familiar?
Conspiring with the local bishop, and without the knowledge of the Holy Father, he conducted a co-ordinated midnight raid on the Knights’ castles throughout Europe, pillaging their goods and excommunicating them. The two leaders, Jacques de Molay, Grand Master of the Knights Templar and Geoffroi de Charny, Preceptor of the Knights Templar were savagely tortured and burned at the stake on Friday, March 13, 1307. (Wikipedia may have it wrong, citing March 18, 1314 as the year of death for both.) Phillip was unable to locate the vast treasure supposedly owned by the Knights, but managed to have his debts expunged. Their vast fleet of ships with which the Knights did their commerce was never located, either.
SPX futures are higher this morning, having reached a high of 3569.12. A flat correction may be formed with the finishing rally reaching 3575.00. The Cycles Model has a possible turn at or near 12:00 when 4.3 days of decline and correction completing a high-to-high Cycle may be completed.
ZeroHedge reports, “US equity futures rebounded and European stocks were mixed as shares of Disney and Cisco jumped after both reported solid earnings, but investors remained cautious as many U.S. states imposed restrictions to curb the relentless surge in coronavirus cases. Treasury yields reversed an earlier rise and the dollar slipped.
S&P futures rose 0.8%, or 27 points to 3,560 while Eupope’s Stoxx 600 Index erased an earlier decline, with tech and banks among the winning sectors after Joe Biden was projected to win the battleground state of Arizona, cementing his win for the office. The projection by Edison Research dealt another blow to President Trump’s effort to overturn the results of the Nov. 3 presidential election.”
NDX futures reached a high of 11936.50 this morning before pulling back. A possible target for this retracement may be 12000.00, round number resistance.
VIX futures reached a low of 23.84, still within yesterday’s trading range, as it consolidates its pattern. VIX is due to have its next Master Cycle high near the end of November, according to the Cycles Model. A pullback after a breakout may be a good long entry point for the VIX ETFs.
The NYSE Hi-Lo Index closed well beneath its 50-day Moving Average at 50.04. This is a clear sell signal and may signify the need to short the bounce, since internals are deteriorating.
TNX made a morning low of 8.64 before rising. The pullback may be over, or nearly so, as the Cycles Model projects a likely continuation of the rally through Thanksgiving week.
ZeroHedge reports, “A record refunding week just concluded when the Treasury sold $27 billion in 30Y bonds – which as with this week’s 3Y and 10Y auctions, was the largest amount of 30Y paper ever sold by the US Treasury at one time.
USD futures consolidated, reaching an overnight low of 92.77. The Cycles Model suggests a rising USD through the end of the year.
November 12, 2020
SPX futures declined to a low of 3538.62 as I write. No supports have been broken, but neutral gamma has risen to 3500.00. The gap left at Friday’s close is 3509.44. Filling that gap opens the way to test four lower gaps through October 30’s gap at 3269.96.
NYSE Hi-Lo closed beneath its 50-day Moving Average at 52.58 yesterday, offering a sell signal to be confirmed by the VIX. However, this rapid deterioration of internals indicates a profound exhaustion in the last rally.
VIX futures rose, but have not broken out or crossed above the 50-day yet.
NDX futures rose to a retracement high at 11964.50 before easing lower, making a Fibonacci 76.8% retracement. That may complete the bounce off the 50-day and allow a resumption of the decline.
November 11, 2020
Peak Market Gamma Rises To 3,600
ZeroHedge reports, “With futures big up aggressively and the emini opening for trading around 3,560, traders are wondering what this means for forced dealer flows, and potential market inflection points.
Well, according to our friends at SpotGamma, “we’re seeing a general shift in the options “structure” from <=3500 to >=3600 which is what we like to see to confirm higher SPX prices. 3600 is now the largest gamma strike, and ZeroGamma if shifting up under 3500.”
SPX futures have made an approximate 45% retracement of its decline to 3573.62. Chart resistance is at the 2-hour Cycle Top at 3584.92, a 55% retracement from the 3645.99 high. While panic selling may not begin until SPX declines beneath the 50-day Moving Average at 3406.42, there may be some “momentum hits” as CTAs and hedge funds try to read the tea leaves for some directional evidence.
ZeroHedge reports, “Stocks gained, bonds dropped and the dollar rose on Wednesday as prospects of an effective COVID-19 vaccine outweighed nagging worries over surging infections, while the rotation out of tech reversed. Oil rose for a third day amid prospects for a global economic rebound in 2021.
S&P futures jumped on Wednesday, rising 0.8% or 27 points to 3,567 as covid vaccine hopes eclipsed pandemic concerns even as some states braced for new business restrictions to combat surging infections. A wide universe of shares rose in pre-market trading, from General Motors to PayPal Holdings to oil producers Exxon and ConocoPhillips.
NDX futures rallied to an overnight high at 11775.00, but unable to fill the gap at 11830.38, keeping downward pressure on tech stocks despite the rally. It bounced off the 50-day Moving Average at 11513.06, its “neutral gamma” line. Below that, forced selling begins.
ZeroHedge observes, “Yesterday was one for the record books: as a result of the unleashed value-able animal spirits following the furious if brief euphoria that Pfizer has somehow cured covid (it hasn’t), the “Insane, Tectonic” rotation from momentum stocks to value names left most quants dazed and confused, with the market-neutral momentum strategy suffering its biggest drop on record.
VIX futures are lower, having corrected to 23.73 as I write. The major players are still trying to make sense of this week’s moves.
The NYSE Hi-Lo Index closed between the 50-day Moving Average at 53.70 and its mid-Cycle resistance at 59.63. This is quite a departure from Monday’s high, but apparently the Cycles Model had expected it. Note that it is 8.6 months from the February high which preceded the March decline. The Cycles Model suggests the next Master Cycle low may occur during Thanksgiving week…not something most people will appreciate.
TNX continues to consolidate near its 8-month high. The Cycles Model indicates a triple play in strength in the next two weeks.
ZeroHedge reports, “While stocks long ago surpassed their pre-covid February 2020 record highs, Treasury yields stubbornly refused to follow risk assets higher amid widespread concerns that a lingering covid pandemic would lead to more economic weakness in the future (read deflation). All of that changed today, when the 10Y refunding auction just priced at the highest yield since before the covid pandemic.
Today’s sale of $41 billion in 10Y paper, which incidentally was another record-sized auction, and double the average auction size in the period 2010-2018…
USD futures climbed to a new high at 93.14 this morning. While not yet confirmed, the new rally may continue its climb through the end of the year. The media is speculating as if Biden has already won the election.
CNBC comments, “The U.S. dollar is poised to further weaken, amid market views that geopolitical risks are falling after the election and that the next stimulus package will likely be smaller than expected, according to analysts.
Citi Private Bank strategists predicted a weaker dollar ahead, given that a Biden administration would reduce uncertainty in international trade policy.
“Victory for President Elect Biden means a return to more conventional governance. As the province of the President, it will result in a major shift in the way foreign policy is conducted. Alliance building will return. ‘Tariff threat first’ negotiating tactics will end,” the bank’s chief investment officer, David Bailin, and Steven Wieting, chief investment strategist and chief economist, wrote in a note published Monday.
BKX also rallied hard on Monday, nearly touching its Cycle Top at 91.49. Note the compressing Trading Bands. They signal a massive move may be about to take place in the opposite direction. This is the strongest reversal signal you may get, telling us something big may be about to happen. The Cycles Model suggests the
The moratorium on mortgage and rental payments is lifted after December 31. Some 30% of all home mortgages are in arrears. Should a lockdown reappear (as it has in Wisconsin) then it will be virtually impossible to make up the payment shortfall, much less refinance their mortgages.
November 10, 2020
NDX blew past the prior gap, leaving an Island Reversal formation before bouncing off the 50-day Moving Average at 11517.93. The decline isn’t over, so it appears probable that we may see the 50-day being crossed with a confirmed sell signal as NDX takes the lead in this decline.
ZeroHedge observes, “While it’s a little odd to read about market and economic risks on the day the every major index hit an all time high (then slumped) amid expectations the economy is on its way to a full recovery thanks to some vaccine which may or may not be available in early 2021 and which half the population have sworn they will not take, moments ago the Fed published its latest semi-annial Financial Stability Report, in which it emphasized that risk assets could be hit if the coronavirus pandemic’s economic impact worsens in coming months, to wit: “the COVID-19 shock highlighted how vulnerabilities related to leverage and funding risk at nonbank financial institutions could amplify shocks in the financial system in times of stress.”
NDX futures are leading the decline, as they are already testing the 50-day and Intermediate-term Moving Averages at 11542.28 this morning after filling the Thursday closing gap. Note the Elliott Wave labelling. Yesterday’s move appears to be a truncated Wave (5), suggesting it may not exceed the Wave (3) high. NDX is on an aggressive sell signal with confirmation beneath the abovementioned support.
I am fascinated by the Cycles, as yesterday’s high is almost exactly 8.6 months from the February 19 high. You can see what happened next. The rally out of the March 23 low has been complex and full of surprises. Just wait for the next one.
ZeroHedge reports, “The 6-day rally which pushed US indexes briefly to all time highs on Monday, fizzled as worries about the extent of the COVID-19 pandemic’s economic impact resurfaced coupled with second thoughts about just how effective the Pfizer vaccine truly is.
SPX futures are lower this morning, but haven’t filled the first gap at 3509.40 as I write. SPX is on an aggressive sell signal, having crossed beneath the Cycle Top support/resistance. There may be a bounce for better positioning, but this decline may be a fast one.
VIX futures have pulled back in what appears to be a normal retracement after yesterday’s reversal. Yesterday happened to be day 269 from the February low. The parallels are intriguing. However, I wish to point out that this formation is starting from a much higher level than the former one. In addition, Cycle Wave III cannot be smaller than Cycle Wave I. That suggests we may see triple digit values in the VIX over the next several months.
TNX is pulling back today after yesterday’s breakout above the June high. However, the Cycles Model suggests that the pullback may be temporary, as TNX gathers strength into Thanksgiving week. Note that the Trading Bands are compressing, signaling a potentially large move in the offing.
USD futures appear to be consolidating beneath yesterday’s high after a rather abrupt reversal from its Master Cycle low (day 262). Note that we are just 8.6 months from a massive rally, which may be repeated. The Cycles Model suggests the rally may persist through the end of the year.
Gold futures bounced this morning to a high of 1888.40 before easing back. Yesterday’s move gave a very nasty surprise for gold investors as we witnessed a monthly Key Reversal. The Cycles Model aims its next Master Cycle low for Thanksgiving week and yet another probable low at the end of the year.
DailyFX reports, “Gold remains under pressure despite a small pick-up from Monday’s low print at $1,850/oz. The precious metal shed in excess of $100/oz. at one point yesterday as risk markets grabbed a huge bid on positive Covid-19 vaccine news. Traditional safe-haven assets, including gold, fell victim to the rush for risk, with the precious metal wiping out six-weeks’ worth of gains in one session. The US dollar also lost some of its safe-haven allure, but rising US Treasury yields and narrowing US real yields, underpinned the greenback and weighed on gold.”
Crude oil futures are consolidating this morning after making a Master Cycle high yesterday (day 263). The Cycles Model now suggests a decline through early January 2021. Yesterday’s high is 8.6 months from the February 20 high at 54.60. That decline took 61 days to the April 20 low at 6.50. This decline projects the same dimensions. Those who are unaware of the Cycles are looking in the wrong direction.
MotleyFool proclaims, “Earlier Monday afternoon, Brent crude oil prices, the global benchmark, jumped 7.5% to $42.40 and West Texas Intermediate (WTI) crude oil prices popped 8.3% to $40.20, as investors cheered positive vaccine results and an election victory for Joe Biden.
The stock market as a whole skyrocketed on news from drugmakers Pfizer and BioNTech that COVID-19 vaccine candidate BNT162b2 was more than 90% effective, compared with expectations for 60% to 70% effectiveness. Here’s why the vaccine news is good for energy stocks, and why oil prices could go higher.”
November 9, 2020
SPX futures feeds are on again, off again as futures have reached 3665.12 this morning. Today is day 264 of the current Cycle as futures reach a new all-time high. The upper trendline of the Orthodox Broadening Top is near 3700.00, which may provide resistance to the rally.
ZeroHedge reports, “Biden in, COVID out.
Global stocks and S&P futures exploded higher, hitting all time highs, following this morning’s news that a Pfizer covid vaccine is more than 90% effective, which came at a time when stocks were already euphoric in the overnight session following the weekend’s political news that Biden was in.
The result, in a nutshell, was an explosion in small caps, a surge in the Dow, a spike in the S&P and a slump in the Nasdaq (more below).
NDX futures reached a new retracement high at 12408.75, but did not make a new all-time high. In the meantime, it has sold off to 11939.25 before bouncing above Friday’s close. This may be a good sign the rally is over.
VIX futures reached a new retracement low at 23.42 this morning. However, VIX appears to be completing its pullback. I will fill in more details as they become available.
TNX exceeded its election high this morning as it continues its rally through Thanksgiving week.
ZeroHedge reports, “While all eyes are on the almost unprecedented surge in equity futures (except Nasdaq as stay-at-home stocks are hammered), there is some serious swings occurring in the bond and precious metals markets also as vaccine hope has – apparently – removed all fears.”
USD futures appear to be consolidating after last week’s plunge to its probable Master Cycle low. Friday was day 260 in the Master Cycle, which leaves a high probability of a reversal to the mid-Cycle through the end of the year.
November 6, 2020
SPX shows an impulsive decline beneath 3496.51 and correction. Although the decline is small, there is enough evidence that the rally may be over. Sell (short) at your discretion with confirmation at the 50-day Moving Average at 3403.00. Good luck!
SPX futures are down this morning, reaching a low of 3457.88 as I write. The Monthly Jobs Report is about to be released at 8:30 am with subsequent reactions. The rally through yesterday was panic-driven, leaving 4 substantial gaps to be filled.
ZeroHedge reports, “The blistering November rally, which pushed the S&P higher by nearly 8% in the first 4 days of the month, the biggest advance in the first days of the month on record, finally reversed and pared some of this week’s gains as the vote count continued but got increasingly more contested amid mounting legal complaints from President Donald Trump’s campaign. Meanwhile, just around 4am, Joe Biden edged ahead of Donald Trump in the latest batch of Georgia results, a major shift in the Republican stronghold that hasn’t backed a Democrat for president since 1992. Biden also got closer in Pennsylvania and is still ahead in Nevada and Arizona, though Trump is catching up.
NDX futures are beginning to fill yesterday’s gap at 11977.01 with a low of 11870.88 this morning. This week’s short squeeze is about to reverse itself with a vengeance.
VIX futures are above the 50-day Moving Average at 28.40 this morning, having made a high of 29.44 in early morning action. The buy signal of VIX is back on after a day of challenges to the 50-day. I have re-labeled this decline as a Primary Wave [B] due to its overshoot.
BusinessInsider writes, “An uncertain outcome of the presidential election and a potential divided Congress result led the stock market to do the near opposite of what some Wall Street experts expected it to do: trade higher.
That surge in stocks has coincided with the stock market’s so-called fear gauge, the Cboe Volatility Index (VIX), plunging as much as 15% on Wednesday, according to data from Bloomberg.
The VIX’s movement was sporadic in overnight futures, with an initially spike on the prospects of a Trump win, before an ultimate deflation as a path to victory for Joe Biden became more possible as votes continued to be counted.”
USD futures broke down beneath its previous low, hitting 92.26 in this mornings session. It is probable that the USD has made its Master Cycle high on November 2. If so, the decline in USD may last through the end of the year.
Here’s not how to time the market: ZeroHedge reports, “And so the massive tide on the reflation trade begins to turn.
In the first of many reports to hit this morning, Deutsche Bank’s FX strategist became the first currency strategist to throw in the towel on his 2-month call for a weaker dollar which was based on expectations of a Blue Wave, and says that “with the US election outcome extremely uncertain” he is changing his view and turning neutral as he “no longer sees a compelling narrative of dollar weakness into year-end for three reasons.”
DBA just broke above its 50-day Moving Average, putting it on a buy signal after a “flat” correction. It appears to made its Master Cycle low on October 29 and may continue its rally through the end of the month.
ZeroHedge reports, “Chicago soybean futures rose to a four-year high on Thursday morning, as dry weather in South America and increasing demand from China supported prices.
“China is actively buying beans and we are seeing additional demand emerge from Brazil,” a Singapore-based commodity trader said, who was quoted by Reuters.
The trader continued: “The weather is not perfect for Brazil and the crop is likely to get delayed due to the dry weather.”
November soybean contracts trading on the Chicago Board of Trade were up more than 1% Thursday morning, trading around $10.95 per bushel, climbing to the highest level since July 2016.”
TNX opened higher, but still within yesterday’s trading range. The rally may resume with strength through Thanksgiving week.
November 5, 2020
SPX hit overhead resistance at 3529.05 and has backed down. Should the expected turn happen here (day 260), there may be another 17.2-market day decline from today. For the brave of heart, one may consider shorting beneath 3496.51. The Cup with Handle formation is still intact.
Yesterday I had mentioned that the final hour of the day may also mark the final hour of the Cycle…While correct, I had failed to include the fractional hour which bleeds into this morning. The exact number is 120.4 hours with the final fraction coming in at today’s open.
SPX futures reached a high of 3508.25, and uncomfortably high retracement – near 87%.
ZeroHedge reports, “It was supposed to be the worst of possible outcomes: a combination of years of gridlock (a Biden presidency with a Republican Senate), coupled with a contested election (which Trump is set to do by contesting state elections all the way to the Supreme Court), was according to Wall Street a bearish trigger that could launch as much as 20% of downside to stocks.
Well, once again Wall Street was dead wrong, because despite predictions ahead of the election that not having an early clear result could derail stocks, equities soared 2% above 3,500 as the prospect of gridlock provided some solace and calm, led by tech and healthcare stocks on hopes the election results won’t trigger major changes to taxes or regulations that have underpinned the bull market. In short – a continuation of the status quo for at least two more years.”
NDX futures tested the Cycle Top resistance with a high at 12116.75. It has backed off while we await the open.
ZeroHedge comments, “For months, The Fed and the market have been demanding, anticipating, and pressuring Congress for moar… moar loans, moar handouts, moar bailouts, and moar promises of moar.
The outcome of the election, most specifically Democrats’ greatly disappointing results in the Senate and the House have crushed the hopes of a ‘blue wave’ and with it, trillions in free money.
VIX futures declined to a low of 26.04 this morning, beneath the 50-day at 28.30. This completes the correction, preparing for the next move higher. It also changes the potential Wave structure to a more bullish view for the VIX.
TNX tested the 50-day Moving Average at 7.30, making an overnight low of 7.48. It has since bounced above the mid-Cycle support/resistance at 7.40. The retracement appears to be over.
USD futures made a new low at 92.49 with a breakdown in sight. The Cycles Model calls for a steep decline into the end of the month.
November 4, 2020
We are about to see the final hour of the day marking the end of the 17.2-day Cycle that I have been alluding to. There is a very important reason to sell a Biden win…taxes. The realization of what he may do may sober up the investors to “sell the news.”
NDX futures made an approximate 65% retracement last night to a high of 11763.25. It has since pulled back, but still above the 50-day Moving Average at 11514.86 as I write. Should it open above the 50-day, we may see another day or so of consolidation near the highs of the day. Note that today is day 259 of the Master Cycle, so it may be winding down.
Last night, ZeroHedge observed, “It was supposed to be a Blue Wave… and if not a Blue Wave then at least a landslide victory for Joe Biden over Donald Trump. Well, not only is that not likely to happen, but suddenly it seems that Trump may be a decisive winner and not need Pennsylvania, with Betfair odds now 70% in his favor.
So what does that mean for a market that had almost entirely priced in a Biden/Blue Wave victory? Well, as we noted on Oct 31, when we pointed out the collapse in Nasdaq shorts, we said that a surge in the Nasdaq was imminent as the so-called dumb money reversed.”
SPX futures made a near-perfect 61.8% Fibonacci retracement in the overnight session at 3429.38. This morning it appears to be challenging the 50-day Moving Average at 3402.16 as it pulls back from the high. Should it remain above the 50-day, it may linger near the high for the balance of the day. However, the Wave structure may be complete.
ZeroHedge reports, “US equity futures fluctuated wildly as investors scrambled to price in shifting odds for Donald Trump’s re-election and control of the Senate after the president declared victory in an early morning announcement, warning he would call on the Supreme Court to stop counting ballots in states where he led, setting up a potentially protracted vote count and the implications for economic stimulus. Emini contracts on the benchmark equity gauge swung from a gain of 2.1% to a loss of 1.3%, and were trading up around +1% as of 7am, and just around 3,400.
VIX futures fell beneath the mid-Cycle support at 32.85, making a low of 30.71 as I write. It remains on s buy signal above the 50-day Moving Average at 28.16. The Cycles Model shows a Master Cycle termination at the end of November with a period of strength beginning this week.
The NYSE Hi-Lo Index closed at 49.00 yesterday, beneath the mid-Cycle resistance at 54.59 and the 50-day Moving Average at 56.45.
USD futures appear to be challenging the 50-day Moving Average at 93.38, having made a low of 93.09 in the overnight session. The Cycles Model suggests another three weeks of decline into Thanksgiving week.
TNX made a wild swing to 8.96 last night before opening down to 7.86 this morning. mid-Cycle and Intermediate-term support are at 7.46, while the 50-day Moving Average is at 7.20. The Master Cycle ends during the week of Thanksgiving and it may be at a low, should TNX break beneath the 50-day.
November 3, 2020
It appears that there may be yet another push to the 50-day Moving Average at 3402.19. It turns out that the 3233.94 low may have been Wave B. It appears that the fireworks begin tomorrow.
SPX futures have reached a high of 3349.62 this morning. The probable target appears to be mid-Cycle resistance at 3385.48, where A of (2) equals C of (2). Today is day 258 of the Master Cycle, which means that the Cycle is inverting. The good news is that the inversion may be short (possibly up to 2 days) and the Cup with Handle remains intact.
ZeroHedge observes, “US equity futures, global stocks and crude oil surged for a second day on Tuesday as a “gust of optimism” swept across global equity markets as millions of Americans headed to vote. The dollar tumbled amid rising bets on FX vol while yields rose.
NDX futures reached an overnight high of 11181.00. The bounce may reach a retracement high of 11222.52 in a flat correction. Depending on how long the correction lasts, it may go as high as the mid-Cycle resistance at 11465.04. However, we are counting the hours until the Master Cycle end.
VIX futures have reached an overnight low of 35.49, still above the mid-Cycle support at 32.74. It remains on a buy signal. Its Master Cycle is not complete until the end of November, suggesting rising volatility for an unusually long duration.
YahooFinance observes, “Heritage Capital President Paul Schatz joins the Yahoo Finance Live panel to discuss how the VIX volatility index may clamp down on your portfolio due to increased uncertainty and what numbers investors should look for as a green-light to invest.
JULIE HYMAN: It’s always a little bit unusual, right, when you see stocks rallying and the VIX at an elevated level as well. But that’s something we have seen more and more of recently. Your thesis that we could see things sort of reverse post-election– how does how the VIX has been trading sort of play into that and play into perhaps investor sentiment right now?
PAUL SCHATZ: Well, the VIX is kind of like that alligator’s mouth. As it opens up and gets big, risk increases for it to clamp down and bite your portfolio hard. But I’d say this. A VIX over 30 is super difficult to get things right in the markets. I think VIX above 30 is certainly in the treacherous category. I want to see it in the 20s. You can certainly invest in trade. It becomes a little more difficult. When the VIX gets below 20, it’s really that green light, all systems go.
The NYSE Hi-Lo Index closed yesterday at 3, after reaching a high of 21.00. It remains solidly on a sell signal, despite the overnight rally.
USD futures challenged Intermediate-term support at 93.58 in the overnight session. The 50-day Moving Average is at 93.36, which may be the final supporting this retracement.
TNX has broken out above its prior high, severing the old relationship between stocks and bonds. The threat of higher rates are about to dampen the bullish expectations in stocks.
November 2, 2020
SPX peaked about an hour later than expected, but the essential timing is still in place. Investors are in a quandary, since they believe that rising 10-year rates go alongside rising equities. A long-time relationship between stocks and bonds is about to be broken.
ZeroHedge observes, “An apparent paradox is emerging in the world of futures positioning.
According to the latest CFTC Commitment of Traders data, after being stuck in a tight range for much of 2020, speculative investors boosted bullish wagers on S&P emini futures to the highest level in almost two years, a that most professional investors saw the potential for the S&P 500 index to bounce back from a two-month slump. As Bloomberg notes, net long positions in S&P 500 e-mini futures in the week to Oct. 27 were the most since January 2019.
SPX futures have exceeded 3300.00, sparking speculation that the decline may be over. Far from it. Equities are in hour 8.6 (end of a minute Cycle) of a 30.1 hour decline from Thursday’s high at 3341.05. That leaves 21.5 hours to the bottom on Thursday morning. This is the last chance to sell longs and go short into the melee about to happen.
ZeroHedge remarks, “In a rollercoaster session which started with futures tumbling at the start of Sunday trading on the heels of a plunge in oil, which sent WTI below $35 on European lockdown fears and up to 1MMb/d in new production out of Libya, risk assets have staged a remarkable comeback with Emini futures rallying around the time of the European open, and surging over 40 points or 1.3%, rising to 3,307 having hit a session high of 3,322 earlier even as oil tumbled and yields were lower on the day.
VIX futures declined to a low of 36.65, still within Friday’s trading range. There may be an effort to spike the VIX in order to generate a momentum rally in the SPX, but it may not last beyond the first hour.
The NYSE Hi-Lo closed right at the Cycle Bottom at -44.41 on Friday. The next three days may see the Hi-Lo mimic or exceed the March lows. We may monitor it later today. However, the Cycles Model suggests the Hi-Lo may remain under water through the end of November.
NDX futures are on the same virtual path as SPX, with an overnight high of 11210.25. It has since backed away from the high. The continued decline may happen with no visible “spark” to set it off.
ZeroHedge observes, “Following a string of breakdowns this year on global stock exchanges – including a hardware failure at the Tokyo Stock Exchange, cyber attacks that hit New Zealand’s stock exchange, a software glitch at Germany’s electronic trading platform Xetra, and Euronext’s widespread disruption last month affecting trading from Dublin and Amsterdam to Paris and Lisbon – Europe’s largest and most-tracked STOXX indices suffered a delayed opening this morning.
“Our input data and index calculation have been affected by input data problems,” said, Qontigo, which is owned by Deutsche Boerse
USD futures appear to be consolidating within Friday’s range. This may only be the calm before the storm as the Cycles Model calls for a month-long rally in USD.
TNX appears to be in consolidation, as well. Yields continue their ascent through Thanksgiving week, according to the Cycles Model.