Market Analysis - Friday, March 13

SPX futures declined beneath the mid-Cycle support at 6651.00 to 6636.90 before bouncing to 6707.50, under the Head & Shoulders neckline at 6710.00. Retail investors are not buying the dip, leaving yesterday’s attempt at a short squeeze empty handed. Having possibly broken the next layer of support, there is a strong likelihood of a further decline to the Head & Shoulders target by next week. Seasonality tells us that we may see a trough in March. However, the Cycles Model suggests a possible further decline into early April.

Today’s options chain shows Mac Pain at 6750.00. Long gamma dominates above 6775.00 while short gamma remains strong beneath 6700.00.

ZeroHedge reports, “US stock futures rebounded from their overnight selloff, and were trading near session highs after three days of losses on Wall Street as Brent slipped below $100 a barrel and investors waited to see if the war in the Middle East would escalate further.”

Premarket VIX pushed up to 28.47, testing the lower Head & Shoulders neckline overnight, then pulled back. Commentators are looking for a peak in the VIX this month. However, VIX remains on a buy signal that may prevail until mid-April. The double Head & Shoulders formations appear to be a product of the choppy market this year.

The March 18 (monthly) options chain shows Max Pain at 21.00, where dealers may have the least payout. Short gamma runs heavy between 15.00 and 21.00. Long gamma picks up at 22.00 and shows large investor presence every 5 points up to 80.00.

TNX broke through its trendline yesterday. This morning it is pulling back, testing new found support. The Cycles Model calls for an increase of trending strength over the weekend, with possible sustained strength during the following week.

ZeroHedge reports, “After two mixed coupon auctions this week, including a subpar 3Y and a strong 10Y, moments ago the Treasury concluded the week’s coupon issuance when it sold $22BN in 30Y bonds in another solid auction.”