Market Analysis - Thursday, August 20

SPX futures have pulled back to 7694.60 this morning, above its correction low at 7688.00. The Cycles Model suggests that the SPX may grind higher through the end of the month. As it overtakes the Cycle Top at 7821.97, momentum players may enter the fray, pushing it to 8000.00. The upper trendline is near 7900.00, so there may likely be a throw-over as panic buying takes over. Bessent’s QE has given the markets the liquidity to go higher despite the pullback in the NDX.

ZeroHedge reports, “US futures slide and are trading at session lows, as bond yields surge after yesterday’s Treasury announcement, having now erased the entire post buyback-boost move; yields are 4-5bps higher as the curve bear steepens sharply with the 10Y yield now at 4.69%, above where it was before the Treasury’s press release yesterday, driven by a surge in Brent above $94 after Trump vowed to unleash an “Economic D-Day” on Iran’s economy.”

The premarket VIX has risen above the Triangle trendline as it bounces toward the Ending Diagonal trensline near 20.00. The Cycles Model suggests positive trending strength may emerge in the next week to punch it up to trendline resistance. Investors are looking to hedge their “uncertain” longs as the crowd is not fully “in.”.

TNX rose above the Head & Shoulders neckline at 478.00 this morning. The injection of QE has no staying power, as things are expected to revert back to “normal.”

ZeroHedge observes, “While today’s market moves (post-Bessent’s OpTwist bailout) are changing things rapidly, since the last FOMC meeting, on July 19th, where Warsh held rates (hawkishly) unchanged (in the biggest surprise to market expectations in decades) amid multiple dissents, gold, bitcoin, and oil have outperformed, the dollar and bonds have lagged, with stocks solidly green in the middle…”

USD is stretching the Master Cycle to a new low this morning, as the fresh liquidity has diluted the dollar. The dollar bears are rejoicing, but there are limits to the decline that may disappoint. The dollar may consolidate beneath the mid-Cycle resistance at 99.13. However, it has the probability to offer a buy signal once the USD rises above it. The new Master Cycle may rise to mid-October, allowing the USD to engage the Head & Shoulders target.