Market Analysis - Tuesday, April 7

SPX futures declined to 6565.90 this morning, possibly beginning the next phase of the decline. Overhead resistance at 6710.00 has not been breached. Nor has mid-Cycle resistance at 6687.39. Instead, a minor resistance at 6628.00 may have turned the SPX back down. The primary reason is that the rally consisted of short covering, not buying-to-own. In fact, the buyers quit buying stocks near 6600.00 and switched to treasuries, leaving no fuel for a further rally. The minimum decline is targeted at the Cycle Bottom at 6276.33. An additional attractor is the 1987 trendline at 6200.00.  However, the current Master Cycle is scheduled to extend to the end of April. There may be something more than just meeting the minimum decline.

Today’s options chain shows Max Pain at a highly contested 6600.00. Long gamma may begin above 6630.00 and is populated to 6700.00. Short gamma begins beneath 6550.00. The big question is the zero-days-to–maturity options traders.

ZeroHedge reports, “US futures reversed earlier gains and oil advanced following reports that Iran’s Kharg island was targeted earlier on Tuesday, while the market was largely paralyzed ahead of Trump’s 8pm ET deadline for Iran to agree to a ceasefire or face escalation.”

The premarket VIX rose to 26.27, held aloft above the 52-day Moving Average, rising above the Cycle Top resistance and reconfirming the buy signal. The next resistance lies at 35.30, the Head & Shoulders neckline. The VIX is due for multiple surges of trending strength over the next two weeks.

Tomorrow’s options chain shows short gamma residing between 20.00 and 23.00. Long gamma begins above 24.00 and stretches to 55.00.

The US 10-year Bond Yield continues to consolidate above 43.00, but may be primed to go lower as investors switch to bonds instead of equities this week. However, it may not last as bond volatility may begin to rise toward the end of the week.

USD is also consolidating in tandem with bonds. The Cycles Model shows no particular strength over the next two weeks and may end next week at the correction low near the mid-Cycle support at 98.56.