Market Analysis - Tuesday, June 2

The Ag Index may be landing at its final Master Cycle low near the mid-Cycle support at 360.82. This provides an opportunity to buy ag commodities and companies at a reasonably low entry point. Prices have been beaten down enough that many producers have cut back or left the business altogether. Shortages loom. Prices may skyrocket.

ZeroHedge remarks, “Asian rice prices logged their biggest monthly gain in nearly two decades in May, as a Gulf energy shock collides with an expected El Niño event later this year. The spike adds to the mounting risks of a broader food price shock that could emerge as soon as six months from now.

Any time rice prices spike, it is a major concern because the grain feeds more than half the world’s population, estimated at 3.5 to 4 billion people.”

SPX futures remained beneath 7600.00 overnight, declining to 7564.60, beneath the trendline. The Trading Cycle rally may be over, but the potential ensuing decline may meet its first support at the Cycle Top 7373.93, with final support at the 52-day Moving Average at 7060.25. There is room in the current Master Cycle for a week-long decline before resuming its probe higher to the end of June.

Tomorrow’s options chain shows Max Pain at 7600.00. Long gamma strengthens above 7620.00 while short gamma gains strength beneath 7570.00.

ZeroHedge reports, “Futs are weaker but well off their overnight lows as the US is set to lag its global peers; according to JPM investors will need to watch to see if there is a beginning of a larger rotation similar to Jan-Feb or perhaps a slight pullback following the US’s multi-week run.”

The premarket VIX consolidated above the Master Cycle low this morning. It is due for a bounce, but may be resisted  at the 52-day Moving Average or the Cycle Top at 25.74. The Wave (E) fractal may have another downward probe by the end of June. There is currently no fear of the downside in the market.

The June 10 options chain shows a single bundle of shorts at 15.00 and very modest calls above 20.00. Nothing to report here.

The US 10-year Bond Yield shows a likely final probe, extending the Master cycle lower today, completing the corrective fractal. TNX is soon to be racing higher, with the Head & Shoulders formation in sight. The neckline may be breached in another week, as the resumed rally gains strength.  The new Master Cycle may rally into August.

The USD remains above the 52-day Moving Average, awaiting the “go ahead” signal from TNX. It also shows momentum gaining strength over the next week. A breakout above 99.54 may propel the USD toward the Head & Shoulders formation.

Bitcoin is nearing the outer limit of extensions to its Master Cycle. The downside fractal is complete as a correction, suggesting an imminent reversal.

Crude oil may have another probe to the 52-day Moving Average at 95.61in the next day or so. The Cycles Model shows Wednesday as a day of strength in crude before making a final probe beneath the lower Triangle trendline. Wave E’s tend to be roguish in their behavior, zig-zagging wildly like a loose cannon in a storm.

Gold continues to bounce off its mid-Cycle support at 4465.00 this morning. However, the Downside fractal is not complete. It may have approximately a week to complete the fractal. A minimal Master Cycle decline may go to 4000.00, while there is a probable trendline that may extend to 3800.00.