Market Analysis - Tuesday, Sept. 1

SPX futures declined to 7638.50 this morning, just ticks above the previous low at 7838.17. I had mentioned yesterday that a decline beneath 7638.00 creates a short term sell signal.  This may create a possible “bear trap” as the SPX declined toward the 52-day Moving Average currently at 7563.38, where it meets a rising trendline. Should the trendline hold, the SPX may then rise toward the Cycle Top resistance currently at 7881.03 over the next 2-3 weeks. It may go higher, if the Cycle extends.  Wall Street is recommending a reduction of exposure to equities. They may buy what you sell.

ZeroHedge reports, “Stock futures are set to start the new month on the backfoot – having weathered a variety of challenges to post a gain for August – with tech lagging as a global selloff pushes yields to the highest level since 2008.”

The premarket VIX rose to 15.96 this morning. A breakout may occur above 16.31 as investors buy protection against the possible decline in equities. The VIX may then rise to the to of the Ending Diagonal near 19.50 in the next few days.

The US 10-year Bond Yield broke out this morning. The futures hit 48.01 thus far while the cash market (TNX) rose to 47.90, above its Cycle Top at 47.77. Investors may likely chase this breakout, but the Cycles Model suggests it may be a fast move, as it has the potential to reach 50.00 in the next week or two. A fast and disorderly rally in yields may be a setback for stocks.

The US Dollar is consolidating above its mid-Cycle support after having risen through it. Additional strength may be imminent as yields rise. The next resistance level is the 52-day Moving Averageat 100.38. Above that, the dollar shorts may panic, boosting the USD toward the Head & Shoulders neckline. A breakout may be in the works, as the new Master cycle may last to mid-October.

ZeroHedge notes, “Last week’s financial media was full of apocalyptic headlines: “$40 trillion in national debt!” “U.S. debt in a doom loop!” “The end of the dollar is near!”

Gold and bitcoin soared in lockstep with the dollar doom and gloom. If you took the headlines at face value, one would assume the dollar was already toast and U.S. Treasuries were worth no more than digital confetti.”

Crude oil rose above its previous high, indicating a continuation of the uptrend. Trending strength has shown up alreaady today and is likely to reappear later this week or early next. The current Cycle may last to mid-October with a minimum target near 100.00. A more likely target may be the Cycle Top at 110.77. Should it go to 119.48 or higheer, a massive Cup with Handle may be formed with an average target near 184.00 sometime in 2027.