Market Analysis - Wednesday, March 4

SPX futures are consolidating near the upper half of yesterday’s trading range with the possibility of another probe higher.  This is an epic battle to regain control as the SPX slips beneath its support at the neckline of the Head & Shoulders formation.  Poor liquidity is being exacerbated by increasingly bearish price movement.  Individual investors are stepping away from the fray while hedge funds are increasingly bearish.  Buybacks are slowing down, leaving no backstop against a further decline.

Today’s options chain shows Max Pain at 6825.00 with long gamma above 6850.00 and short gamma beneath 6800.00.

ZeroHedge reports, “It was shaping up as a catastrophic, margin-call driven Wednesday session after Japan’s Nikkei tumbled about 4% and Korea’s Kospi suffered its biggest drop ever, plunging by a record 12%. But after initially plunging overnight, S&P futures rose as much as 0.4% after the New York Times reported that operatives from Iran’s Ministry of Intelligence used backchannels to contact the Central Intelligence Agency a day after US-Israeli attacks began.”

The premarket VIX pulled back to a low of 22.18 this morning as tension eased in the Middle East. With corporate credit risk and Treasury yields rising, the path for the VIX may be higher for some time.  The Cycles Model suggests volatility continuing to rise into the weekend. A possible target overthe next month may be the April 7 high at 60.00.

The March 11 options chain shows Max Pain at 19.00 with dwindling short gamma beneath it. Long gamma seriously begins at 20.00 with calls owners grouped between 20.00 and 25.00. There are outlying groups of calls up to 55.00.

TNX is consolidating within yesterday’s massive move. Although appearing calm, it may be ready to explode even higher today. The 52-day Moving Average at 41.53 may be a temporary stopper.  Should it go higher, the 200-day resistance at 42.07 may prevail.

USD is consolidating near its Diagonal trendline after a massive two day rally breaking through all resistance.