SPX futures declined to 6912.90 after the close yesterday, then recovered near the close this morning. Holding steady at this level is not a long-term option, since Intermediate support is at 6922.00 and rising while the 52-day Moving Average and Ending Diagonal trendline lie at 6892.00 and also rising. Support is becoming thinner, while the flat close belies the turmoil underneath the surface. The next breakdown may be the last time we see these levels. The Cycles Model suggests a 6-week decline ahead. Volatility and velocity may increase over the weekend.
Today’s option chain shows Max Pain at 6965.00. Long gamma strengthens at 6975.00 while short gamma clusters at 6940.00, then 6900.00. Short gamma may be waiting for a stumble.
ZeroHedge reports, “Futures are higher, but there continues to be tangible angst below the surface as traders are aggressively shorting potential AI losers, while US stocks continue to fall behind the rest of the world.”
The premarket VIX is holding steady above the mid-Cycle support at 17.20. The Cycles Model suggests a rising VIX with a possible breakout by early next week. The Cycles Model shows the next 6 weeks to be complex, with the first possible peak at the end of February.
The February 18 (monthly) options chain shows Max Pain at 19.00. Short gamma is strongly clustered between 15.00 and 18.50. Long gamma begins at 20.00 and runs strongly to 70.00, with an outlier call wall (129,000 contracts) at 100.00.
TNX may have completed its correction at 41.25 yesterday. It may test the 52-day Moving Average at 41.76. Above it the buy signal is reiterated. The inverted Head & Shoulders formation has been revised, with a higher target than first projected. This new target actually matches the Cycles Model projection.
ZeroHedge reports, “After yesterday’s mediocre 3Y auction (which saw a drop in foreign demand offset by record direct bid), moments ago the Treasury concluded the sale of 10Y benchmark paper, and despite a cheerful preview by the Bloomberg MLIV team (which appears to be wrong every time it tries to handicap the outcome), today’s auction was absolutely dreadful.”
USD may finish its correction beneath the Cycle Bottom at 96.65 with a probe lower in the next couple of days. The Cycles Model suggests a mighty surge out of the low beginning over the weekend, with the knock-on rally extending to mid-March. Dollar shorts may be squeezed, providing more fuel for the rally.
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