NDX futures continued their relentless march higher, to 16393.70 thus far. The intended target may be the Cycle Top at 16638.79. It may have a limit not to exceed 16660.00. Today is day 275, which is an outer boundary of the time allotted to the Master Cycle. What comes next may be a violent reversal.

Today’s options chain shows Max Pain at 16340.00. Long gamma begins at 16350.00, while short gamma is in short supply. A reversal today may be a total surprise.

ZeroHedge observes, “All I want for Christmas

Everyone apparently needs to have more Tech. Most inflows into the S&P Tech Sector (XLK) yesterday in the last 5 years…

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Source: GS sales
 

Terrific Tech Tuesday

The themes/sector performance yesterday somehow feels bullish. Everything tech / AI/growth did well. And the mega-caps are back at doing what they do best after a little well-deserved rest.”

SPX futures also maintain their climb to 4652.10 thus far. The apparent target may be the Cycle Top at 4677.43. A rough calculation of the 1987 trendline places it at 4705.00, which may be an alternate limitation to the rally. A normal decline from here may target the Cycle Bottom at 3992.42.

Today’s op-ex shows Max Pain at 4590.00. Long gamma starts at 4600.00.  Short gamma begins at 4575.00.

ZeroHedge reports, “S&P 500 futures continued to grind to fresh 2023 highs, quickly approaching all-time highs ahead of the Federal Reserve’s last interest rate decision for 2023, after Tuesday’s cash close was at its highest level since January 2022. As of 7:45 am ET, S&P futures rose 0.12% while Nasdaq futures continued their relentless ascent, adding another 0.2% as investors looked ahead to the Federal Reserve’s interest-rate decision, bracing for any warnings from Chair Jerome Powell that market expectations of policy easing are overdone (our full FOMC preview is here). European stocks are also ahead, with the Stoxx 600 rising 0.2%. Asian stocks fell, with Chinese equities leading declines on disappointment over a lack of more stimulus from a key economic leadership meeting, while European stocks rose, with the Stoxx 600 rising 0.2%, and touching fresh 2023 highs. Sterling tumbled after UK GDP printed -0.3%, contracting more than the lowest consensus estimate while the Bloomberg Dollar Index rose 0.2%. oil prices are little changed, with WTI trading near $68.70. Spot gold rises 0.1%. Bitcoin traded just above $41,000. Today’s macro focus is on PPI and the Fed. The Fed is expected to make no changes to its policy, Powell is expected to deliver a hawkish press conference, and the dot plot decline by 50bps. For markets the keys will be the dot plot and whether Powell discusses a pathway for cuts.”

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VIX futures are bouncing off yesterday’s low at 11.81 to a morning high of 12.27 thus far. A rising VIX in tandem with a rising SPX is a sign of danger ahead since one or the other is wrong. Yesterday was day 274 in the Master Cycle, stretched to its outer limits. Should VIX move lower, the Cycle Bottom lies at 11.18.

Today’s options chain shows Max Pain at 16.00. Short gamma runs from 12.00 to 15.00. Long gamma may start at 21.00 to 23.00.

ZeroHedge remarks, “Vol keeps resetting lower into this Spot Equities Index rally (VIX at levels which would be a fresh “post-COVID closing low”)…

…and as is so often then the case, a “virtuous feedback loop” ensues: the persistent absolute wreckage in realized Vol allows for mechanical “VaR-up”, as Exposures are bought back and price-momentum / trend re-builds to the Upside…

Nomura’s Charlie McElligott estimates a cumulative $notional of Equities purchased across “Systematics” Vol Control + CTA Trend ~+$104B since early November as a proxy.

This all fits with his warning of an “equity upside pain-trade scenario into year-end”.

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