BKX, our liquidity proxy, has declined beneath it’s Head & Shoulders neckline and made a new 2022 low. The Cycles Model suggests a continued decline to the end of October. Credit Suisse’s capital shortfall is in the news. Market stresses are eroding the capital structure of many banks, and CS may be the first to go down.

Today I am bringing out my alternate Elliott Wave Structure as a better fit with the Cycles and certain formations in the chart. I am tentatively counting last Wednesday’s high as an Intermediate Wave (B) instead of a minor Wave 4. Wave 4s can be triangles and zigzags but not Broadening Wedges. Broadening formations seem to be the property of Wave Bs.

If the old Master Cycle were to continue, today would be day 260. We would need a limit down day to complete the old Master Cycle, should it still be appropriate. Should the old Master Cycle be intact, 3400.00 is still the target. Under the new structure, the next target would be below 3000.00 by mid-November.

SPX futures declined to 3575.75 before easing back to flat with yesterday’s close. In today’s op-ex, Maximum Pain for investors is 3625.00. Long gamma begins at 3675.00 while short gamma starts at 3600.00.

ZeroHedge reports: 

“Another day, another rout, only this time there was an even more ominous twist. It’s shaping up as another risk off day on Wall Street, and around the world, as stocks fell... again... as usual... pressured by the relentless rout in the chip sector (following Friday’s decision by the Biden administration to put fresh curbs on China’s access to US semiconductor technology) which sent chip giant Taiwan Semi conductor plunging 8.3%, its biggest drop on record, and wiped out $240 billion in market cap from the global semiconductor sector, while US futures extended their Monday slump amid general amid fears of persistently high inflation two days ahead of the CPI report, and signs that company earnings were set to disappoint. A gauge of the dollar climbed to the highest this month before reversing.

But the ominous twist today is that for the second time in two weeks, the BOE stepped in the market, this time boosting its 'temporary' QE to add linker bonds to its usual array of gilt purchases to tackle what it called 'fire-sale dynamics.' While this helped lift gilts and cable (if only briefly), its effect on futures was truly transitory, with the E-mini dumping as much as 1% to a low of 3584, falling below the key level of 3,600, before stabilizing uneasily just above 3,600. It was down 0.6% at last check, while Nasdaq future were 0.5% lower as of 7:45am ET.”

VIX futures rose to 33.95, remaining beneath the Cycle Top resistance at 34.40. I have tentatively marked last Wednesday as a Master Cycle Bottom. There are just a few more days that may change this outlook, as this would be day 260 of the old Master Cycle.

In tomorrow’s op-ex, Max Pain is at 29.00. Short gamma begins at 28.00, while long gamma starts at 30.00. The VIX may be due for a powerful move higher.

TNX futures climbed to 40.06 over the holiday weekend. Today, however, it opened at 39.00 and resumes its upward march with a high thus far of 39.37.

US dollar futures rose to 113.46 before easing back to the flat line. In doing so, it challenged the Cycle Top resistance at 113.23. The Cycles Model shows growing strength into the next Master Cycle (high) over the next week or so.

More By This Author: