Navigator™ Signals for Day Traders Pre-Market Outlook – 5/11/2021 May 11, 2021 AF Thornton 0 Comment Tuesday Morning - 5/11/2021 Be sure to read the View from the Top – Interim Report from earlier this morning. From all appearances, the 18-month cycle peak has arrived. A reasonable target for this correction in normal circumstances is the 200-day moving average – not necessarily a straight shot to that level but more as a destination. This morning, the 200-day line sits at about 3665 on the cash S&P 500 index. On the NASDAQ 100 cash index, the line is at 13,324. Gap rules will apply this morning, as both the NASDAQ 100 and S&P 500 indices will gap down with true gaps. The NASDAQ 100 is still leading lower this morning, but there is slightly more parity with the S&P 500 now. As with any large true gap, the early focus will be on the fill, complete lack of fill, or partial fill. Every one of those scenarios will tell us a different tale about how much conviction overnight sellers have. Gap rules #2 and #4 should be at the forefront of your mindset when navigating this open. On the S&P 500, pay close attention to the May 4th swing low at 4188, as it was the last pullback low before the market made a higher high. The level also represents the last cycle low, the violation of which confirms the top. This level has already been breached on the NASDAQ 100. If there are no buyers at the level on the S&P 500 index, that is further market-generated information regarding the weakness at hand. As usual, with a large gap, assume the potential for fade early in today’s session. Either buy the first one-minute high or cross back up through the open should the opening drive be lower. Taking out the overnight low and moving back into the overnight range can also be a strategy. Monitor for continuation and context. Gap and go scenarios from gaps this large are relatively rare. That means that they usually play out along the gap rule #4 and spend most of the session digesting the overnight move. That would be bearish in the bigger picture, but offers little opportunity for day timeframe futures traders. Those looking for short-term opportunities should know that Individual equities often trend better.Trying to “buy the dip” or pick a bottom in the circumstances can be treacherous at best. Sometimes, it can be wise to sit out a few sessions and let the market telegraph more certainty.Good luck today.A.F. Thornton
Founder's Trading Journal View from the Top – Interim Report May 11, 2021 AF Thornton 0 Comment I could give you an elaborate discussion this morning, with fancy charts and graphs. Or, I can just give you the bottom line. We were in the zone for the intermediate peak of the nominal 18-month cycle. We have been discussing the potential peak for a few weeks. All we needed was a catalyst. We never know what the catalyst will be – that is why we use stops.This time, some Russian hackers just hacked, captured, and are now ransoming one of our largest oil pipelines – demonstrating our vulnerabilities. It does not take a lot of imagination to postulate what might be next – perhaps part of the power grid? This morning, gasoline has popped over $5 per gallon in California. Add this to all of the rest of the inflation distortions currently underway in the economy. Inflation, without commensurate wage increases, destroys the purchasing power of our most vulnerable, lower-income citizens. The shifting sands have the potential to derail the recovery.The NASDAQ 100 has now rolled over, taking out its 50-day line. The S&P 500 is rolling over this morning, taking out its 21-day line. With the news of the pipeline ransom mid-day yesterday, money stopped rotating and started exiting the market generally. The price action triggered our stops, taking us back to 100% cash, and that is where we find ourselves this morning.I think it fair to assess that the 18-month cycle peak has arrived, and the more probable profits likely will be made shorting stocks and rallies for the next few months.As bad as these events may be, it is time to profit from the ensuing decline.As always, stay tuned.A.F. Thornton
Navigator™ Signals for Day Traders Navigator™ Signals for Swing Traders View from the Top – Sell Signal May 10, 2021 AF Thornton 0 Comment The NASDAQ 100 and monsters of tech were hit hard today on a spike in 10-year U.S. Treasury rates. The downtrend accelerated on announcement of a major pipeline shutdown do to a cyberattack. As I warned this morning, the 30% tech weighting eventually spilled its negative returns into the S&P 500 mid-day, and caught the Russell 2000 as well. While there were more advancers than decliners, and more positive than negative sectors, the tech math overcame the gains from the other sectors and S&P 500 index members, at least for now. We are stopped out of all positions and back to cash. A.F. Thornton
Navigator™ Signals for Day Traders Navigator™ Signals for Swing Traders View from the Top – Interim Stop Alert May 10, 2021 AF Thornton 0 Comment Disappointingly, the selling in technology has accelerated mid-day, partially driven by a spike in 10-year treasury rates. If the S&P 500 breaks Friday’s low, we could be left with a failed rally and our stops would be triggered. Stay alert, as I will make a final decision about 15 minutes before the close.This also qualifies for one of those WWSHD moments. When what should happen doesn’t is often a signal that the market wants to go the other direction. We will see what the market decides to do before the close.
Navigator™ Signals for Day Traders Update 1 – Pre-Market and Morning Outlook May 10, 2021 AF Thornton 0 Comment The divergent, negative behaviors in the NASDAQ 100 (QQQ) and technology generally (XLK) this morning are holding back the S&P 500 (SPY) and Russell 2000 (IWM) from making much progress – but the NASDAQ profits are not leaving the market. Instead, they are rotating into other sectors. These are not recommendations to buy, but unofficially I picked up some at the money calls in Southwest Airlines (LUV), Disney (DIS), and Expedia (EXPE). I used a screen to look for names in volatility squeezes. Of course, they also have to have liquid enough options for the bid/ask spreads to be reasonable. These names are all in volatility squeeze bases. The retail sector fund (XRT) appears poised to break out of an ascending triangle. The Energy sector fund (XLE) is at a new post-pandemic high. Both the S&P 500 and the Russell 2000 benefit from continued leadership in Financials, but the technology selling needs to abate to let the S&P 500 continue to break higher. The Russell 2000 (IWM) is also moving to break out of a nice volatility squeeze and basing pattern – but still has a bit of a climb to get there. Due to its weighting, and as mentioned this morning, the negative behavior of the NASDAQ 100 has the potential to derail the entire rally, but that is not the most likely outcome. Stay tuned. A.F. Thornton
Navigator™ Signals for Day Traders Pre-Market Outlook May 10, 2021 AF Thornton 0 Comment Monday Morning - 5/10/2021 Keeping in mind the negative divergence in the NASDAQ 100, overnight distribution in the S&P 500 is neutral to bullish, with the S&P 500 achieving a new all-time high in the Globex session. Overnight action indicates acceptance of Friday’s strong closing prices thus far.Nevertheless, we will be opening inside Friday’s range, and in the middle of the overnight range, so there is not much to guide us as to direction at the open. In the circumstances, I would rather trade later than sooner.If sellers get some control this morning, I will be looking at the top of the single prints at 4912 and, of course, the roundie at 4200 as lines in the sand for positive or negative tone change. The index should find support around those levels, and failure to test those areas also should be carried forward as bullish. The next support level would be 4180 at the base of the spike – but reaching down to that level today would result in a slightly negative short-term bias.Price action above Friday’s high has the potential to continue the rally. Of course, monitor for continuation, keeping the NASDAQ 100 weakness firmly in mind. Technology is 30% of the S&P 500 index and can stunt the rally with such a large divergence.As mentioned in the View from the Top, there are more stocks breaking out of volatility squeeze bases than I have money to invest. Those might be good alternatives if the rotation from growth to value continues to distort the indexes.A.F. Thornton
Founder's Trading Journal View from the Top May 10, 2021 AF Thornton 0 Comment Week of 5/10/2021 - Navigator Swing Strategy 100% Long We triggered an algorithm buy signal last Friday morning at 4208 on the S&P 500 index. Given the consolidation in most indices, they are nearly all firing long out of volatility squeezes, a positive boost to a normal pivot higher from a correction. In this case, we were coming off the 80-day cycle low last Tuesday. From all appearances, this will be the final rally before the 18-month cycle peak begins to influence the markets. With the indices firing long out of these volatility squeezes, a number of stocks are following suit and breaking out of bases. Viewing a scan last night, themes include travel and leisure, industrial (infrastructure beneficiaries), and retail. Some examples (without recommending the same) include Southwest Airlines (LUV), Williams-Sonoma (WSM), Caterpillar (CAT), and Deere (DE). Seemingly, technology and growth stocks are suffering from profit rotation into the new “value” themes, as we can observe the NASDAQ 100 lagging the rest of the market. We have experienced this push/pull rotation several times since the new year commenced. You need to adjust your sails accordingly. I also believe that the NASDAQ 100 and growth stocks generally are losing ground as investors lock in substantial trailing profits and capital gains in anticipation of capital gains tax increases. The Founders Group focused on the S&P 500 futures as our vehicle of choice for now, as the index is the best compromise of the current themes. With the futures leverage, we can achieve all the return we need. Of course, you can use the S&P 500 Index ETF (SPY) as a straight cash investment or options on the SPY as an alternative to the futures, depending on your risk tolerance. Nothing has changed much in the big picture. Inflation continues to present as the sovereign debt crisis builds to a crescendo. On a positive note, however, many global economies (including Europe) have not even opened up yet, so there is more recovery growth ahead of us. We will use a 5-day EMA as our stop line for now. I will issue a sell signal if we see a material close below the EMA. My target for the S&P 500 this week will be 4280, at which point I will reevaluate our position. There is a plausible target of 4500 before this last rally leg finishes, but we will see how it goes. A.F. Thornton
Navigator™ Signals for Swing Traders Buy Signal Update – 5/7/2021 May 7, 2021 AF Thornton 0 Comment The S&P 500 futures just barely tagged 4216 and then pivoted almost instantly. As predicted, the index is moving sideways today. Do your best to try to enter around the 4215 WEM high level if possible. Otherwise, you can try for a dip early next week. It might make sense to wait toward the close. On uptrend days, the market often curls back over during the last hour. FOMO (fear of missing out) might nip that in the bud today, but patience is usually rewarded.Tech continues to be noticeably weak, we will see how the rest of the day goes, but rotation favors cyclical and inflation beneficiaries. Notably, the April employment report missed the estimates by a country mile. 200,000 new jobs versus estimates of 1.5 million. Someone should get fired for that miss.Wages were up 0.8 % – more evidence of inflation. When wages begin to respond, it will be hard to put the genie back in the bottle.Have a great weekend.
Founder's Trading Journal Update on Emails May 7, 2021 AF Thornton 0 Comment Sometimes I spend half of my time trying to outsmart software. As well, living in front of nine computer screens can put me in a geeky netherworld.On mornings, I am in an understandable rush to get the pre-market commentary out – but as close as possible to the open for the overnight analysis to be accurate and timely. In a rush, I often make mistakes, typos, or like this morning – digit errors.Once the outlook is distributed, I then go back to proof and edit one more time. So if you see a mistake, it is often corrected already, and you can see this by refreshing your browser.Up to this point, the content snippet in the email has not been correctable – even if the content has been corrected on the website. So I eliminated the snippet today. This email is the new format. Click on the Castle Rock image or the “Click Here for New Post” button to read the update.Make sure our return email is whitelisted – so nothing gets stuck in your spam folder. Already, my email does not like the new image and spammed me.A.F. Thornton
Navigator™ Signals for Swing Traders New Buy Signal – 5/7/2021 May 7, 2021 AF Thornton 0 Comment Buy signal corrected – buy is 4208, not 4108. The Navigator swing strategy has triggered a new buy signal at 4208 on the S&P 500 index futures. It is recommended that the buy signal be executed towards the close today or on a return to 4215, where weekly options expire. The Founders Group is 100% invested using the S&P 500 Mini-Futures Contract. Risks are extremely high, so be very, very careful and use stops. You can use other indices or sectors by analogy. Due to the Weekly Options Expiration at around 4215 on the S&P 500 index, the market-makers will likely drive the price back down toward this level before the close. If so, that would be a good place to get positioned today. If the market makers cannot drive the price lower, an unlikely outcome, then wait for a dip on the one or two-hour chart to get involved – even if it is next week. The point is, we are now buying dips as we enter this last phase of the rally before a larger correction unfolds. A.F. Thornton