Archives September 2021

Steady selling all week in this first business week of the fall season, together with a close below the 21-day EMA on the S&P 500 index, is cause enough for the Founders Group to return to an all-cash position, exiting all of our calls in the XLF, XHB, XLE, IWM, and QQQ. While these positions are not violating their 21-day lines, we appear to be heading into the 80-day cycle low a bit early. We are getting little, if any, lift from the 20-day dip. These other sectors are likely to join the fray, and we don’t want to wait until the last minute. We will regroup over the weekend.

AF. Thornton.

There is not much change from yesterday. The market is trying to pivot from the 21-day EMA, similar to the past few months at about a similar point in time. As a side note, don’t forget to switch to the “Z” contract today.

If the 21 holds, the market likely will make an attempt at the old highs. If not, a larger correction is underway. In any event, it is all about the Fed and Fed policy. The liquidation break yesterday was driven by Fed comments, and even the European central banks are weighing in with rollbacks.

Sentiment remains negative enough that the market could hold the 21. But there also is a negative pell over the country given the Biden speech yesterday and what it portends in terms of authoritarian overreach. It is almost laughable now that the Democrats accused Trump of being a dictator. I think they call this “projection”

The problem is that in a time of supposed labor shortages, a lot of people could refuse jobs if they are required to take this experimental vaccine in order to work. We don’t yet know the potential impact of these mandates

Stay tuned and focus on the 21-day line today as your threshold.

A.F. Thornton

The market is following the same path as the past several months thus far. It shoots up from the 50-day line, stalls, and then dips into the 21-day line around the 10th trading day. If the path is to continue, then we shoot up again for a few trading days into a new high, before dipping into mid-month options expiration.

So the key references today are yesterday’s low at 4492 and settlement up around 4511 or so. Acceptance and/or a close above 4511 keeps the bull case alive. A close below 4492 changes the tone considerably.

Central bank chatter both here and across the bond continues to bubble up under the surface. But the economy appears to be slowing, which takes the pressure off tapering.

A.F. Thornton

I consider yesterday to be the first full business day after summer. Except for the Tech Monsters, there was quite a bit of broad-based but minor selling.

Concerning our market proxy, the S&P 500 futures, we tested the balance area low at 4410.75 yesterday and breached it overnight. But we are back into balance at this writing. So sellers did not pile in, at least overnight, giving us a WWSHD signal.

Also, when the balance area is breached and the price returns into the range, it frequently travels to the other end, which would be the all-time highs. Anyway, as this was also the down mode of the minor, 10-day cycle – nothing significant has been violated yet.

But, key levels have shifted focus to areas below the current price as any movement below yesterday’s low would be significant.  You have the overnight low at 4497, also in the realm of the roundie at 4500. The top of the single prints is at 4492. Balance Rules remain in play for the larger range (4410.75 to the all-time high). 

The concept “When What Should Happen Doesn’t” applies to today’s session.  Failure to find acceptance below 4410.75 keeps things status quo even with the overnight price exploration since we don’t “count” that towards structural repair or change.  

In the bigger picture, today puts us exactly two weeks from the next FOMC announcement.  The focus will start to shift towards that meeting gradually.  Thus far, sellers have been noticeably absent in this market, and there is no obvious catalyst that would attract them until the meeting.  Sector rotation continues to keep the overall market healthy.

A.F. Thornton

I am still not quite set up after a temporary cross country move, but should be fully operational later today.

Meanwhile, the market continues to climb the wall of worry. Again, I am watching both sentiment and momentum carefully. Breadth improved last week and is becoming less of a concern.

More concerning is a two-fold problem developing in China. First, they have been lying about their growth and GDP. No surprise there. I recall the old Soviet military parades. We now know that the missiles, etc. were fakes – fancy balloons.

But the Chinese commercial real estate market is teetering. Bonds of their largest real estate developer collapsed on Friday, halting the Shanghei exchange for a time. A lot of other Chinese bonds will suffer in sympathy.

These markets are like a pile of kindling. All it takes is a match to light the fire. We don’t know what the catalyst will be, but likely it will come from a quiet, unexpected corner of the world. So I am watching events carefully.

Meanwhile, stick to the balance range as your bull/bear guide. Closing above 4550 is bullish, below 4530 is bearish. The target remains 4600

More details to follow later today.

A.F. Thornton