Founder's Trading Journal Afternoon Notes – 6/30/2022 Jun 30, 2022 AF Thornton 0 Comment S&P 500 Index Futures Intraday Chart - 2-Minute Candles - The Walkaway Trade Good Afternoon:I mentioned the “Walk Away” trade in the Morning Notes – refer to them for the details.And right on cue, the market peaked at lunch and sold off the rest of the day.I cannot believe that the trade still works. I started taking this trade 25 years ago. Even with all the computers, and the sophistication of today’s modern trading world, I guess money managers are still people, and they don’t change.Speaking of tendencies, for the past 21 years, tomorrow (the first trading day in July) has far and above been the most consistently bullish day of the year. And the good news is that the bullish tendencies typically spill into the next nine trading days. You may have heard this referenced as the “Summer Rally.” And if we are lucky enough to have it present – the rally may be the last clear chance to avoid the accident promised this Fall.When you have witnessed multiple crashes in September and October over the years, one begins to believe that it is called the “Fall” season because of the stock market – not the leaves.But even the “Summer Rally” requires context. We are still in a bear market. I found it more natural to take a short trade on the “Walk Away” today, but going long on a seasonal tendency is a bit more difficult. It does not seem to fit the current narrative.And if the market waxes and wanes in the next ten “reliably bullish” sessions, that tells us something too.Whatever your setups may be, never forget WWSHD (When What Should Happen Doesn’t). Always treat the failure of a high probability setup as an indicator in and of itself.The average trader gets mad and starts yelling at her computer screens.The master trader immediately recognizes the contraindication and fully reverses the trade, rather than just abandoning it in frustration.We had another good day in the Trading Room today. We took two very conservative trades, given the distractions of month-end and quarterly options expiration.We started with the gap-and-go trade (per Gap Rules) and then aligned with Money Manager window dressing leading up to the Walk-Away trade.They always say, “If you can’t beat ’em, join ’em.”We picked up 19.5 S&P 500 points before closing shop after the first two hours.Room Members got the text alert when I decided to buy a put option at the Walk-Away peak on the chart above.I will have more on how we will prepare for next week in tomorrow’s AM live session at 8:30 AM EST on YouTube and Rumble. I think it fair to say that we closed out June with an ugly monthly candle.The point I will make is that you need to put your big boy/girl/whatever pants on next week as it will be a wild ride when we return from the three-day weekend on Tuesday.Stay Tuned, and Well,A.F. Thornton
Founder's Trading Journal Morning Notes – 6/30/2022 Jun 30, 2022 AF Thornton 0 Comment S&P 500 Continuous Index Futures - Daily Candles - 2000-2003 Bear Market Good Morning:Review yesterday’s Morning Notes again as not a lot has changed.As highlighted yesterday afternoon, the market pinned at the WEM low for one of the narrowest trading range days of the year.What worries me this morning is that Dealers were getting out of their WEM positions early yesterday as the market has been pummeling them with 2-Sigma moves four out of the last five weeks. Since we already had a 2-sigma move on the daily chart Tuesday, I am not surprised the Dealers might be running for cover.But will Dealers still defend the WEM levels – which expire as they normally would tomorrow- instead of with the rest of the options today?It is the last day of June, the last day of the second calendar quarter, and the day monthly and quarterly options expire (with the weeklies still expiring tomorrow).Today is not a good day to day trade – but here is today’s Sandbox if you choose to try: S&P 500 Index Futures Intraday Chart - 2-Minute Candles - The Walkaway Trade Note that the market will open below the WEM, and the options market priced the DEM at plus or minus 57 points today, for a range between 3669 and 3788.You would think that the options market could get it right on a day with so many options expiring – but the overnight market at this writing is already trading at 3760.75 – below the DEM low!That is also why I have built a Gamma adjusted database that calculates an expected move from the regular session open rather than yesterday’s close.I would set the Sandbox at plus or minus 50 points from today’s regular session open.I am not vouching for my sanity, but in the old days, we used to place the “walk-away” trade at the end of the calendar quarter.On the final calendar quarter trading day, the portfolio managers tend to run out of money after window dressing and marking up stocks in the morning.So, by noon to 1:00ish Central (Chicago) Time, the S&P 500 is susceptible to declining into the afternoon.We would look to set up a short position in the early to midafternoon as the professional money managers “walk away,” leaving the equities market ready for an afternoon fade.As with many trading setups, one still has to be aware of this tendency in context.And the context here is a rapidly deteriorating bear market – with a full retest of the June 17th low (3639) a bit more probable now than the potential “C” wave higher I discussed yesterday.I put the 2000-2003 bear market at the top of this writing to illustrate that leading diagonals, such as we see on the chart now, don’t always lead to big rallies.Here, our oversold market could stage a successful retest of the June 17th 3639 low and rally to 4000 from there, but bear markets are difficult to predict.I will be in the Trading Room for the first few hours today calling balls and strikes – but it is unwise to day trade today – unless something obvious slaps us in the face.Like the walkway trade?Today’s Red Letter economic reports will complicate matters – look for unemployment claims, consumer spending, consumer income, and the PCE inflation statistics (Fed Chair Powell’s favorite inflation gauges) all pre-market.Wait until next week! We return from the July 4th holiday weekend into a cluster of June reports sure to keep the volatility high. More on that tomorrow.Overnight trepidation about these reports may have set the tone for a Gap down at the open.Of course, any potential Gap down at this writing could easily reverse higher on one of these reports.And just to trip up any opening trade, the Chicago PMI comes out 15-minutes after the open.And, speaking of the open, overnight inventory is net short, and the market would open with a True Gap down at this writing, triggering Gap Rules this morning.There is a time to go long, a time to short, and a time to go fishing. If I did not need to spend a few hours in the trading room today, I would be going fishing.A.F. Thornton Click to Learn More About Navigator™ Trading Subscriptions Share with Friends and FamilyWord of mouth is crucial for growing our trading community and providing education and support for your trading decisions. Please feel free to share this with your friends and family if you find the information beneficial. Facebook Twitter Email LinkedIn
Founder's Trading Journal Afternoon Notes – 6/29/2022 Jun 29, 2022 AF Thornton 0 Comment Good Afternoon:We are working on the videos for today’s live sessions. The microphone still sounds a bit raspy so we are working to correct that. By next week, video production will be a finely tuned machine.As the proverbial saying goes – do you want the good news or the bad news first?Ok, let’s start with the good – the S&P 500 finished MASSIVELY unchanged today, leaving this morning’s narrative intact.Options expiration already asserted itself today, which is why the market chopped sideways in a kill zone!As you will see from the 2-minute chart below (with my scalping bands), all the market did today was chop around the Weekly Expected Move in a tight range as Dealers defended the level all day. S&P 500 Index Futures - 2-minute Candles Reflecting Today's RTH Session. And some more good news – the WEM held instead of getting blown out in 2 SIgma moves as it had in four out of the last five weeks. Normalcy ahead!And the bad news is there was little to no money in it unless you wanted to hyper manage in the one or two-minute time frame. I don’t call it a “kill zone” for nothing.And now you know why I typically sit these days out – and tomorrow has the same potential as pointed out this morning.I am not aligned either way and have no dog in the hunt.Just tell the dealers and money managers to let it loose on Friday for a nice, pre-holiday rally or more declines – dealer’s choice.See you in the new Trading Room bright and early, about a half-hour before the open!Likely, we will be observers only if there is another day like today. I will call balls and strikes anyway, so you still learn something.A.F. Thornton Click to Learn More About Navigator™ Trading Subscriptions Share with Friends and FamilyWord of mouth is crucial for growing our trading community and providing education and support for your trading decisions. Please feel free to share this with your friends and family if you find the information beneficial. Facebook Twitter Email LinkedIn
Founder's Trading Journal Morning Notes – 6/29/2022 Jun 29, 2022 AF Thornton 0 Comment S&P 500 Index Continuous Futures Daily Charts - Key Levels and Trading Ranges Good Morning: The Narrative Always monitor the Current Market Thesis for the big picture – it hasn’t changed since January.Until otherwise negated, this is a generational, mean-reverting bear market that will take us to the middle of the 100-year channel (SPX 2500) over time.The first bear leg (January-June) appears complete – It is a leading diagonal into the June 17th low at 3639 on the futures, behaving somewhat similarly to the 2000 bear market top.The S&P 500 is now in a retracement rally, with the potential to retrace about half the January to June decline. The 2007-2009 bear is a good analogy for a similar retracement that occurred at this stage and time after it topped..What is unique and challenging about this bear is the plethora of exogenous, global events typical of a “Fourth Turning.” Any of these events can stop a rally dead in its tracks.When you think about it, the 2000-2003 bear was primarily about mean revbersion from a bubble. The 2007-2009 bear was primarily driven by a financial shock. The current bear market we are experiencing has both bubble and financial shock characteristics.In other words, there is something to be learned by carefully studying both of these bear markets.But for now, do not get married to any particular scenario or outcome. When in doubt, favor the bear trend.This retracement rally is aligning with the seasonally strong summer rally period. The next 10-days are typically the strongest and most often repeated uptrend days of the year.This week, the WEM Sandbox is 3815 to 4015 on the futures. We are in negative gamma which means high volatility. The relevant lines in the sandbox this week are the 5 and 21-day lines. In addition, there is the formidable resistance from 3920 to 3950 we pushed down from yesterday. There is strong breakout support underneath us from 3775-3788.The Navigator Algorithm gave a new buy signal on the daily chart at last Thursday’s close or 3762.25. The buy signal is still intact, but we protected our gains in light of the volatility with a rising stop. We stopped out Tuesday at 3788.25 for slightly more than a 100-point profit. The next swing trade from the Algorithm is something we call a “cradle trade.” I cover that in the Trading Room., but you can see the trade illustrated in the chart immediately below. S&P 500 Index Continuous Futures Cradle Trade Today's Issues We pushed away from yesterday’s key resistance zone which peaked at 3950 and created some nice short trades in the room.Key support today is now at the previous breakout level around 3788 and possibly as low as 3775.We could also see support from the 3800 roundie and WEM low at 3815. Since there is nothing to guide us at the open, let the market settle in before making any big commitments.Trading into Thursday’s month-end, quarter-end, and monthly options expiration sometimes results in odd behavior and unreliable market structure due to expiration, mutual fund rebalancing, and money manager window-dressing.It is best to stick to day trading with rigorous discipline today and wait until next week before considering swing trades. I do not recommend trading tomorrow,We will be in the Trading Room tomorrow (Thursday), but as it is that final day of the month and quarter, any trades must be well-considered if we trade at all. Nevertheless, it is always productive to observe.The most important new and developing issues are a big, deflationary spiral in consumer goods due to bloated inventories, while food and energy prices continue to rise. It will be Christmas in July at Walmart, Costco, Target, etc. – so get ready for bargains.Given recent events, the “Groupthink” of higher inflation makes no sense right now. Remember, government reports reflect stale data that is a month to two months old. The recent 40% collapse in copper, wheat, lumber, and other base materials is pointing to a short-term peak in inflation – assuming these markets have it right.In that regard, and with quarterly earnings approaching, the bad news is bad news again. Bond yields may drop as inflation wanes, and the Fed can ease up. But they also reflect a rapidly deteriorating economy which is bad for corporate earnings.The change will soon hit the market as it struggles with these two variables – potentially lower rates and waning earnings associated with a recession.Always remember, no matter how brilliant anyone sounds, the truth is nobody really knows what comes next. Never forget that.Our first clues will come from the bond market. Then it will spill over into stocks – which are affected by interest rates and earnings.The price action will tell us what to do next, as it always does. For now, we will stick to the day time frame – but watch for the cradle “swing trade” devloping on the daily chart.Crypto is still treading on thin ice and could cause further market dislocations and contagion. It still has the potential to lead a complete crash and meltdown in these precarious markets.Any new lows in Junk Bonds (JNK or HYG) would put me on high alert. These bonds are rapidly aproaching those very June Lows. Red Letter Reports Yesterday’s Consumer Confidence and expectations report appeared to reverse the market’s early uptrend, and the market went into a falling Gamma spiral, never looking back.1st Quarter GDP and inflation were revised this morning – and the revisions went in the wrong direction.Fed Chair Powell is speaking now, and we have Fed Speakers over EST lunch. Be aware and careful. Today's Sandbox and Master Chart S&P 500 Index Continuous Futures Hourly Chart and Sandbox Today’s Sandbox is above.There is only one task today – get aligned with the trend (or lack thereof) as soon as possible.There is only one issue today – will the breakout support at 3775-3788 hold, allowing a “C” leg higher into the rocket pocket above 3910 to take us to 4000. The market couldn’t do it yesterday.If not, then we are headed for a full retest of the June 16th low, and I would consider the weak retracement of the leading diagonal ominous – a WWSHD moment.You can see a failed diagonal leading the 2000-2003 bear market in the chart immediately below. I don’t know what the market will do, but I know how to get aligned.You will too if you join us in the Trading Room tomorrow.A.F. Thornton Click to Learn More About Navigator™ Trading Subscriptions Share with Friends and FamilyWord of mouth is crucial for growing our trading community and providing education and support for your trading decisions. Please feel free to share this with your friends and family if you find the information beneficial. Facebook Twitter Email LinkedIn
Founder's Trading Journal Afternoon Notes – 6/28/2022 Jun 28, 2022 AF Thornton 0 Comment Good Afternoon:Today was a disappointment. Despite my best hopes, the market rejected the price at the key inflection point I have discussed this week, between 3900 and 3920.And the daily bar shows a preliminary trend reversal as the market closed well below yesterday’s low.The Navigator Swing Strategy stopped live in the trading room today for a 100-point (S&P 500) gain from last Thursday’s entry.Today was our first trading day in the room. We took a successful short trade off the opening range trade.After that, we shorted a couple of bounces successfully, And then we had one minor loss going long from the daily 21 (mean).We will be back in the room on Thursday morning.Today’s action was somewhat ominous, negated Friday’s follow-through day, and could result in a full retest of the June low.I will have more to say in the morning after I have a chance to review everything.Guess what? It is still a bear market.Stay lean, mean, and flexible.A.F. Thornton
Founder's Trading Journal Morning Notes – 6/28/2022 Jun 28, 2022 AF Thornton 0 Comment This is a chart of the S&P 500 INdex Futures with Today's Key Levels Marked Our working thesis is that the first Bear leg (1-down) is complete at the June low and is a leading diagonal much like the start of the 2008-2009 Bear. The S&P 500 is likely to retrace 50% (4150) to 61.8% (4338) of the January to June decline in a (2-up) wave retracement. Again, the 2008-2009 Bear is the best analogy. Be sure to look at the Current Stock Market Thesis, which is a complete analysis of the Big Picture. This retracement rally aligns with the seasonally strong summer rally period, quarterly rebalancing, and monthly options expiration (Thursday). This week, the WEM Sandbox is 3815 to 4015 – Today, the DEM Sandbox is 3855 to 3965. The Navigator Algorithm gave a new buy signal on the daily chart at last Thursday’s close or 3888.75. The short-term trend and context is up. For the most part, we want to look for long trades this week on pullbacks as long as the rally prevails. But we are still in a bear market in the intermediate trend and trading right on the Volatility Trigger at 3902. Below the Volatility Trigger, we are in a negative gamma regime – dealers still must sell into declines and buy into rallies, exacerbating and lengthening the move in both directions. Above 3902, Dealers will sell rallies and buy declines, reducing volatility and resulting in “mean reversion” price behavior. The key inflection point today and for the rest of this week’s sandbox is the super high-volume node and key cluster on the daily chart at 3900-3920. The node is a significant hurdle to conquer coming from either direction. There are significant air pockets above and below the node, allowing the market to move freely (almost unobstructed) through the zones. The 21-day line (mean) at 3902, last week and Friday’s high at 3920, the 50% retracement of the previous down leg at 3904, and the midpoint of June’s monthly bar all cluster here. It would be short-term bullish if the market could stay above these levels, and we could look to them as support. The opposite is also true. If this rally fails early, this is the level to push it back down. The last few sessions appear to be forming a bullish flag on the daily chart. Overnight traders pressed the top and bottom of yesterday’s range, running the stops, and it looks like we will open towards the top of the range this morning. If the rally fails here, the relatively minor support in the air pocket below is Friday’s POC at 3890, its midpoint at 3875, the 5-day line at 3856 (also the low volume node of the pocket), Friday’s breakup candle low at 3831, and then the WEM low at 3815. Though ostensibly outside this week’s projected range, the air pocket ends at 3761, and the next super high-volume node on the daily chart is 3688. My best judgment is that the market is more likely than not to use the bullish seasonal bias, together with the tailwinds associated with this Thursday’s month and quarter-end, to push up to the WEM high this week at 4015. The scant resistance traveling north to the 4015 WEM high lies at the bottom of a gap around 3960, and the downtrend supply line from March at about 3995 (tracking close to the falling 50-day line). (See chart above). The market has to move higher almost immediately to maintain the “V” reversal, or a retest of the June low will happen sooner rather than later. The video from this morning’s live session is in editing and will be posted later today. I will be trading live in the Trading Room this morning for the first few hours of the session. Good Luck Today! A.F. Thornton
Founder's Trading Journal Afternoon Notes – 6/27/2022 Jun 27, 2022 AF Thornton 0 Comment Recording - YouTube Livestream
Founder's Trading Journal Morning Notes – 6/27/2022 Jun 27, 2022 AF Thornton 0 Comment This is a daily regular session chart of the S&P 500 Index Futures with the Navigator Algorithm Signals and System Status. The Day and Week Ahead Good Morning:We had a good forum on YouTube Live last night, but the video recording did not come out well, so I deleted it. I am working on a solution – but I think I ran too many monitors, creating a feedback loop.We will hold the first “live” version of Morning Notes on YouTube this morning from 8:30 to 9:00 am EST. The link to our YouTube Channel is here.The first Bear leg (1-down) is complete – It is a leading diagonal much like the start of the 2008-2009 Bear Market.The S&P 500 is now likely to retrace 50% (4150) to 61.8% (4338) of the January to June decline in a (2-up) wave retracement. Again, the 2008-2009 Bear is the best analogy.Be sure to look at our current Market Thesis (to your right in the “Categories” menu) for a complete Big Picture analysis.This retracement rally aligns with the seasonally strong summer rally period.This week, the WEM Sandbox is 3815 to 4015 – Today, the DEM Sandbox is 3850 to 3975.The Navigator Algorithm gave a new buy signal on the daily chart at last Thursday’s close or 3888.75. The short-term trend and context are up. For the most part, we want to look for long trades this week on pullbacks as long as the rally prevails.But we are still in a bear market in the intermediate trend and trading on the volatility trigger at 3905.Below the volatility trigger, dealers still must sell into declines and buy into rallies, exacerbating and lengthening the move in both directions.Above 3905, Dealers will sell rallies and buy declines, reducing volatility and resulting in “mean reversion” price behavior. Key Levels and Issues Today The key inflection point today and for the rest of this week’s sandbox is the super high-volume node on the daily chart at 3910-3920. The node is a significant hurdle to conquer coming from either direction. There are substantial air pockets above and below the node, allowing the market to move quickly, regardless of the direction it chooses.Coincidentally, the 21-day line (mean) at 3903 is close to the super high-volume node, as is last week and Friday’s high at 3920. It would be short-term bullish if the market could stay above these levels, and we could look to them as support. The opposite is true if this rally fails early, as this is the level to push it back down.Overnight traders have already helped the bullish case, first testing 3895 but later besting Friday’s high (bullish) and trading as high as 3948. As a result, the S&P 500 could open with a True Gap higher. If so, Gap Rules are on the table.If last week’s rally fails here, the relatively minor support in the air pocket below is Friday’s POC at 3890, its midpoint at 3875, the 5-day line at 3856 (also the low volume node of the pocket), Friday’s breakup candle low at 3831, and then the WEM low at 3815.Though ostensibly outside this week’s projected range, the air pocket ends at 3761, and the next super high-volume node on the daily chart is 3688.My best judgment – the market is likely to use the bullish seasonal bias and tailwinds associated with month and quarter-end to push up and through the air pocket into the WEM high this week at 4015.Going north to the 4015 WEM high, the index will encounter resistance at the 3960 Gap bottom and the downtrend supply line from March at about 3995. The falling 50-day line tracks close to the downtrend line.I am noting that there was still a lot of put buying on Friday and the options vaccum into 4000 is filling in. More and more 4000 looks like a realistic target, but it is getting harder to target anything above that level for now. Red Letter Issues and Caution We are still in a bear market until proven otherwise. So don’t hold any opinion too tightly.Don’t forget that there are exogenous events all over the world that could rear up at any moment. Do not trade without stops.Today, we have durable goods coming out pre-market and existing home sales about a half-hour after the market opens. Some European Central Bank speakers give presentations later in the day, but otherwise, today looks quiet on the home front.Recall that Friday’s existing home sales report threw the market for a loop as it was much higher than anticipated. I was about to short a rising wedge when the news came out, and the market ripped higher. Be careful.Friday was a range expansion day, and today could follow suit with scant resistance in the air pocket above us. The street has been quite short lately, and Money Manager FOMO leading into the end of the calendar quarter and monthly options expiration on Wednesday could provide tailwinds.Nevertheless, contraction typically follows a large expansion day like Friday. Consolidation could lead to balanced, responsive trading in today’s RTH Session.While I generally get all the information I need to know from the S&P 500 price action itself, Junk Bonds (HYG or JNK) can be a good leading indicator for stocks. I would shift my short-term stance to bearish if Junk Bonds fell to a new low on the hourly charts. Set an alert to keep track of this.Crypto is still trading on thin ice and could cause market dislocation and contagion in a meltdown. Keep an eye on it.It is nice to see some green on the screen for a change. Let’s enjoy it while it lasts. For all we know, the bottom could be in for a “cyclical” bear, and the market will march on to new highs. The truth is we don’t know. We never know. Our job is to read the tape and follow it wherever it leads.A.F. Thornton Click to Learn More About Navigator™ Trading Subscriptions Share with Friends and FamilyWord of mouth is crucial for growing our trading community and providing education and support for your trading decisions. Please feel free to share this with your friends and family if you find the information beneficial. Facebook Twitter Email LinkedIn