Archives June 2022

Are You Serious About Learning to Trade? I Mean Really Serious? The Time is Now!

  • Today is the first day of the rest of your life; what kind of life will it be? As the famous pastor and author Joel Olsteen often says, will you be a victim or a victor?
  • Learning to trade gives you and your family freedom to live on your terms – anywhere you want (or might need) to live. Why might that be important?
  • We can no longer live in denial. You see what is happening all around us. I am sure when I first mentioned things like the “World Economic Forum,” “Great Reset,” or “Fourth Turning,” it sounded a little out there. But now you realize I was right. Everything is at stake – our assets, values, way of life, and even freedom.
  • If you don’t see it yet – you can trust me that the WEF is bound and determined to drag us into war with Russia. Both Russia and China oppose the WEF’s Great Reset and its nonsense. So Russia and China’s leadership have to be eliminated – according to Davos anyway. 
  • The WEFs process to undermine Russia and accomplish regime change, led by George Soros, was well underway in Ukraine until Putin finally put his foot down. 
  • The Davos crowd and other U.S. Neocons have no problem sending our children and grandchildren into a war with these superpowers to achieve their ends. This is the first time in my life when I have heard discussions like – “well, you know a nuclear war is survivable.” Are you kidding me? Is that why Barrack Obama is building a bunker on his Martha’s Vineyard Estate?
  • Recently, Canadian Prime Minister Justin Trudeau seized the bank accounts of the truckers opposing the mandatory vaccines in Canada. Not long after, he has now proposed to disarm all Canadians. Whose side do you think he is on?
  • If you don’t think that could happen here, think again. Have you heard about the Department of Homeland Security’s new “Disinformation Governance Board?” Even though they let the “Mary Poppins” like character Nina Jankowicz go after all of her partisan videos surfaced, the Board is alive and well, like something straight out of George Orwell’s 1984. 
  • The Board is already proposing Canada-inspired rules allowing banks, with or without the Department’s direction, to “freeze” bank accounts of so-called “purveyors of misinformation.” 
  • We all know what this means. Suppose you oppose the current regime, good luck with your assets. Is this how you want to live? Is this how you want your children and grandchildren to live?
  • And how about those vaccines?
  • Joe Biden isn’t finished. Do you know why he is not worried about the upcoming midterms? Read Molly Hemingway’s new article “Yes, Joe Biden is Hiding His Plan to Rig The 2022 Midterm Elections” in the Federalist. Molly is mainstream – she is no nut case. Is this the kind of country where we want all of our assets?
  • Say the wrong thing, speak out against the regime, and your bank accounts are frozen – not by the government but by a private bank. What do you do?
  • And wait until the government converts us to digital currencies. You and your family can be starving at the flip of a switch.
  • In less than 18 months under the Biden Administration, over 1.5 billion people have aligned against the U.S. and its Allies under the BRICS alignment (Brazil, Russia, India, China (PRC), and South Africa).
  • The BRICS’ sole aim is to challenge the current global order and U.S. hegemony. Understandably so!
  • Let’s face it; the West is a mess under Davos-influenced rule.
  • Down to the U.S. Military, we are allowing ourselves to drink the woke Kool-Aide – obsessed with nonsense like pronouns, gender, controlling the weather, adopting dark-age energy systems, and all manner of ridiculous political correctness. 
  • And It is almost unbelievable that our leaders have driven arch enemies Russia and China into a  new romance based on despising the West. That is quite an accomplishment. 
  • Our only prayer in the circumstances was to keep India on our side. Now we have lost them and Brazil to the new alignment.
  • In the meantime, Russia and China are staking their influence in our backyard (e.g., Mexico, Latin, and South America).
  • Friday, the BRICS countries announced a new global reserve currency backed by a basket of commodities, including gold, to compete with the U.S. Dollar.
  • It will take a long time to displace the U.S. Dollar, which is not inevitable, but the threat is real.
  • What would you rather own? A piece of paper and a promise from a corrupt and ideologically confused government with nearly $31 trillion in debt? How about Bitcoin (now down 60%) and backed by nothing? Doesn’t a BRICS collateralized currency make sense?
  • I could go on and on and have gone on long enough. The point is that you and your family need the freedom to choose where you will want to live out this period. 
  • Do you want to be stuck in a job? Maybe you shouldn’t have all your assets in one place. There are a lot of considerations.
  • In short, you don’t want to be a victim or be enslaved to a New World Order. So what is the answer?

Give Me The Time - And I Will Teach You How to Trade Anything and Enjoy All of the Benefits That Come with This Knowlege - Starting with the S&P 500 Index

We Will Build a Small and Exclusive Community of Like-Minded Traders and We Will Weather the Coming Storm Together
  • Admittedly, I am a bit of a geek. I started trading in my late teens. I have been trading and investing now as a professional for 35 years. 
  • I have read every book, made every mistake, washed-out accounts, and experienced all the ups and downs of life while I worked out nearly every bug until I perfected a swing-trading algorithm that consistently worked. I have made over $25 million sourced from that algorithm since 1987.
  • Branded as the Navigator Algorithm™,  you have seen that system return triple-digit annual percentage gains since we started this group in the fall of 2019. 
  • Since then, we have avoided the downdrafts of the March 2020 Covid Crash and recent Bear Market and have also taken advantage of them. 
  • The Navigator Swing Strategy signals have already achieved a 90%+ gain year-to-date. How many hedge funds, mutual funds, or money managers can make that claim, especially with this bear market?
  • But swing trading and the requirement to hold overnight positions are trickier in any bear market, including this one.
  • Over the past four years, my partner and I have been working on expanding the swing-trading system into the daytime frame and perfecting it. While the principles are the same as swing trading, the daytime frame is a lot noisier. 
  • It is like the difference between the scratchy AM band (Daytime Frame Trading) and quiet FM radio (swing-trading).
  • The March 2020 Covid Crash was somewhat easier to navigate than the current, slow-motion bear market. In the Covid crash, we had to get out in time and get back in. For the most part, we could then swing trade and hold for days, weeks, or even months at a time.
  • In the current bear market and volatility, it is not easy to sit tight, especially if you prefer to be long and not short the market. And that is where day trading makes sense – meaning that you are back in cash by the end of the day.
  • And taking it to the next level, it has often been the case that participating solely in the overnight futures session has delivered better returns than the regular U.S. session. We have a strategy for that too.
  • So today, without much fanfare, we start the soft opening of our new, comprehensive trading and mentoring services.
  • Allow me to take a moment and explain the new services. 
  • For $99 monthly, you can still receive all the basic communications and swing-trading signals. Nothing will change. 
  • However, for the $297 monthly Active Trader Subscribers, the Trading Room and many other benefits are now open. Swing Traders should read on as the free and public portion of the services are also available now.

The Week Ahead - Live on YouTube and Rumble

"The greatest victory is that which requires no battle." - Sun Tzu, The Art of War
  • You are invited to join me live every Sunday Night from 6:00 to 6:15 pm EST for my new program “S&P 500 Futures – a Quantitative Look at the Week Ahead.” This show will be recorded, available on the channels, and will be open to everyone.
  • I designed this live, 15-minute program to help traders build their trading sandbox and plan for the coming week.
  • At the conclusion of the program, BluPrint’s Navigator Active Subscribers™ will head over to our new “Members-Only” Trading Room for about 45-minutes to discuss the proprietary Navigator Algorithm™ trading edges for the week ahead. 
  • A comprehensive Q&A session will follow.

Morning Notes - Live on YouTube and Rumble

“If you know the enemy and know yourself, your victory will not stand in doubt." - Sun Tzu, The Art of War
  • Next, I invite you to join me on YouTube every morning from 8:00 to 8:15 am EST for my new program, “S&P 500 Futures – Trading The Day Ahead.” This show will also be recorded, available on the channels, and open to everyone.
  • The 15-minute live program will help traders build their trading sandbox for the day session ahead.
  • On Tuesdays and Thursdays, subscribers will then head over to BluPrint’s new “Members-Only” Trading Room to observe and interact with me while I trade the S&P 500 Futures live.
  • I will be calling out my trades and why I am doing them as we move through the morning session, generally concluding as Chicago and New York head into lunchtime.
  • The subscription allows any serious student to apprentice under me as a veteran trader and investor.

Afternoon Notes - Live on YouTube and Rumble

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win” - Sun Tzu, The Art of War
  • Finally, I invite you to join me on YouTube and Rumble every afternoon from 4:15 to 4:30 pm EST for my new program, “S&P 500 Futures – Today’s Post Mortum.” This show will also be recorded, available on the channels, and open to everyone.
  • The 15-minute live program will help traders reflect on the day’s action while still fresh in their minds.
  • On Tuesdays and Thursdays, subscribers will head over to BluPrint’s new “Members-Only” Trading Room for a 45-minute Q&A session to drill down into the granularity of that day’s session and what we can model from it to improve for the future.
  • Despite all that is happening around us, you have a chance to take control of your life. I can teach any serious student to trade with our tools. And though I choose to trade the S&P 500 Index Futures exclusively, I teach principles applicable to any financial instrument.
  • This is not an overnight process, and it is certainly not for lazy and undisciplined traders. Most of the time, we trade against ourselves and our personalities. Five traders with the same information and tools can end up in five different places because of their individual personalities and idiocyncracies.
  • Join me in creating this amazing community where you will learn how to trade. We will keep each other informed and prepared as we traverse the rough road ahead and take advantage of the opportunities presented.
  • As we build the community, there will be many other benefits, including resource libraries, software, indicators, trading systems, and advcie on selecting and building trading computers. We will have lots of single-subject educational webinars designed to help you hone your skills.
  • Look, everything in life cycles. As sure as we are in a Fourth Turning, a wonderful First Turning lies ahead of us. But it is not likely to arrive until the end of the decade. So let’s look forward to it and pray that our country emerges stronger, better, and with our core values intact.

You will receive an invitation later today, about a half-hour before we go live on YouTube. As this is our first day, and we may have a few bugs, be patient and don’t be surprised if the invite comes a little late. That is why it is a “soft” opening. We will hold the “grand” start in a few weeks.

A.F. Thornton

Morning Notes – 6/24/2022

Good Morning:

  • The bond market is the tail that wags the proverbial dog. At least, it used to be that way before the Fed started using the financial markets as its primary monetary policy tool.
  • And let me interject, as a side note, that central planning by any measure is communism. I don’t understand why we find the Fed’s role acceptable considering their deplorable (no pun intended) track record.
  • The bond market has been rallying lately (using the TLT Treasury ETF as my benchmark).
  • You will recall my unofficial long TLT September Call trade several weeks ago.
  • The bond market is beginning to accept the Fed’s commitment to fighting inflation. As Chairman Powell said yesterday, he is willing to impose a “hard-landing” recession and rising unemployment on the rest of us to accomplish his goals.
  • A recession is precisely what it will take to impact inflation, as President Biden’s approval ratings plunge to the lowest levels of any modern President at this comparable stage.
  • Meanwhile, I have been giving the stock market a slight bullish edge (and I mean tiny) for an intermediate low.
  • We put in that low a week ago today.
  • Futures have popped higher overnight to 3830. Volatility estimates remain near 1%, with 3800 now acting as support. The next support is 3750. Resistance shows at 3855 (SPY 385) then 3900. I would give the market a range today of plus or minus 45 points from the open, keeping in mind that we are opening above the WEM high at 3796 on the day weekly options expire. So 3800 or so will likely act as a magnet through the close, muting today’s gain potential.
  • In rare cases, especially in bull markets, the market will bottom in a “V” reversal and not look back. The reversal usually begins with an inverse head and shoulders pattern. Arguably, there is one forming on the daily chart.
  • A valid “V” pattern requires the market to follow through in the next few sessions, break the balance range high at 3844, and then slide through the air pocket above on the way to 4000.
  • The more likely alternative to the “V” is a full retest of last Friday’s low at 3639, or perhaps flipping slightly above the low off the rising trendline. But we successfully probed that low three times on the 16th, 17th, and 21st. Maybe that gives the “V” reversal a slight edge.
  • Of course, the retest could fail, putting us into the other air pocket below 3639 that finds major support at 3400, with a couple of tree branches the market could grab onto as we slide off the cliff.
  • So, it might be this, or it might be that, right? Doesn’t that help?
  • To further complicate the case, there are rising wedge patterns all over the stock and bond markets, which typically means that these markets are getting ready to drop one more time – supporting the retest theory.
  • And, to spice it up a bit more, recall that the WEM high is at 3795, about 30 points below where the market is trading at this early, pre-market writing.
  • More than likely, dealers will try to hold the market to this level before weekly options expire at the close.
  • And what about the Navigator Algorithms? The Algo already threw an “E” exhaustion signal and would paint a solid buy signal with another close above the trigger line today at 3780. 
  • Also supporting the bull case, the market has closed above the 5-EMA for two sessions, and today could be the third. But the 21-day line (mean) remains a hurdle at 3857.
  • The Algo buy signal does not tell us how far the rally takes us, but we could at least target the middle or top of the down channel.
This is a chart of the S&P 500 Index Futures with the Navigator Algorithms and System Status Panel
This is a chart of the S&P 500 Index Futures applying the Navigator Algorithms and System Status Panel
  • As always, the truth is that I don’t know what the market will do. I give a slight edge now to the retest case, but it is ever so small.
  • I know what I will do – e.g., if this, then that. If not, then what? That is how I view the market.
  • And that brings me back to Balance Rules. We are in a balance range, so apply them.
  • But first, it appears that we will have a True Gap higher out of the gate this morning. So apply Gap Rules first.
  • Small gaps (and this one is likely to be small by recent comparison) typically get filled.
  • Another bullish factor is that the market rallied yesterday afternoon after two days of harsh market rhetoric from Fed Chairman Powell. I see that as a short-term bullish sentiment indicator.
  • So my forecast is:
    •  We are finishing an intermediate low likely to be followed by a rally up to 4000.
    • I am not certain about whether a retest of last Friday’s low is required first, or perhaps even a spike lower just to squeeze out the weak hands, so the dealers can buy some cheap inventory just to bring the market back up again.
    • I give a slight edge to the retest scenario, but I will remain very mindful of the somewhat rarer “V” reversal possibility already underway.
    • The WEM High at 3795 will likely draw the market back down and mute further gains today, so look for a potential gap fill.
    • We are still in a bear market until proven otherwise. So rallies are opportunities to cull your holdings or potentially get short. Periodically review our Market Thesis to stay in tune with the macro picture.
    • Seasonally, a summer rally usually presents toward the end of June, even in a bear market.

Have a terrific weekend.

A.F. Thornton

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Morning Notes – 6/23/2022

S&P 500 Index Continuous Futures
S&P 500 Index Continuous Futures

Good Morning:

  • Whether or not we are in a bear market boils down to one question: Is the Fed friendly or not? We know the answer. 
  • All we can try to determine is whether the market is washed out enough in the short term to give us a short-covering rally. By most measures, it is – virtually on par with the March 2020 Covid Crash lows.
  • We can also determine that there can be a bullish bias going into the end of the calendar quarter a week from today—more on this below.
  • And that has put us back into another 200-point balance range between 3642 and 3843 on the S&P 500 futures contract. Balance Rules apply to the range. In other words, a breakup puts a target of 4042 in reach, and a breakdown brings 3442 into view.
  • The market probed the range in both directions yesterday, closing in the middle. The overnight range is in the middle of yesterday’s range, but the market has steadily increased since Europe opened. 
  • The market may open in the top third of yesterday’s range this morning with an orthodox gap higher. Though not a True Gap, you may still use some Gap Rule principles to guide you. 
  • Most important is how the market handles the morning Gap if it materializes. Does it fill right away (negative), or does the market move away from the Gap with impunity (positive)? The Gap serves as an initial sentiment indicator.
  • Fed Chairman Powell’s congressional testimony yesterday and today likely has a lot of money sidelined until his testimony is over.
  • The bottom line is that we should treat rallies into June 30th options expiration as “short covering” and subject to failure.
  • The best case is “positive drift” into expiration – perhaps allowing us to break the upper end of the balance range and move higher. I give slightly better odds to a breakup than a breakdown.
  • In that case, I would use 4000 as the short-term goal, with 3600 as significant downside support into June 30th. Remember that the June 30th expiration removes important put positions and may expose the market to further downside into July.
  • Getting a bit more granular, and focusing on the downside, recall that the market broke out from the pre-Covid Crash highs at roughly 3400. So carry that number forward in your narrative as well.
  • Also, carry the following numbers forward related to the retracement of the Covid rally and extension of the January to February decline; (i) the .382 Fib retracement at 3550, (ii) the 1.618 Fib extension at 3435, and (ii) the .50 Fib Retracement at 3235.
  • Recall that our intital target for this down leg was 3500, and our ultimate target for this bear market low is 2500 (and rising with time).
  • For now, use the balance range and Balance Rules to project targets. Spike low support below us is in the 3400 range.

A.F. Thornton

Morning Notes – 6/22/2022

Good Morning:

  • S&P futures are trading near 3705, having reversed most of yesterday’s gains.
  • Support lies at 3700 followed by 3620. Resistance shows at 3755 (SPY 375).
  • Fed Chairman Powell speaks today at 9:30 AM. EST.
  • Much of today’s consternation may be anticipating Powell’s remarks.
  • Yesterday’s action did little to support the idea of a sustained bounce.
  • Both volume and conviction were lacking. 
  • The retest I discussed, which normally comes on the fifth day after a new low, could result from Powell’s speech.
  • So while caution may be the rule of the day, it would not take much on a positive note to send the shorts into panic mode.

A.F. Thornton

Morning Notes – 6/21/2022

Good Morning:

  • Options expiration has cleared the decks, expanding the range boundaries to 3600 as the Put Wall on the downside, also near the WEM low for this week set at 3575.
  • The upper boundary now sits at 3900, but the price will first encounter the WEM high this week at 3795.
  • Today, the options market priced the range (from Friday’s close) at 3617 to 3750. The market already tagged 3750 in the Globex sessions  (from Sunday night through the holiday and into this morning).
  • Using a Gamma calculation, it might be better to set the range from the open this morning at plus or minus 37 points.
  • The ranges have been less accurate recently, as the options market has been running inefficiently, punching dealers and other premium sellers in the face.
  • Last week, we saw one of the largest sell programs in history, the second-largest week of shorting the market in history, and four days of 90% breadth participation in the downdrafts.
  • As usual, a lot of the action occurred overnight, leaving U.S. traders with gap and crap ranges to daytrade.
  • At this writing, the market will gap higher this morning, if ever so slightly. If it is a True Gap, Gap Rules will apply.
  • Today’s sandbox includes the 5-day line at 3745, already overnight resistance, and where the market broke down from Thursday. There is good support at 3725 and then 3688.
  • The pattern since March has been for each short-covering rally to cover less ground than the last, with the market rolling over sooner.
  • The chart looks like the market is possibly curving down into an eventual waterfall decline and capitulation.
  • From a macro perspective, 3688 is in the middle of two volume air pockets on the daily chart.
  • The overhead air pocket has 3900 as its target high, with a few bumps on the way there. The underside air pocket has 3370 as its target low, with a few bumps along the way lower.
  • At this point in the 2000-2003 bear market, which I am using as the base model, the market still had more left on the downside, and the lower target is where the bear staged its first major rally. 
  • On the other hand, with the market extended this short and other signs of a sustainable low, 3900 is more than possible.
  • Don’t forget that important lows usually require a retest about five sessions later.
  • Also, remember that the shorts have been making money and are not likely to abandon ship easily. We are in a “3” wave down in Elliott Wave jargon, which tends to be vicious, as we saw last week.
  • If the market can close above the 5-day line at 3745, that would be the first good sign of a sustainable trip north. Still, be careful. The sell programs have clobbered the previous short-covering rallies.
  • Any close below last week’s low at 3639 would hit the eject button and require a parachute down to 3370.

From a Gamma perspective, daily volatility should be declining to about 1%. But the options market is still pricing in a lot of volatility considering it is a shortened, four-day trading week, so be careful today.

A.F.Thornton

Morning Notes – 6/17/2022

S&P 500 Cash Index Bear Channel
S&P 500 Cash Index Bear Channel

Good Morning:

  • Yesterday was brutal, though not a surprise to subscribers. It was a gap and pin day, with a balancing range of plus or minus 40 points centering around 3670, also the bottom of the S&P 500 index channel.
  •  I am still viewing 3700 as a support/resistance “pivot” line, with further support at 3670, 3650, 3620, and 3600.
  • Resistance sits at 3755 and then 3800.
  • The overnight range is in the upper half of yesterday’s balancing range, but still well below yesterday’s gap.
  • The market is stretched like a rubber band 3-ATRs under the daily mean and is due for a snapback/short-covering rally at any point. Shorting here is unwise unless one is absolutely convinced the market will crash here. 
  • The better strategy now is to patiently await a long buy signal
  • There were few puts cashed in yesterday, so a lot of puts will expire or get rolled today, and that should provide some taiwinds for the market.
  • But the options market is only one piece of the puzzle. Strong institutional selling has been dominating the markets recently.
  • I still see signs of an interim low develping. We are at the SPX channel bottom. Junk Bonds have not confirmed the S&P 500 and NASDAQ lows. I am tracking the JNK hourly. There are Demark price decline exaustion signals. Positive momenum divergences continue developing across a broad range of sectors. Breadth indicators join sentiment indicators at bearish extremes (which is bullish).
  • It escaped my attention that Monday is the new Juneteenth holiday commemorating the end of slavery. Domestic financial markets will be closed, except for Globex.
  • I am already wondering how the holiday might affect Quarterly Expiration today. Even after expiration, dealers must reconcile their books, usually the following Monday. Now this will occur Tuesday.
  • Tuesday is typically when the market resumes its trend. Maybe now it will be Wednesday.
  • With everything moving forward a day, it could make today all the more interesting.
  • Trying to day trade during Quarterly Expiration is unwise unless you have a specific strategy (e.g., a pinning strategy) or exceptional, long-term trading experience.
  • And pinning does come to mind. As I have pointed out over the last week, 3700 has the largest open interest and Gamma expiring today and has already drawn the market back up overnight.
This is a chart of the S&P 500 Options Gamma by Strike Price. The light gray shading represents the portion of the options Gamma expiring today.
This is a chart of the S&P 500 Options Gamma by Strike Price. The light gray shading represents the portion of the options Gamma expiring today.
  • So the most probable case for today is a balancing market trading around the 3700 S&P 500 strike.
  • Worst case is the decline continues, but since we are at the bottom of the down channel, I am giving that outcome less probability.
  • Best case is that there are enough dealers left to draw the index back up to the WEM low at 3800. It is not unusual to see a positive lift going into a holiday weekend. Again, quarterly expiration complicates any forecast because expiration often leads to random, unpredictable results.
  • The projected range today is 63 points plus or minus yesterday’s close, leaving elevated volatility on the table.
  • Keep in mind that projections are less useful in the current environment. The options market has mispriced volatility for nearly three weeks in a row.
  • What I worry about is next week, is that all of the  SPX-related puts and VIX calls expire. It leaves the market vulnerable on the downside until more protection is placed next week.

Have a great weekend. You will receive an invitation to our Monday evening “Start the Week” series where our community briefly gets together to plan the week ahead.

A.F. Thornton

Morning Notes – 6/16/2022

S&P 500 Index Futures - Long-Term Support
S&P 500 Index Futures - Long-Term Support

Good Morning:

  • The market reacted somewhat favorably to the .75 bps increase yesterday, though short-covering likely drove the gains.
  • Given how short the street is going into quarterly expiration tomorrow, I was surprised that there wasn’t more short-covering of the rip-your-face-off variety after the Fed announcement.
  • So like a drunken spree the previous night, everything looked good at the time. The Fed is aggressively fighting the inflation they caused!
  • But with the morning hangover, everyone asks, “How high are mortgage rates again?” “How high is inflation?”
  • The answer on mortgage rates is – 5.54% on average,  double the rate from January. The response on inflation? 20% under the old calculation and 10% under the new formula.
  • So the market (S&P 500 Index) tested new lows in Globex at 3695, erasing all of yesterday’s gains.
  • Recall that 3700 is short-term armageddon headquarters. It is our “Put Wall,” and It is preferable to maintain that level through tomorrow’s expiration.
  • Given the open interest at 3700, there is at least an even chance of pinning there. There is a longer-term support structure at 3688 to give the market some breathing room, but 3620 is the next stop after that.
  • On the upside, it gets complicated around such significant options/futures expirations. Out-of-the-money puts from yesterday are suddenly profitable this morning.
  • Even if investors roll the puts ahead of tomorrow’s expiration today, the exchange creates an imbalance for Dealers. It forces them to buy futures, thus triggering a move back to resistance at 3800 up to 3850.
  • Don’t forget that the WEM low can still draw prices back up to 3800 as it did yesterday.
  • On the other hand, dealers may have already taken the last clear chance to avoid catastrophe by hedging at 3800 yesterday.
  • If prices stay below 3700 for long, volatility increases, and sparks could fly.
  • It all depends on the confidence of the shorts. If the shorts are making money, their incentive to cover wanes.
  • I don’t typically recommend trading around Fed Meetings, especially when combined with quarterly expiration. Distortions can arise through dealer rolling and hedging activity.
  • The best time to position will likely develop late Monday or Tuesday morning after the dealer books clear.
  • Keep in mind that the market may be temporarily vulnerable on the downside as the hedges come off tomorrow through Tuesday.
  • If the S&P 500 decides to follow the NASDAQ 100 down into a 50% retracement, the next significant support is at 3400, which is (i) the highest volume node below us, (ii) where the Covid Rally from March 2020 had fully recovered from the crash and broke out to new all-time highs, and (iii) lies smack dab in the middle of the 38.2% and 50% retracements of the entire Covid Rally.
  • That would be a 30% decline from the peak.

Stay nimble. We remain in cash.

A.F. Thornton

Morning Notes – 6/15/2022

Good Morning:

  • Considering the wholesale inflation report was as bad as the consumer report yesterday, the stock market barely reacted.
  • And there were many other positive divergences (e.g., momentum and junk bonds failing to follow the S&P 500 index to new lows), demonstrating that the market is trying to put in a (temporary?) bottom at 3700.
  • The chart pattern also showed a bullish falling wedge into 3700, which is THE critical level to watch in the next few sessions. 
  • 3700 is where the most strikes and negative gamma concentrate. Falling wedges typically lead to reversals higher.
  • In brief, the market wants to rally, and we even saw a small short-covering rally start into the close.
  • The futures are positive this morning. The overnight range barely tagged the halfback from yesterday and has stayed in the upper half of yesterday’s range. 
  • Bulls and bears were evenly matched overnight, much as they were yesterday.
  • So it does not take much for the market to take out yesterday’s high and end the brutal one-time-framing lower bear candles of the past few days on the daily chart.
  • Today is Fed day, and the street has baked 75 bps into the price cake.
  • And as I have been saying for a few days, the street is incredibly short, and it won’t take much to send the shorts on a relentless buying spree.
  • Recall that the WEM low sits at 3800 for the S&P 500 futures (3804 on the cash SPX and 380.40 on the SPY).
  • The WEM low target is still in reach as a magnet to draw the market up for the few Dealers who did not bail on Monday’s significant breach of the level.
  • The volatility range for today is roughly 65 points in either direction from yesterday’s SPX close at 3735, so it will be a wild ride as usual. I usually don’t trade until at least an hour after the announcement, if at all. 
  • I think framing the market on days like this might be pointless. But price acceptance above yesterday’s high at 3782 and the overnight high at 3783 is the most bullish outcome. Dropping sustainably below the overnight low at 3739 would cause me to question the bullish case. Acceptance below 3700 is bearish. 
  • Given the strikes sitting at 3700, there is also a case for pinning at the level on Friday, which may draw the market back after some short-covering. Pinning at 3700 is a very low probability but keep the possibility in mind.
  • And don’t forget that sometimes statements at the news conference can reverse the market’s initial reaction to the rate change.
  • My best guess is that the stock market is poised to start a short-covering rally at a 75 bps or higher rate increase.
  • The market could continue lower if the Fed comes in at 50 bps or less without reasonable justification.
  • The rally could be the beginning of the end of the bear if it is cyclical and not secular. I doubt it, but keep that possibility in mind as the crowd would least expect it.
  • Also, the street is short and expecting a short-covering rally into the quarterly options /futures expiration on Friday with some Vanna tailwinds. I am inherently suspicious when too many traders and investors agree on the same thing.
  • The magnitude of options expiration cannot be overstated. We only get options and futures expiring simultaneously four times a year.
  • If the market topples further here, it will be on the Fed’s forward guidance, not today’s rate increase.
  • Using the original CPI calculations before the government tried to put lipstick on them after the 1970s, inflation is running very hot at 20% – almost hyperinflation by any other measure. As far as the street is concerned, the Fed cannot be aggressive enough.
  • The problem is that much of this inflation is deep and structural, unlike “Happy Days are Here Again,” consumer-driven inflation. So the interest rate cure may be worse than the ill.
  • Higher rates cause more consumer suffering. Demand destruction will not likely stop the structural inflation caused by (i) deglobalization (nobody’s fault) and (2) extraordinarily poor and unwise Biden administration energy policies.
  • Until events check the rise in oil prices, there will be no inflation hope on the horizon. It is not as much a demand problem as anti-energy government policies and insane, ineffective global sanctions.

Let’s see what the day brings. Good luck today!

A.F. Thornton

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Morning Notes – 6/14/2022

Good Morning:

  • I am fortunate to have a great business partner that helps keep my feet on the ground. I think of him as my business wife. I am lucky to have a real wife that does the same thing.
  • My business partner and I discussed some of my macro concerns yesterday, and he said, “don’t put that in the Notes; you will sound crazy.” I promised I wouldn’t, as I had similar concerns.
  • But then we had to remind ourselves that when we first discussed the Davos crowd, their “Great Reset,” and their video, “You Will Own Nothing and be Happy,” we thought that was crazy too. It was hard to swallow. That was two years ago.
  • We discussed then that this group of prominent government and corporate leaders at the World Economic Forum wanted to crash the economy, take control of the food and water, and eventually price us out of single-family homes and energy as part of their Climate Agenda. This Davos crowd also wanted to push us to get chipped and convert to digital government currencies to firmly establish their social credit system and surveillance state.
  • Of course, my partner told me, “no way that will happen here – this is America! I saw his point, and I wanted to believe him. I needed reassurance. But I knew what I knew. 
  • I read voraciously, and I have well-placed global contacts. Most importantly, I know how to connect the dots.
  • Neverthless, my business partner and I are still shocked by what has transpired, even though we saw it coming. It is like a bad dream.
  • Did you know that Bill Gates now owns 80% of farmland in our country? What is the current price of a single-family home? What is the interest rate on a new mortgage? How much is gasoline per gallon now? 
  • By the way, how is Bitcoin working out as the new Gold? Isn’t it proof that you can sell ice to Eskimos? I think I will stick with the old Gold. In the end, Central Banks will steal Bitcoin and blockchain technologies for their purposes, just as they suppress the price of Gold so as not to interfere with their worthless paper currencies.
  • Then we ask ourselves, with the Great Reset well underway and the “new” economy coming, should we be accumulating Gold Coins or bullets? I wonder which one will have the most value for bartering in the coming collapse? You know what they say, “diversify!”
  • No, I am not watching too much “Infowars” and Alex Jones. Though I must say, Jones now looks like a seer. And you know we are in trouble when Alex Jones has become an excellent mainstream news source.
  • Anyway, how is everyone enjoying the “Great Reset?” How about the “Fourth Turning?” I am sorry that everything I had predicted and worse has come true. And it will get worse before it gets better if it can ever get better. The rest of this decade will be difficult – so prepare yourself.
  • Meanwhile, back at the ranch, yesterday was brutal for the indexes, though expected. The overnight futures market has not taken us to new lows, which is at least slightly encouraging. Of course, it is possible nobody is showing up until New York opens.
  • On the charts, the overnight S&P 500 futures traded in the middle of yesterday’s price action below the gap, having no success at even tagging either end of yesterday’s range. And it would not surprise me to see the market move into rotation as it awaits the Fed decision tomorrow at 2 pm EST.
  • So the overnight range is a suitable bull/bear breakout threshold today. As upside resistance, the top of the overnight range is at 3807, then the Gap from yesterday begins at 3820.
  • On the downside, support lies at the bottom of the overnight range at 3750, with additional support at yesterday’s low, around 3735.
  • Interest Rates are climbing fast. In less than 24 hours, the consensus has gone from 24% to 95% of economists expecting a 75 bps hike tomorrow. Partly, this is due to the Fed’s favorite leaker at the Wall Street Journal floating the trial balloon.
  • Some rumors even circulated yesterday that the Fed would go to 1%. In the meantime, mortgage rates climbed to 6.1% yesterday, double the level from January. Consumer Confidence hit the lowest level ever recorded last Friday. 
  • Yet, Uncle Joe is mystified by his low approval ratings, the lowest recorded for any President at this point in his term.
  • As we wander the next few sessions, don’t forget that the street is incredibly short here, so we are looking for the short-squeeze coming from tomorrow’s rate announcement. 
  • But we could easily see panic and a spike low before the squeeze kicks into gear. But the shorts will not panic buy and cover when they are still making money, as they did yesterday.
  • I would put “panic” spike-low support at 3250, near the 50% retracement of the entire Covid rally from March 2020. That was where the market broke to new highs from the 2018 to 2020 expanding triangle and consolidation. It is also where the most volume congregates since the March 2020 lows – the so-called high volume node as identified in the chart yesterday.
  • I fully expect we will flirt with 3250 and eventually 2500 before this bear ends, but it does not necessarily need to happen now. It is simply the case that 3250 has a good chance of catching the S&P 500 in a panic.
  •  I hope I am not being too conservative in the estimate because the next macro high volume node is at 2700, with the largest node over the past few years at 2100.

Would someone tell me how George Orwell saw this coming so many years ago? Is this all life imitating art? Or is George Orwell’s “1984” where the Davos crowd and World Economic Forum got their ideas in the first place?

A.F. Thornton

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