Archives July 2022

Good Afternoon:

• I am always trying to figure out who is offsides in the market. You should too.
• Then I figure out what the market could do to cause them the most pain. It is called the “Pain Trade.”
• I shared it with you on these pages and several YouTube videos a little over a week ago.
• I called it “X Marks the Spot” at 4070 or so in the S&P 500 futures. And the level was the Grand Central Station of important resistance – a magnet of sorts to be conquered or not.
• Like a nasty cactus needle, today’s candle left a spike through the heart of the “X.” We danced on the stab wound, taking substantial profits. Morbid, right?
• We realized 32 S&P 500 points per 2-contract multiples in the Trading Room today and more than that on the latest 50% SPY call swing positions established yesterday when the futures reached 3970, half of which we covered at futures 4045 and the other half when the futures reached 4074.50.
• And then I sipped Margaritas on the beach. Not really, but it sounded good.
• Back to reality, I said I would reevaluate at this level, and I am.
• We tagged 4100 after the bell on positive results from Apple and Amazon.
• 4180 is the next high volume node and resistance, though it starts at 4150 and could go as high as 4200.
• But for tomorrow, and barring something unforeseen in the PCE inflation index, the market will likely pull back below the WEM high (also 4070) before the close. Otherwise, Market Makers and Dealers lose billions on their positions – at least the ones not already wiped out in the volatility of the past few months.
• Anyway, perhaps I will get the weekend to contemplate the next move rather than being forced to draw my conclusions overnight.
• Of course, my thoughts may be superfluous if the Asians and Europeans join the panic buying before we rise in the morning.
• And what does any of this mean? Is the worst behind us? Are there new highs ahead?
• I don’t know, but this looks like the last 40-week cycle launch in March when the market sucked in the retail crowd before the Big Boys and Girls (or whomever of the 97 or so genders) threw them out the 20th Floor window.
• By the way, like Ted Cruz my pronouns are “Kiss my Ass.”
• No, things are not ok, and they are likely to worsen. You already know that.
• And did you get today’s memo? The Orwell Administration reported the second negative GDP quarter in a row, meeting the former technical definition of a Recession. 
• You see, just as they redefined “vaccines” last year, and the Consumer Price Index had to be changed too, the Orwell Administration also got ahead of this one. 
• That old Recession definition was too darn technical. A Recession now has to be viewed more broadly – taking in many factors- unless the other side is in charge. It is like Climate Change – we need a definition that cannot be proved or disproved. This is because the Orwell Administration is special! Nothing to see here.
• But ignoring them, just for the moment, this rally is not about how the economy or stock market works anyway. If it was, we should announce Recessions more often.
• This is about how the business of money management works. Fear of Missing Out (“FOMO”) is almost as powerful an emotion as Fear of Loss in the money management business. Maybe it is better described as the Fear of Getting Fired by your clients for underperforming your peers. 
• You can lose a ton of your client’s money if you lose a little less than everyone else. But there is no sin worse than leaving money on the table when the market (and your peers) leave you in the dust. Clients are fickle.
• Money Managers and Hedge Funds were (are) sitting on their highest cash levels since 2009. All that needed to happen was to light the match.
• And that is all this stock market rally is about for now – the money management business and how it works.

Be Careful!

A.F. Thornton