Founder's Trading Journal Morning Notes – 6/8/2022 Jun 8, 2022 AF Thornton 0 Comment Good Morning: I had warned yesterday to watch for the fakeout. And this is why you should never put on shorts in the hole at the end of a session, as many had on Monday. Yesterday’s snap recovery off the bottom of the balance range was primarily short-covering. Monday’s shorts were trapped. Volume improved over the previous bear day, so that was encouraging. Balance Rules continue to prevail with the range between 4070 and 4202. Don’t forget the WEM range between 4050 and 4250. Nothing resolved overnight, as the S&P 500 traded inside yesterday’s range. The index did stay in the upper half of yesterday’s range. The daily chart pattern looks like a consolidation to move higher, and the extraordinarily negative sentiment would certainly support higher prices. Regardless, reticence ahead of next week’s Fed meeting and quadruple witching (quarterly) options/futures expiration has the indexes running in place. 4100 is significant support within the balance area, with 4150-4160 primary resistance. The 4200 Call Wall likely is the max overhead target into Friday, even though the WEM would allow a move up to 4250. At this point, traders who want to hedge into next week have likely done so. So the market is a bit tired here. With the practically historic $3.2 trillion expiration next week, I expect the markets to reset with whatever direction ensues from the Fed meeting. Range trading can be productive, but it is still a time to be careful and be sure to use stops. The primary risk right now is an exogenous geopolitical event. Don’t get caught off guard without a stop. A.F. Thornton
Founder's Trading Journal Morning Notes – 6/7/2022 Jun 7, 2022 AF Thornton 0 Comment Good Morning:Review yesterday’s AM Notes and stick to the script.The open question is whether the market will draw down into the Fed Meeting and Options/Futures expiration next week or rally into the dates.This morning, we add that the market will open with the 5-day line breached (a negative), though the market is opening on the 21-day line (important support).How the market closes today will tell us a lot.We will open with a True Gap down, so both Gap and Balance Rules apply today.Watch for the fake-outs – it is that kind of market.Balance means that bulls and bears have relatively equal power. They trade places day to day and hour to hour until a winner emerges.The 10-year Treasury Note popped back over 3%, which put pressure on stocks yesterday and this morning. The higher rates brought us to the lower end of the balance range.Remember that the WEM low is at 4050, so Dealers need to close at or above that level to avoid considerable losses this week.The 4000 level is the lower support boundary, but we are already in negative Gamma below 4100, so volatility will pick up this morning.For the past several sessions, options traders added negative deltas as the S&P went above 4150.Essentially these 4150-4200 (415-420 SPY) call positions are starting to limit the chance of a 4200 test (aka upside volatility), while 4000 is still reasonably viable to the downside.Good luck today. The market is not easy to trade at the moment.A.F. Thornton
Founder's Trading Journal Morning Notes – 6/6/2022 Jun 6, 2022 AF Thornton 0 Comment Good Morning:The overwhelming consensus is that we are in a bear market rally, and the market will roll over again soon.Accompanying that opinion are some of the most bearish sentiment readings I have seen in my career – which usually means that sellers are exhausted.On the first point, there is little doubt that the recent rally started with short-covering. But all rallies start that way after lengthy corrections.On the second point, market lows generally align with the negative sentiment we are experiencing rather than another roll down.I almost loathe having an opinion that aligns with consensus – and being bearish now seems antithetical.These are unprecedented times, and the crowd could be right for once, but it would be the first time in my 35 years of trading and investing.The market will open around 4150, about halfway back to the top of last week’s trading range between 4100 and 4200.Whichever way the market breaks from the range leads to another 100-point move.Because of the negative sentiment and the lopsided consensus, I believe that the market is likely to go higher rather than lower.The Fed Meeting and Quarterly Options expiration next week are the draws to keep the market turbulent until it establishes a clear direction.More than $3.2 trillion in options/futures will expire on 6/17, a staggering figure.For now, The most crucial indicator of where the market is going is the price action.I use the 21-day line as my bull/bear threshold until the trading/balance range breaks.Use Balance Rules as your guide in handling the 4100-4200 range.Volume continues to increase on down days and decrease on up days, which is slightly negative.Naturally, we would expect total volume to decrease as summer gets underway in earnest.The twin dynamics of declining implied volatility and put-decay (vanna/charm) make it challenging to forecast the outcome of next week’s Fed meeting and options expiration.If the market rallies into the Fed meeting, particularly toward the 4300 line, Dealer hedging likely pulled the fuel from put expiration (via dealer short hedge unwind) forward. The hedging removes energy for a post-meeting rally.If the market is weak into the meeting and the quarterly expiration a few days later (<4100), then we’d look for a rally after the 6/17 quarterly (quadruple witching) expiration.So any directional edge isn’t likely to emerge until we get closer to the 6/15 Fed meeting.For now, I expect either a test of 4300 or the large open interest strike at 4000 into month-end. 4100-4200 remains critical for the rest of this week.This week’s SPX WEM is roughly 185 points, between 4015 and 4200. The expected move for today is approximately 110 points, using Friday’s SPX close at 4108.54 as the center point. The move is likely capped by the WEM high at 4200 with 4190 as the lower boundary.Since the market will open with an orthodox gap (not a True Gap), you can draw a range plus or minus 44 points from the open (an 88-point range). I base this range on recent implied volatility (VIX) readings, but since realized volatility has been deviating from implied volatility, the estimates have been less accurate over the past week.I always draw the expected move from the open and the previous day’s close on my day trading charts. I view this as my sandbox and look for any key indicators or levels I am likely to encounter. I prefer to go long in the lower quartile of the projected range and short in the upper quartile, all else being equal. I coordinate these daily levels with the WEM levels to have a clear windshield of all I will encounter that day and for that week. Nothing is a mystery for me as the week wears on.I post charts with all of these critical levels pre-market for subscribers pre-market.Have a great day and a fabulous trading week.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 6/3/2022 Jun 3, 2022 AF Thornton 0 Comment This is a daily chart of the S&P 500 Index with the Navigator Algorithm and Readout Panel Applied Good Morning:Resistance remains at the 4200 Call Wall, with support at 4155 (SPY415), 4127, and then 4100.The gravity line remains at 4211. Remember that sustained acceptance above that level adds to the bullish case.Volatility is compressing now that we are above the trigger, so the move for today projects 44 points plus or minus the open.Liquidity is still low (see the volume discussion below), so outsized moves are possible. The below-average liquidity explains why the realized volatility has exceeded implied volatility lately.The street is, once again, well-hedged. Put buying has dried up, and the SKEW is extremely low, perhaps clearing the way for higher prices.However, downside protection is still relatively cheap if one wants to hedge ahead of the 6/15 Fed meeting.As I shared with one of our subscribers yesterday, I wake up these days wondering whether a systemic collapse, the beginning of the Biden Depression, or something worse is on the table. My wife doesn’t call me the “Doomscroller” for nothing.Fortunately, I am usually wrong about these things – so let’s hope this is not the one time I am right.And the stock market may already be counteracting my irrational fears. Yesterday, it retested the mean and bounced, precisely what the index should do if a significant low is in place.And we remain in a Navigator Swing Buy signal.As you will see from the chart above, the Navigator Algo painted preliminary buy signals (yellow arrows) at the literal low on 5/20, with another painted the next day on 5/21. Then it painted an all-clear green arrow on the cross of the 21 on 5/27.Our Swing Trader subscribers have been making a killing in this run. Consider a subscription; you will be happy you did.As a result, the bottom that began forming a little less than two weeks ago looks similar to any significant low I have seen in my career, except that volume support is not ideal.Each day, the volume on bear candles still uncomfortably exceeds the volume on bull candle days.Nevertheless, fear gauges remain elevated, and the progression off the low is constructive, so the market has room to run higher.Aside from that, over the past four trading sessions, the S&P 500 remained in a 100-point balance range bounded by 4075 and 4175.If the index breaks higher, the balance range projection predicts another leg up to at least the 50-day line at 4275 or so.If you look back at the charts presented over the past week, that is where this bear retracement leg should end, assuming the index is genuinely completing an expanded flat “2” wave.But even accomplishing the move to 4275 still leaves ambiguity. Both bulls and bears have a leg to stand on, even at 4300 or so.For example, you can observe the potential formation of a head and shoulders reversal pattern with the neckline at 4300.This pattern could take the stock market even higher, while traders are getting all beared up again in the next dip, which ends up merely being the right shoulder of the pattern.And what would be the bull case? Besides most stocks having lost half of their value recently, the market could be anticipating a Fed pivot or perhaps a resolution of the Ukraine conflict.The point is that there is always a catalyst to take the market higher, especially when the darkest days dawn.Remember, the bad news is good because we don’t want the Fed to keep raising rates.Overnight traders have erased about half of yesterday’s gains at this writing.Let’s see if yesterday was a fluke, or whether we can keep this rally moving today.Recall that the WEM this week is 4050 to 4250. For once, it would seem we end up somewhere in the middle.A.F. Thornton
Founder's Trading Journal Morning Notes – 6/2/2022 Jun 2, 2022 AF Thornton 0 Comment Good Morning:In just about any time frame, traders nearly always buy the first visit to the mean (21-period EMA) once conquered. Yesterday was no exception on the daily chart.And there certainly is room to take the market higher and still be in the bear or a recovering bull.But the bears caught an edge yesterday, as the bounce yesterday was anemic. Comments from Jamie Dimon, CEO of Chase Bank, accelerated the move into the 21-day line and muted the bounce as he advised that there was a financial “hurricane” coming.Recall that Mr. Dimon was one of the few CEOs (and Chase was one of the few banks) who survived the Great Financial Crisis without a hat in hand to the taxpayers.Mr. Dimon is a highly competent banker and an exceptional leader in managing risk.Combine this with similar warnings from people like the head of the European Central Bank, and you will begin to understand the current pale that remains over the markets.But I will give Janet Yellen, current treasury secretary, some credit where it is due.In a rare admission, Ms/ Yellen stated that she completely screwed up her “transitory” inflation forecast.These people are fallible humans, after all. And they suffer both from Groupthink and academic isolation.Admitting you have a problem is always the first step to solving it.Surprisingly, she has caught nothing but grief from her comrades on the left for admitting she got it wrong. I find the admission refreshing.Futures have edged higher to 4120 overnight. Our models suggest similar volatility to yesterday, with a plus or minus range of 45-50 points from the open. 4100 remains the main support level and key to containing volatility. 4150-4160 (SPY 415) remains solid resistance, followed by 4200.There is a clear trend toward buying short-dated puts and selling calls in the options market.The piling on of these bearish option plays could easily push the market over again to retest the recent lows at 3800.The key for the markets is to hold the conjunction of the 5-day and 21-day lines currently sitting around 4075.Global tensions and climbing food and oil prices add to the worries.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 – 6/1/2022 Jun 1, 2022 AF Thornton 0 Comment Elliott Wave 2 Targets in S&P 500 Index Good Morning:Yesterday’s price action mainly behaved according to the script, consolidating the short-covering gains from last week.The geopolitical situation continued to deteriorate, and I will have more to say about that in the Weekly/Monthly forecast.Futures are trading at 4130 after a quiet overnight session.Today, we see support at 4100, with resistance at 4160 (SPY 415) and then at 4200 (Call Wall).Calls continue to fill into the 4150-4250 strikes, which add to overhead resistance but also help reduce overall volatility.We are likely to see short-dated hedging strategies lead us into the next Fed meeting. Protection is relatively cheap right now.Today’s expected move is 44 points plus or minus the open, with the WEM range still set between 4050 and 4250.Overnight inventory is balanced, so there is nothing to help guide us at the open. Let the market settle in a bit before day trading today.I still believe that the S&P 500 Index can hit the 4185-4233 target mentioned last week and remain in the bear.Sustained price action above 4211 would cause me to reevaluate whether the bear is still in place.The market may continue consolidating last week’s gains for a few more days.All eyes will continue to point to mid-June and the next Fed meeting and Quarterly options/futures expiration.In the meantime, oil prices keep climbing, and our current overlords in Washington continue pursuing policies that are virtually certain to lead us into the economic abyss.The European governors are also leading Europe into the abyss, so there is comfort in numbers.In the meantime, Vlad and Xi are smiling at our demise.There is no reason for them to nuke us. If Russia and China wait patiently just a bit longer, we are sure to destroy ourselves from within.Other than a peace deal in Ukraine, there are not many positives to write home about. The monthly employment report should be interesting later this week.We have a couple of Fed governors speaking today (Williams and Bullard) so be careful around 11:30 AM EST.On the economic front, we also get JOLTS job openings, ISM Manufacturing, and the Fed’s Beige Book to give us some additional economic clues.Recall that the bad news is good news for interest rates at this stage until it negatively impacts earnings.We are always wise to follow the price action with no preconceived notions.But the issue remains whether we just ended a cyclical bear with enough damage done to begin recovering.It is possible, and if it were October, I would be more convinced.The alternative is that there is more to come after we meander through June, July, and August.I am betting that the May low is not the final low, which is more likely to be achieved on the 18-month cycle low later this year.If my calculations are correct, and we know I am a genius at this (you can laugh now), we just finished the mid-point of the nominal 18-month cycle, and the ultimate low lies out in mid-September.As they say, one day at a time.A.F. Thornton
Founder's Trading Journal Morning Notes – 5/31/2022 May 31, 2022 AF Thornton 0 Comment Good Morning:Futures have pulled back to 4124 at this writing, down from Friday’s highs of 4202. The shift over 4100 has reduced volatility estimates, with the implied move for today now at 1.07% or about 44 points plus or minus the open.Not that these estimates have turned out to be accurate lately, as realized volatility has been higher than implied volatility – outside the 68% statistical boundary.I expect resistance at 4135 (the current Volatility Trigger) first, then 4150, and finally 4200.Any sustained acceptance of prices above 4211 is bullish and builds the case that the recent low is more than a pause in the bear trend.Support today comes in at 4115 (SPY 410) to 4100. Below that, there is a gap of 4000.There are many times that I envy the Dealers and Market Makers with their inside knowledge of the book and virtually guaranteed profits, but Friday was not one of those days.The professionals lost billions when the market tilted higher halfway through the session, ending the week at nearly twice the expected move high.We also had a chance to see why my weekly/daily projections have a 68% probability of being correct – while ordinarily accurate, and they are not 100%.This week, the options market is pricing in a WEM estimated at 100 points plus or minus Friday’s close for a total 200-point range roughly between SPX 4050 and 4250.Was the parabolic move higher a surprise last week? It shouldn’t have been, not if you are following these pages. As we have been pointing out for several weeks, the street had been nearly 100% short with improving internals.Notably, and other than 4200, new call positions are still lacking, and the rally was not supported by the kind of volume we would typically expect.Nevertheless, bullish sentiment had dropped to nearly zero, and many signs pointed to an intermediate low, including the Navigator Algorithm Swing Buy signal last Monday.If nothing else, all one had to do was follow Gap Rules on Thursday and Friday for some nice gains, and our Subscribers did. Consider a subscription as it more than pays for itself.Subscribers picked up nearly 175 S&P points on Thursday and Friday alone, and an equivalent move in the NASDAQ 100. We used 50/50 SPY and QQQ June Monthly Calls for the positions.Of course, a lot happens overnight that we missed, leading to those morning gaps, which can be frustrating.We will work off some of last week’s gains at the open today from all appearances. But as the last trading day of May, there will be window dressing which could distort day trading.I suspect that month-end will lead to some buying in the cases where money managers missed the rally. Remember our old friend FOMO?So other than a short-covering rally and oversold bounce, where does this rally take us? Is this THE bottom or just A bottom?Of course, nobody knows, and there is no shortage of opinions.We will encounter considerable resistance around current levels and up to 4220. But I could even see the rally take us up to 4300.Beyond 4300, I have my doubts. However, I let the price action and algorithms guide me, as you should already know. Strong opinions tend to lead to losses in this endeavor.Increasingly, investors will focus on the June 15th Fed meeting and quadruple options/futures expiration on June 17th.Even if this is the end of the correction, I would not be surprised to see a retest of the recent low at 3800 in the S&P 500 index into the mid-June Fed meeting.Chairman Powell meets with President Biden today at Biden’s request to discuss the economy and inflation. Can you imagine the uproar if Trump had a similar meeting with Powell in similar circumstances? The left’s hypocracy knows no bounds.I don’t see any Fed speakers scheduled today, which should help the bulls. But Consumer Confidence comes out later today. Similar readings to those expected have led to recessions 100% of the time in the past – no exceptions.A few months ago, Canadian Prime Minister Justin Trudeau seized the financial assets of his political opponents, a group of harmless truckers who were the equivalent of “Trump” supporters in Canada. Now he is coming for Canada’s handguns.The actions of this Davos devotee and Chinese President Xi worshipper, less than a few days after he returned from Davos, are frightening.Combine Trudeau’s actions with his worship of Chinese President Xi and the Chinese Authoritarian system, and there is a frightening reality gripping our neighbors to the north.President Biden is coming for your guns too. And it is not just AR-35s; he also wants the 9-mm handguns.Recall that there is more than one way to skin a cat.How do you get around the First Amendment’s prohibition on censorship? You make the Tech companies do it for you,How do you promote the dubious science of Climate Change? You price people out of oil and gas.How do you outlaw guns? You price people out of firearms, outlaw bullets, chip away at it with red flag laws, etc. The left knows no bounds.Anyway, I will have a lot more to say about all this in the monthly/weekly report coming out later this week, including China’s plans to take Taiwan and possibly land on the shores of California.Indeed, you cannot make this stuff up. I feel like Mad Max arriving at the Thunderdome.A.F. Thornton
Founder's Trading Journal Morning Notes – 5/27/2022 May 27, 2022 AF Thornton 0 Comment Good Morning:Last week, the S&P 500 Index traded 80 points below the WEM low Friday morning, and I thought there would be no way that the market could crawl back above it before the close. I was sure that the market was ready to hand the Dealers a massive loss.But the market staged a last-minute short-covering rally, and the Dealers escaped financial death by a thousand cuts.Today, we are at the other end of the spectrum. The market is roughly 60 points above the WEM high this morning. Will the market sell 60 points of yesterday’s gains into the close, saving the Dealers once again? With the street as short as it is right now, we could be in the midst of that short squeeze and Dealers stand to have a challenging day ahead it so.Nevertheless, I am always amazed at how powerful the WEM high and low are each week. The potential to reconnect with the WEM high could complicate day-trading today into the close.Also, the options market continues to misprice volatility – with realized volatility differing significantly from implied volatility. This makes setting targets less reliable.The Founder’s Group enjoyed nearly a 100-point profit on its SPY calls yesterday, but the market continued rising, indicating that we sold a bit early.But a profit is a nice reward, even if we left some money on the table. Profits are why we do this – FOMO is not a strategy.We want to reenter on a pullback, but we are mindful that we are going into a three-day weekend, and cash typically allows the weekend to be more restful.Yesterday’s price action still looks mostly like short-covering. The move lacked confirming volume, so the jury is still out.Nevertheless, we predicted the rally, and the following chart from Daneric’s Elliott waves is a good depiction of the current market structure and targets. Futures are holding near yesterday’s close of 4070. With the push higher, volatility estimates are slightly lower, not that they have been accurate lately. Resistance is in the 4100 – 4115 (SPY 410 equivalent) area. Support shows at 4065 (the updated Volatility Trigger), then the 4000-4015 (SPY 400) WEM high area. All eyes will be on the 8:30 AM ET Personal Consumption Expenditures (PCE) data. The environment remains somewhat illiquid, exacerbated by the upcoming holiday weekend (Monday, US equity markets are closed for Memorial Day). Thus prices may be excessively volatile in either direction. Once again, we saw a pickup in call positioning at strikes overhead yesterday. We have not seen this in some time. As those calls fill in (and the index rises), volatility should also contract. The call buying is a bullish signal, but I remain alert that this could be a false breakout spurred by short-covering and the lack of liquidity. Today’s expiration is not particularly large, but about 20% of S&P 500 Index Gamma expires, concentrated in the 4000-4100 range (SPY 400-410). We look for a test of one of those strikes today from the Personal Consumption Expenditures (PCE) release, the Fed’s favorite inflation measure. Perhaps the PCE will be the catalyst to save the Dealers in a drive down to the WEM high. Another complication is two Fed governors speaking today, including mega-hawk Fed Governor Bullard. Their strategy has been to talk the stock market down when it has rallied lately. The plan is part of their demand destruction goals, and talk is cheaper than higher interest rates, which could undo the economy. But never forget, inflation is good for the government, seeing record income tax receipts, almost a 25% increase. Do you see how that works? Isn’t it a coincidence that government receipts are closer to the “real” inflation rate?Gap Rules may be in play today, depending on the PCE Report. They worked beautifully yesterday, so follow them today if the market opens with a True Gap higher. As always, stay tuned and enjoy the holiday weekend. I know I need a break after a couple of difficult weeks for me personally. But at least we booked some significant profits. There will be plenty more in the volatility that lies ahead. 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 – 5/26/2022 – Update May 26, 2022 AF Thornton 0 Comment Because I mentioned it in the Morning Notes, the Founders Group is taking a profit on our S&P 500 calls entered yesterday at 3955. We are out at 4035, as we expect the price to return back to 4000 by tomorrow’s close.If we are wrong and the price keeps going higher, so be it. We have a nice profit. We are willing to reenter, but also mindful that we have a three-day weekend coming up.A.F. Thornton
Founder's Trading Journal Morning Notes – 5/26/2022 May 26, 2022 AF Thornton 0 Comment This is a daily chart of the S&P 500 Continuous Index Futures showing a potential trend reversal. Good Morning:Overnight futures are trading positively, around 4000 at this writing.S&P 500 volatility estimates remain in line with the last several days, allowing for plus or minus 50 points from today’s regular session open.It would appear from the Option Contract Open Interest released overnight that call positions were added above 4000 yesterday, with 4100 and 4200 adding 10,000 and 15,000 contracts, respectively. That is not huge, but it was enough to kink the gamma curve.The Volatility Trigger, one of the critical metrics we watch, moved down to 4000. That would typically indicate that volatility will contract above that level, and the market will return to “mean-reversion” behavior. Dealers will need to sell rallies and buy dips to hedge positions rather than sell into declines and buy into rallies – exacerbating the moves.Our next focus is the June 15th Fed Meeting (also VIX Expiration) and June 17th monthly options expiration. Quarterly expiration also arrives on June 30th. How much “risk-on” behavior will market participants seek ahead of the Fed meeting?Resistance is in the 4000-4015 (SPY400 equivalent) area, with support at 3960 (SPY 395) followed by 3900. More details about the 4000 resistance area appear below.The market survived the release of the April Fed minutes relatively unscathed yesterday.The S&P 500 index could be breaking the steep downtrend (depending on how you draw it), and perhaps it will even break the 7-week bear candle streak if the market stays above 3931 today and tomorrow (and it should).Note that there is a positive bias moving into month-end next week. Corporate buybacks are also on the table again.Overnight, the market is taking out yesterday’s high, but the price is also at the expected move high (WEM) for this week, roughly 4000 on the S&P 500 index. The vertical downtrend line also sits at 4000. So 4000, give or take a few points, will be resistance for the rest of the week, hence the 4000 – 4015 resistance levels mentioned above. The Volatility Trigger itself can provide initial resistance at 4000 until it breaks.There are positive divergences and improving market internals on the recent lows, making a rally somewhat more probable here, even if it is short-lived.Watch for a True Gap higher at the Open and apply Gap Rules as necessary. But focus more on what happens when the Gap fails.Remember that the WEM high is a formidable barrier to higher prices until next week when prices will have more headroom. Recall that dealers fight to maintain these levels, which have a 68% probability of holding.One only needs to look at last Friday for proof. The S&P 500 Index recovered nearly 60 points in the last hour. Dealers and Market Makers staved off billions in losses by staging the last-minute rally to close a few ticks above the WEM low at 3900.We have to go back to 1932 to find a similar 7-week bear candle streak as we just experienced, and I don’t need to remind you what an unpleasant period marked the Great Depression.But alas, nothing goes straight down, and in most bear markets, we get a relief rally just about this time. I have been expecting it and mentioning the possibility on these pages over the past week.And the mean (21-day line) is coming down to meet us. The market could break this line, but it could even rally back to the 50-day line if history is any guide.When the Founder’s Group issued the swing buy signal at 3955 yesterday, we set the ultimate target to 4125. If past bears are any guide, that should be an achievable goal. Some precedents could take the market back to 4300, so we will see how it goes.I also have less confidence in this signal than just about any signal we have issued recently. We are moving our stop to 3975 this morning to lock in some gains and may move it higher as the day wears on.If you are not a subscriber (and you should be), Look for pullbacks on the hourly charts to take a position. But my overall concern for this rally and where it could take us relates to the sloppy overlapping price action on the hourly charts. Even the daily chart has a rising wedge appearance to it. Wedges are not guaranteed to lead to a price reversal, but I prefer a cleaner look to the rally.This rally attempt posits a one-for-one relationship between the first and second down legs from the top. If it fails quickly, the index will likely need to complete a 1.618 retracement of the first down leg.That brings the price down to 3500, which could also relate timewise to the June 15th Fed meeting.So be careful here, do not get too aggressive, and do not be surprised if this rally fails. I view it as a bear market rally even in the best case.As mentioned yesterday morning, the Founder’s Group also maintains an unofficial position (meaning we are sharing what we are doing instead of calling out a trade) in September Monthly TLT calls (U.S. 20-Year treasury ETF).We expect longer-term treasury bonds to recover gains as short-term rates rise and long-term rates fall (yield-curve inversion).Also, longer-duration treasuries may experience a flight to safety from further global tensions and as the economy shows signs of sputtering.Stay tuned,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