Swing Traders
The Navigator Algorithms remain in cash. While today’s action did not compel us to deploy some money for a swing trade, the market behaved as anticipated in the weekly forecast. The S&P 500 held above the January low, an impressive feat in light of all the distressing global news on Russia and Ukraine. We will deploy cash if the low holds and price pivots.
It is explainable if the low holds and forms the bottom of a trading range here. The unexpected price action may reflect the conflict between global tensions and hawkish Fed policy. Consumer and investor pessimism could mute spending and growth, tamping down inflation. The results could help do the Fed’s job for them.
But there is no modern precedence for the current situation, and inflation could persist, especially for energy prices. So we need to be very technical and accurate about any turn higher. Putin’s limited invasion expanding to the rest of Ukraine could be a catalyst to breach the January low.
Nevertheless, be on alert for an entry tomorrow. Today’s price bar finished in the middle of the range. We need some upside follow-through to trigger a buy signal. We should know if the retest is successful in the next few sessions. For now, so far, so good.
Day Traders
The market rallied initially, then rolled over into a negative gamma spiral reaching the lower support line at 4270 mentioned this morning. A short-covering rally kicked in on positive delta trades coinciding with the 4270 level. The rally faded as it ran out of short-covering fuel, and futures finished in the middle of the range near 4300. Bears remained in control most of this day.
With the daily candle ending as a doji, the market can still go either way tomorrow. But thus far, the market held the January low on a lot of bad news. The trading was slow at times, indicating that the market fell due to the absence of buyers rather than aggressive sellers.
I will update all critical levels in the morning, but 4250 is the ideal level to hold if you look back across the past few years’ price action. Tomorrow’s action should be much like today’s – characterized by large directional swings.
We’re holding 4400 as major overhead resistance and see today’s test of 4270 as unlocking a step lower to test 4250 and 4200. Acceptance below 4200 pulls the rug out from under the market, opening up a measured move to 3600. The Gamma wall at 4000 is extensive and could stop any freight train before it reaches 3600.
A.F. Thornton