Morning Notes – 3/30/2022

Good Morning:

• It has been a couple of frustrating days dealing with our website and trying to improve speed and security. You should see a noticeable speed improvement. Security issues occur behind the scenes – but with the international cyber threats from unfriendly actors, we can never be too careful.
• The number of Chinese and North Korean bots constantly trying different ways to hack into websites is astonishing.
• Interestingly, there has been a noticeable reduction in Russian attempts since the sanctions took a number of them off the Web. Maybe we should keep them off permanently.
• And then – have you tried to get help with anything online these days? I recall complaining about all the automated phone systems when they became prevalent. Remember voice mail jail?
• Now, you don’t even get a voicemail jail  – you have to email – and wait, wait, and wait.
• When working on a website, or any technical programming, you are often stuck until the issue is resolved.
• This is a huge step backward from the old days in my view.
• Meanwhile, while I was tinkering with the site, the market sailed 50 points past my original target of the February 2nd highs around 4475.
• As I indicated, anything above 4600 is overbought in my work.
• I have counseled everyone that you will see orderly climbs in bull markets as the market zig-zags higher, but corrections are sharp and steep.
• In a bear, it is the opposite. So if we are in a bear, the sharp, steep rise we just experienced is typical. Perhaps it is more typical in the early bear stages because traders are ingrained in buying every dip.
• I can track the short-covering panic in the options market in droves. 
• But it likely takes a behavioral psychologist to unpack the FOMO (Fear of Missing Out) buying that must be happening as we approach the quarter-end tomorrow.
• April typically records the strongest gains of the year, which makes the current situation even more interesting.
• Technically, there was little justification not to grab final profits on our longs last Friday. A pullback will come, and we can decide when and where to re-add. This is just not a place where I want to trade long.
• Shorts, nonetheless, are tempting on a true pivot lower or sell signal.
• It remains to be seen if the negotiations between Russia and Ukraine will truly lead to a “peace dividend.”
• There should be some rebalancing into bonds today and tomorrow by the big balanced mutual funds, which could give us a pullback.
• The bottom line is that stocks appear to be disconnected from fundamentals. Or, the fundamentals are better than we think. That is why the price action is more important than our opinion. The price action has been strong. and there is some confirmation in call buying and risk on behavior – now that we are a few sessions out from all the short-covering.
• The volatility index (VIX) has been absolutely crushed in the rally of the past few weeks. As a result, the daily expected move in the S&P 500has dropped to between plus and minus 27 points with volatility this muted.
• Pinning behavior should continue around the 4600 Call Wall with resistance at the 4625 WEM high, then minor support at 4575, and more significant support at 4550.
• Above 4600 should still be considered overbought and likely leads to mean reversion until additional call buying moves the Call Wall higher.
• I don’t day trade into a month or quarter-end. There are too many cross currents. Many had shorted this rally into last Friday, and I get why they would do so.
• Then, the market just ripped higher Monday and Tuesday. This is typical of what happens around quarter and month-end. You can get your head handed to you as a small trader. Been there and done that, so I swore off the need to trade into these periods.
• Remember the famous Kenny Rogers line – “you have to know when to hold them and fold them.”
• We tagged the WEM High at 4625 yesterday, another reason to avoid longs here.
• Given the structure and failure of the overnight session to make new highs, there is potential for sellers to get active below the overnight low at 4602. This could also lead to a break of the tight rising wedge pattern on the daily chart.
• If it breaks, monitor for continuation and note the support below as set forth above.
• Context is important as anything on the downside runs completely counter to the current narrative, which is to buy.
• All subscriber charts are posted. 

Now that you know my views, what do you think?  Send me your thoughts to my private email.

A.F. Thornton