Morning Notes – May 6, 2022

Good Morning:

• Even as bearish as I am, yesterday’s reversal was stunning, mainly attributable to Fed jawboning and negative Gamma.
• But there is not much good news lately either.
• The Fed sent its troops out to talk the market back down because it had rallied so hard after the Fed rate increase announcement.
• The Fed Governors are also out today – so day-trading will be treacherous. I would not recommend it.
• Since the options market has mispriced the volatility for two days in a row, I am unsure how valuable my range estimates are this morning.
• The Gamma adjusted range is about 44 points plus or minus the open for a total 88 point range.
• Not adjusted for Gamma, the range is forecast to be 75 points plus or minus yesterday’s close for 150 points.
• So far, the market does not seem happy about the April Employment Report that came out pre-market, but I have not had time to analyze it.
• Unless something in the market breaks – and the possibilities are endless – there is a lot of support between 4000 to 4100.
• Significant resistance remains at 4200.
• 4300 opens the door to a bullish bias. Below 4300, the sellers are in control.
• The bond market has practically crashed – and I am waiting for the bodies to float to the surface.
• On a positive note, the S&P Futures held yesterday’s low overnight, so sellers could not gain more traction.
• We will be opening towards the bottom of yesterday’s range.
• Spike Rules are applicable at the open today, so make sure you are familiar with their application.
• With more Fed Governor jawboning and the weekly options expiration, I do not think it advisable to trade today. Take the weekend to get some perspective.
• There is an adage – “don’t fight the Fed.”

A.F. Thornton