Morning Notes – 6/7/2022

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