Morning Notes – 6/8/2022

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