Morning Notes - 7/18/2022 | Archimedes Methodologies

Good Morning:

Like thieves in the night, our Asian and European cousins were buying like crazy from last night’s Globex Open and never looked back.
The S&P 500 Futures are already up 37 points this morning, almost a full percentage point and slated to Gap Open in New York at this writing.
Gap rules will apply if the rally continues. Click on the Chart above for the Algo dashboard. A third buy alert could paint depending on whether today’s candle closes above the Algo trigger.
I find it better to use the 2-hour chart to take Algo Buy signals against the trend, and it has been supportive since Thursday.

The overnight buying follows on the heels of something I mentioned Friday morning – the market stopped declining on bad news.
Normally, this behavior would be a sign that the sellers are exhausted short term.
I remain cautious, however, as nearly $1.4 trillion in notional options expired Friday, and dealers will continue to adjust their books this morning. I thought it better to wait for the options’ influence to wane before drawing any definitive conclusions. Expiration could have propped the market up – fooling us into thinking that bad news is good news.
Moreover, the market is at a proverbial brick wall.
While the S&P 500 Index is trading above the 21 and 5-day lines in Globex (it closed on the lines Friday), it is now facing the recent downtrend line, the 50-day line, a lot of higher time frame moving averages and the highest volume node in the neighborhood at 3910-3930 or so.

And with a convergence of multiple moving averages in the same zone, I raise the question as to whether all of these averages will kiss or cross, the latter being supportive of the rally. Kissing is what the averages tend to do in a bear.

So here is my love letter to the bulls:
- You came this far; will you turn south from the top of the hill? Ridiculous!
- Precedence permits a retracement to 4150 in this period – 7-8 months after a bear is underway.
- That 6/17 low came on a rigorous, relentless, gapping down move – a mini-capitulation by any other name.
- The 6/17 low is important and marks the low of the 40-week cycle. Can’t you put a little gas in the tank before the left translation?
- And you don’t care about bad news anymore.
- Hey, you took the five and 21-day lines; what is a 50-day line among friends?
- You will have to conquer these lines someday; why not now?
- You have a Rocket Pocket on the other side of the hill, and you can rest then…
And to the bears…
- You suckered them in during July seasonality – trap the bulls, then dump them!
- That 200-week line at 3525 is calling you! This bear is the most fun you have had in years! Don’t stop now. Even if you feel sorry for the bears, remember how unmerciful the bulls have been since the Covid Crash!
- Just one more thin mint – one more leg to crush the bulls! Take them up just a little bit, then wack-a-mole.

Try not to get dizzy looking at this week’s and today’s sandbox. There is a lot of stuff on our windshield this week.
But keep it simple – we either get through this resistance or not. If so, we head towards 4000. If not, we will head towards 3500.
The only way I know to monitor this is to watch the auction as it develops in real time – it will tell you whether prices are being accepted or rejected in the zones.
The options / Gamma strikes are unusually compacted this week, so there is not much to glean there except that the Volatility Trigger is at 3850 – and below that, selling pressure and volatility intensify.

As you know, I have been expecting the market to resolve higher since the June 17th low. We have captured some nice, short-term gains on the rally attempts.

I am still ever so incrementally bullish on a retracement north and up to 4000, but willing to change my mind. And the market has been trying to find its footing.

Nevertheless, the cardinal rule has not changed. Traders and investors should resolve all doubts in favor of the existing trend – which is bearish. Experts I respect are extremely concerned about domestic and world events.

But connecting current events to the market is a fool’s game. The market looks ahead. Whatever is coming out now, regardless of what it is – news, interest rates, and global events – is already baked into the indexes.

Good luck today, and be patient. If we pay attention, the market will tell us what it wants to do.

Watch today’s video for more detail on how I set up the week and built the charts above. I will have the footage polished and out in a few hours.

A.F. Thornton

Morning Notes – 7/18/2022

Morning Notes – 7/18/2022

AF Thornton

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Morning Notes – 7/18/2022

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