Morning Notes – 7/20/2022

• Good Morning:
• Sorry to be running a little late from the live show this morning. I am learning that this is all a lot to pack in before the New York Open, especially when I am on the West Coast and have to get up in the middle of the night to meet all the deadlines.
• The good news is that the scenario I had been forecasting since the June 17th low at 3639 has finally come to fruition – or perhaps better said, the forecast has been confirmed.
• While Monday’s action nearly fooled me, we hung in there and got a 25% position in SPY August monthly calls on the Gap and Go trade per Gap Rules live in the trading room yesterday morning.
• Consider joining us. While the past does not necessarily predict the future, we notably realized 20 points in futures trading in the room yesterday that we closed out and booked before the end of the day. And that is in addition to our SPY calls, which continue to build gains from our entry.
• Twenty points in the Emini is $1,000, significantly more than the $297 monthly subscription costs. Since we started the room two weeks ago, we have achieved several thousand dollars in gains using both S&P 500 futures (micros and minis).
• But the most important issue on the table now is that yesterday confirmed that the important 40-week intermediate cycle low is the suspected 6/17 at 3639. We now have a projection up to 4200 or so.
• However, the futures encountered the WEM high at 3964 overnight, which may dampen further gains through weekly expiration on Friday.
• But once we get through the overnight high, just above the level we enter the previous capitulation, Rocket Pocket. All else being equal, I expect the market to fly through that zone – roughly beginning at 3986 and ending at 4042. 
• The next major resistance we will encounter sits at 4062.
• The Weekly Expected Move high may cause some backing and filling, leaving the big move for next week. There is a 70% probability that the 4064 WEM high will hold for the week, but we need to let the market guide us by carefully monitoring the auction. 
• At the very least, we are back to the “buy the dip” mode.
• Note that we have a daily and weekly bullish pivot now on tap.
• Also, every major near-term moving average has now been conquered, including the 5-week and the  5, 21, and 50–day lines. 
• All of these moving averages should now provide support. We will look to the 5-day line as our trailing stop on our SPY calls.
• Note that the index broke above the 6-month opening range line at 3922. The level should now provide support, and any move back inside the range is negative for the rest of the year.
• And by the way, we crossed instead of kissed on the moving average front – another major accomplishment for this market.
• I covered all this with charts in this morning’s live notes linked above.
• Let’s enjoy some positive gains while they last. There is a Fed meeting in two weeks, and the consternation may return ahead of the date.

A.F. Thornton