Morning Notes – 8/18/2022

Good Morning:

• We will be in the Trading Room today and tomorrow.
• Today’s DEM shows +/- 40 points from yesterday’s settlement at 4276.75. That puts today’s range (rounded) at roughly 4235 to 4315. The WEM remains between 4205 and 4355.
• Resistance is at 4298, then the DEM high at 4315 and the recent high at 4327.50. Don’t forget the WEM High at 4355 which could act as resistance if we are lucky enough to get there. Support lies at 4275, 4233, and then 4208.
• With Monthly Options expiration tomorrow, the market will increasingly be more difficult to read and pinning is possible around the high open interest at 4300 and secondarily at 4250.
• While the market has weakened and Algo sell signals have painted on the daily chart, our 5-day stop line has been maintained on a closing basis. But the market closed below the Algo trigger yesterday. So, we remain in cash and slightly bearish for at least a normal pullback.
• Support and resistance reverse polarity when breached, which also applies to the big picture. Coming out of the June hole, our original key targets, now breached, should act as support in a pullback, at least if a new bull has resumed. 
• Ideally, I am looking for a low-risk to-stop entry point around 4120. Remember “X” marks the spot? Now “X” should be our new support and a low risk-to-stop entry point if the market is going to work off some of the recent froth. We are not likely to tag the level this week, but with the significant Gamma expiring tomorrow, we could see the level early next week.
• In any time frame, including the daily chart, buyers typically buy the first pullback to the mean. So regardless of bull/bear prognostications, it makes sense to buy the mean (“X”) even if it is only good for a bounce.