Founder’s Trading Journal

Below are a few relevant excerpts for today from A.F. Thornton’s personal trading journal and notes. Check out the full notes with a Subscription, which includes access to Mr. Thornton’s live charts in the Founders Trading Room. The full journal contains Mr. Thornton’s daily trading plan and reflections on his daily gains and losses. 

Be forewarned that the notes can sometimes be offensively blunt and politically incorrect, as Mr. Thornton occasionally vents about geopolitical and economic issues influencing financial markets.

References to “the Market” in the journal and Blog refer to the S&P 500 Index. The quoted numbers are from the front month E-Mini continuous futures contract. BluPrint’s primary business focus is applying its proprietary Navigator Algorithms™ to the S&P 500 index using the cash SPY ETF, options on the SPX or SPY, and S&P 500 EMini and micro futures as the investment vehicles.

The Navigator Algorithms™ dictate the buy and sell signals for BluPrint’s Navigator swing strategy. But Mr. Thornton also applies the algorithms to day trade intraday charts down to 2-minute candles. His live, intraday charts are available throughout the day in the Founders Trading Room with a Subscription,

The algorithms also show whether the S&P 500 is in an uptrend or downtrend. The direction of the index has a considerable influence on the path of individual stocks. The Navigator Algorithms™ can serve as an initial screen to help determine whether you have the wind at your back in stock trading.

• Considering the negative energy news out of Europe over the weekend, the markets held up remarkably well today. I am suspicious that there might have been some Fed assistance – but who ever really knows (other than them)?
• The 3900 Put Wall was the inflection point where the market danced most of the day after the opening rally and immediate sell-off, a typical pattern of late. I am suspicious that 3900 could morph into resistance if the price finds acceptance below. We shall see what the next few days bring.
• The market is working its way lower, and my target would be 3865 or so before we get a significant flip.
• Keep in mind that I am never married to any working theory. I go will always go with the flow.
• I listed all key support and resistance in the table above. I also marked the important clusters on the first chart. The levels help you know where to anticipate a pause or turn, but there is no substitute for monitoring the auction level by level to see where the price wants to stick or reverse.
• Watch the 5-EMA on the daily chart – traders are still shorting off the level. Closing above the level could be bullish. Also, keep an eye on the CBOE equity put/call ratio. It rose into the high end of the range today and creates the risk of a rip-your-face-off short-covering rally or meaningful reversal point. The sentiment is about as negative as I have seen, presenting a contrarian’s paradise. That is unless the crowd is right…
• And we are reminded that the market is in its third wave down, arguably the cruelest leg of any bear market. But you can expect the market to tease and wear you out before delivering the negative goods. 
• Tomorrow (Wednesday) will be tricky. There is a cadre of Fed Governors hitting the speaking circuit. The first question is why? What expectations will they attempt to manage? Will they try to offset the European contagion with a more doveish tone? 
• Regardless, the speakers are sure to cause some volatility, which is likely why the options market has priced in a 130-point expected move range for the day. I don’t typically day-trade until after the Fed Govs hit the speaking circuit.
• The 30-Year U.S. Treasury rate closed at a new high yesterday, and the 10-year rate is close to a new high. My best guess is that new highs in the 10-year rate eventually mean new lows in the stock market – below the June low at 3639. But close only counts in horseshoes and hand grenades.
• I am still looking at an ultimate bear market target of 3000 before year-end, give or take a few hundred points. And, after all, what are a few hundred points among friends?
• Don’t forget that all key levels reverse polarity when materially breached. Support becomes resistance and vice versa. The table above shows where the S&P Futures traded when I published today’s Blog. Move the support and resistance labels as appropriate after the NYSE opens. Anything above the Open is resistance, and below is support.
• The parabolic U.S. Dollar, which threatens to take down all the emerging, debt-ridden, global economies, is finishing a rising wedge pattern on the daily chart. The pattern telegraphs a decline coming soon – some welcome relief for the third world debtors. By the way, shouldn’t the debt-ridden “third world” now include the United States Banana Republic of America?
• A falling dollar is usually good for stocks – but the parabolic dollar uptrend must reverse.
• Traders continue to add protection, moving the Put Wall, Zero Gamma, and Volatility Trigger lower. 
• Negative Gamma pressure persists – count on more. Dealers will continue to hedge their inventory by selling futures into declines, worsening the down thrusts. But this effect also works in reverse. Dealers must buy futures into rallies, making them stronger and last longer. We call this behavior Gamma squeezes or spirals.
• Heavy volume continues, and the daily chart candles have one-time framed lower for quite a few days in a row. Continue to watch how much volume is moving price. Stalling (high volume with very little price movement) often precedes important lows.
• Don’t forget that the Hurst Nominal 80-day cycle is due to trough soon and could give us a left translation bounce – perhaps from the 1.618 Fib target (approximately 3866). The “perfect” cycle low date coincides with the 9/21 Fed Announcement.
• Very serious global tensions continue to mount now that Russia has formally weaponized energy. The Germans are no longer laughing at President Trump’s Russian energy dependence warning, are they?
• As mentioned before, we are experiencing a moment in time that requires us to prepare for the worst. It would help if you had a contingency plan for yourself and your extended family. 
• It is always advisable to have such a plan, with extra food and water on hand. But perhaps it is more important now than ever before.
• I plan to be as self-sufficient as possible if there is a need to ride out the economic and political storm. 
• But my plan is all about keeping my trading screens running. How could I possibly live without trading? I can last a few days without food and water – but my screens?
• I will be the guy who shorts the crash and doesn’t get paid because the brokerage firm goes bankrupt.

A.F. Thornton