Founder’s Trading Journal – 10/10/2022

• The market caught its breath Monday, with bulls and bears evenly matched and leaving an indecision (Doji) candle on the chart with a slight index loss.
• The Founders’ Group has high cash positions and some puts – so it was a good day for us.
• Today’s market could have been worse – and the market managed to hold 3600. Mercifully, the bond market closed for Columbus Day.
• Buying came in 25 points above the recent low – so there is demand, even if it is primarily the Fed Plunge Protection Team. Sell them all they want – they caused this mess and deserve their mounting losses.
• I cannot remember such doomsday headlines – I hope they are not right. But it takes abject fear to usher in another tradable low in the current realm.
• Wednesday is the day – Fed Minutes and CPI are on deck. It isn’t easy to know what happens between now and then, but all the key levels are in the table and marked on the chart above.
• Markets don’t crash when the crowd expects them to – so we shall see what the markets deliver. With monthly options expiration on the 21st, I expect selling pressure will continue into that date. Recent hikes in gas prices will endure another high CPI reading unless they try to cook the books for the election.
• And I am still unsure how to gauge the mid-term elections’ impact between now and then – it may have an influence since no side is likely to be happy with the outcome. And we await the October surprise. Marshall law, anyone?
• Call buying has been scarce – and that remains negative. As I said last week, man cannot live by puts alone. But the WEM low at 3530 or so is supposed to catch us in a fall – at least for the week.
• Oh, by the way, the cradle trade is not dead, but it is starting to drip like a Weeping Willow Tree.
• And the 200-Week Moving Average at 3595 is also trying to act as a safety net. Price acceptance below it would be unpleasant.
• Note the Founders’ Group is keeping the Swing Buy Stop for our Swing Shorts at 3668.50, which still gives us a 100-point profit on each futures contract and something analogous on our puts.
• This kind of market confounds even the best of us. It will go up when you think it will go down, and vice versa. The bad news is good news. The good news is bad news – at least for the markets.
• But the trend is down until proven otherwise, and the trend is your friend.
• Anyway, “it is the Bond Market stupid” to steal a slightly altered phrase.
• More concerning – it is the U.S. Treasury market. A nuclear bomb might become somewhat attractive if the U.S. Treasury Market seizes up or goes the way of the Bank of England.
• Strap in – crash or no crash, we are in for a long, dark winter. When the market peaked in 1966 – it went sideways across the channel for 16 years.
• I have renamed the January peak in the S&P 500 Index “Bliss.” Why? Because I don’t think I will ever see anything like we have experienced the past 40 years to bring us to that high.
• It is not unlike when people ask me how I knew the 40-year bull market in bonds had ended. Simple, when interest rates hit “0,” I thought the bottom in rates was close at hand.
• Will it be the same for stocks? I sure hope not.

A.F. Thornton