Founder's Trading Journal Interim Update – 10/18/2022 by AF Thornton Oct 18, 2022 0 Comment Good Morning:Before I forget, I want to mention two of the best sources I know right now for unfiltered, objective Global News. First, let me mention Alex Christoforou [https://rumble.com/c/AlexChristoforou]. Alex roams around Athens, Greece, Nicosia, Cypress, or wherever else he may be, with his GoPro camera giving you straightforward, unfiltered, and compelling analysis while touring beautiful historical sites. He is a true, old-school journalist in a time where everything is propaganda.My second suggestion is Redacted [https://rumble.com/c/Redacted]. You will likely remember Clayton Morris from Fox News. He and his wife, Natalie, have joined the ex-pat community in Portugal. They do a daily broadcast at 4 pm EST, and I never miss it. The couple always records the broadcast for later viewing. Once again, objective, unfiltered, old-school journalism.I provide Rumble addresses for both news sources because they have been suspended from YouTube several times for departing from the prevailing “narrative.” That is how you know you can trust them. They won’t be on YouTube much longer, as nobody is who tells the truth.Now, on to the stock market. Besides seeing the most upticks in several years at yesterday’s NYSE Open, we now have a huge gap open in Globex last night, and the market has yet to stop rallying. We have not seen a Globex Gap open of that size in a long time.At this writing, the market will open in New York with a 272-point gain in NASDAQ, 627 point gain in the Dow, and 80 point gain in the S&P 500. All of the major indexes have gained more than 2% overnight. The Asians and Europeans are experiencing the same “Pain Trade” as the Americans as they all puke up their puts. The following chart tells the story. The Put/Call Ratio Screamed "Pain Trade Ahead" on Friday This Chart shows the S&P 500 Index in the upper half, and the Put/Call ratio in the lower half. The ratio hit the highest level in history Friday, higher even that the 2008-2009 Financial Crisis. What does the chart above tell us? Retail traders were shorting the market in historic numbers – AT THE BOTTOM. And it is likely that some hedge funds and institutions were doing the same. They are all running for the exits now as if someone yelled fire in a crowded theater.And here is another chart that lends some perspective: Typically - The 200-Week Moving Average Only Fails in A Full-Blown Recession This is a chart of the S&P 500 Index with Recessions Shaded in Red, and the 200-Week Moving Average Underneath. Cleary, the 200-Week Line Holds Unless A Recession has Fully Taken Hold Naturally, the Orwell Administration has redefined the term “Recession,” but with the GDP Now forecasting growth in the third quarter, the economy is sputtering but not quite there yet. War is good for business – do you see how that works?In our decision matrix, we deal with probabilities and look for low-risk entry points. This is why I had mentioned the 200-week line Sunday evening.And, since everyone will be looking for an excuse why the market is rallying (until it stops), how about this? Peak Inflation and Interest Rates, Anyone? Last Year, this chart was flipped, with the divergemce indicating that rates would rise. Now it is the opposite, indicating that the important 10-year Treasury Rate could be peaking. We will have some deeper analysis for subscribers later today. For now, resistance shows at 3875, then 3895. Support shows at 3700, then 3649. The Put Wall has rolled up to 3600 (from 3500), statistically a bullish signal. We also see the Vol Trigger & Zero Gamma points sliding lower, which suggests calls building. Like the last rally, call-building is necessary to sustain the rally and pick up where the short-covering leaves off. I still see a bullish edge into Friday’s OPEX, due to Vanna tailwinds and Charm. This idea strengthens if/while the S&P remains above 3700 support (the highest Gamma Strike). Large puts <=3700 also tilt the board in favor of bulls as these Puts decay into Friday’s expiration. Needless to say, Gap Rules are applicable this morning, especially Numbers 2 and 4. Overnight inventory is obviously 100% long, so there might be some profit-taking from our overnight brethren at the Open. I will be in the trading room today, though day trading could be treacherous in this runaway environment. I will join the room about 15-20 minutes after the opening. Buy dips to the five-day line – at least for now. A.F. Thornton
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AF Thornton Website: https://tradingarchimedes.com A.F. "Arthur" Thornton is an expert in logic, risk/reward quantification, market fractals, pattern recognition and asset class behavioral analysis with 34 years devoted to developing algorithmic and quantitative trading systems. In addition to trading his own capital, Mr. Thornton designs custom algorithmic and quantitative trading systems for a small and exclusive group of exceptionally qualified traders.