Pre-Market Outlook - 5/6/2021 | Archimedes Methodologies

Thursday Morning, 5/6/2021

Nobody came away happy yesterday. For the bulls, we can say that the market did not revisit the lows and held within what is now a bit wider balance range. But the market rejected the gap area, the old balance area, and the 5-EMA. What makes a bull sad, makes a bear happy. So the aforementioned bull negatives are bear positives.

Pin the Tail on 4180

There is the old game, pin the tail on the Donkey (poor Donkey). Here, the game is to pin the tail on 4180, where all the volume over the past few weeks is concentrated.

Options strategists are no doubt selling premium around that level now, perpetuating it. Every day that passes then, the risk of an explosive move increases. Whichever direction the market moves outside the bounds of the balance area, all of those option players will have to scramble to unwind their positions. For now, the balance area is bounded by the all-time at 4211 and the recent low around 4114 – roughly a 100-point range.

For now, the S&P 500 index has support at 4114; also, the Weekly Expected Move low. That likely means that the big move will occur next week. Only time will tell. The recent low is likely an 80-day cycle low – a low of relative importance. However, if a bear market is underway, the cycle will peak early and roll over in what is called “left-translation.” What that means is that if you look at the semi-circle representing the cycle, it has the tendency to peak left of center rather than right of center, as with a bull cycle.

Yesterday’s action gave me no reason to change our intermediate strategy, which remains 100% cash.

Today's Day Trading Strategy

We will be opening inside yesterday’s range, with overnight inventory nearly 100% long, raising the possibility of a negative counter-auction at the open. Key support is the overnight low around 4151.50 and the half-roundie itself around 4150. From there, the key reference would be a retest of the recent low, 4/20 low, and WEM low, which is an area ranging from 4120 to 4110.

A move back up and through the open would be bullish, as would a move back up and through the 5-EMA and back into the balance area above 4167.

Watch internals. It is challenging for the S&P 500 to overcome tech if it continues to weigh the market down.

I would trade later rather than earlier, when the picture may be clearer.

A.F. Thornton

Pre-Market Outlook – 5/6/2021