All posts by AF Thornton

Founder's Trading Journal

Mid-Day Outlook – 6/11/2012

AF Thornton 0 Comment

Yawn. While it has been a slow road today, the market has thus far survived the tests previously discussed and congregating around the 4225 – 4227 area. Investors traded only 14 contracts on the S&P 500 at the 4221.50 low, which could be the low of the day.

Perhaps there will be some action at the close, but nothing is resolved. The market remains in balance and largely in the same value area as the past week. Tempo is slow, internals are mixed, and that won’t drive a trend.

There is a nice “V” off the lows and into the 4228.30 settlement from yesterday. With another small dip forming a right shoulder, we may have a long trade before the close. I did take a nice short off the 4236 area this morning, but my confidence level was not high enough to convey it. I used two micros and made $50. Again, yawn.

I would take a long trade if it presents, but I want to be out for the last 30-minutes of trade on a Friday. I think it is up to the bears to press their case here. We can criticize the breakout failure, but we have not broken down either – at least yet.

Stay tuned,

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Update 1 – 6/11/2021

AF Thornton 0 Comment

Traders are testing the 5-Day EMA on the downside for the S&P 500 after another failed breakout attempt this morning. The overnight low hovers at the same level. The Navigator Algo trigger on the daily chart (self-calculating) also points to the same general level as go/no-go for the algorithm..

Unless we get a break up and through the 5-min Navigator Algo trigger, the balance rules point down and through the 5-day EMA here and to 4205, but it does not necessarily have to happen today. I am monitoring carefully here.

Be vigilant and careful today.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook – 6/11/2021

AF Thornton 0 Comment
S&P 500 Futures - 24-hour Chart - 5-Minute Candles - 9:48 AM

Today's Key Levels

The Micro Narrative

Yesterday’s intraday breakout to new highs failed and qualifies for a “look above balance and fail” per balance rules. A visit to 4205 is forecast, but there may be a few stumbling blocks on the way.

Ultimately, the price finished in the middle of yesterday’s candle, resolving nothing in terms of our recent balance range. Globex trading leaves a very small candle in the middle of yesterday’s candle. We switched to the September contract on the futures at the end of the day, and that might have some brief impact on pricing but I cannot quantify it. 

Additionally, the S&P 500 gapped down when the Globex futures market opened last night, an unusually negative opening of late. This could be associated with the contract change as well. Globex trading is inside yesterday’s range, forecasting even more balancing. The market spent a lot of time and has a very wide TPO (where price spent the most time) around 4230 overnight, near the top of the balancing range. Inventory is 100% long, so there may be some normal profit taking at the open – old business before new business.

All in all, the market appears tired, but is also challenged by the math between and among the positive and negative sectors. My concern here is that the narrowing spreads between two and ten year rates is unhelpful to bank profits, which threw cold water on financial stocks yesterday. 

By mid-day, leadership surrendered to more defensive sectors, though tech stocks positively reacted to lower rates, as the 10-year Treasury rate tucked below 1.5%. Financial stocks could take the rest of the market down with them, if the negative trend continues.

Our General Day Trading Plan

Our plan always starts with knowing our neighborhood. We need to map all key levels and trendlines we are likely to encounter today.

From there, we have to prioritize those levels we expect to be the true inflection points so that we don’t end up hopelessly confused. Some lines and levels are more important than others. It would help if you similarly mapped any instrument you trade.

I rarely trade Fridays due to options expiration, but today the S&P 500 and NASDAQ 100 will not skirt the edges of their expected moves unless an extensive range manifests. So the usual distortions are inapplicable and I will be trading.

We always start with identifying our quartet levels – yesterday’s high and low, and the overnight high and low. The market typically starts in one direction, then reverses, and sometimes reverses again. There is a 70% probability that price generally will establish the high or low of the day by the end of the first hour of trading. We keep this in mind.

We monitor each of the four levels for support or resistance, as the case may be and as the market picks its direction. If the market breaks a level, we monitor for continuation and move to our next target. That is the basic strategy.

Yesterday’s high and low are 4249 and 4207, respectively. In this writing, the overnight high and low were 4238.50 and 4225.25, respectively.

We augment the quartet with any other important levels we may encounter in the neighborhood. Today, we need to be cognizant of the 5-day EMA trading around 4227 on the September futures contract. We also find the Navigator Algo trigger at the same level. Too much time, or a close below that level, would tip the hat in favor of sellers.

It likely is no accident that the market spent a lot of time at 4227 overnight, as that is also where a very wide TPO and VPOC (volume point of control) lies. Wide TPOs can interrupt price direction.

Below that, we have the wedge uptrend line around the 4215 area (our old balance area high). From there, support lies at yesterday’s 4207 low, just above the 4205 balance low forecast by the “look above and fail” per the balance rules.

We also monitor how the market reacts to the VWAP (volume-weighted average price throughout the day). Long trades generally work better above the VWAP and short trades below the VWAP.

There is nothing but blue sky above yesterday’s high at 3249. But the top wedge line will provide resistance at 4266 or so.

We also monitor internals to determine whether the market is more likely to trend or move sideways. Mixed internals generally send the market sideways, and the best trades are “responsive,” meaning you respond to the range boundaries, long or short, as the case may be.

Exceptionally strong or weak internals, the exception to the rule, cause the market to trend in the direction of the internals. In other words, sideways is the default trading stance as most days are non-trending.

In responsive trading, you can also go long or short to the VWAP or 21-EMA (on a 5-minute chart) from the VWAP standard deviation lines or the day’s value area high and low.

I will continue to expand and document this strategy for day traders with checklists and rules.

We don’t have a lot to go on at the open today. As a trader, I would be quite disappointed had I bought yesterday’s failed breakout. There may be such traders looking to get out today.

This morning, it will pay to monitor the first 30-minute bar. Wherever the range breaks, look to get positioned in that direction on the market’s first pullback to the 30-minute range. That is one way to approach the day.

Good luck today.

A.F. Thornton

Navigator™ Signals for Day Traders

End of Day – 6/10/2021

AF Thornton 0 Comment

Big picture, we are closer to the end of this run than the beginning. That is for sure. You can draw that 5th Wave wedge previously discussed in these pages on the daily S&P 500. That would potentially get us a move higher into the 4250ish area – that would be my bull case. The NASDAQ 100 would likely be testing its all-time highs in the circumstances.

There is simply tension between all of the sectors keeping the picture mixed. The Financials look bad today – no surprises with interest rate spreads compressing. The industrials like Caterpillar and Deere are correcting. A vote on stalled infrastructure negotiations? Health care (XLV) looks great – maybe one of the best charts I have seen in a while – but the returns may not be what we are accustomed to in tech. But tech is not fairing badly either today.

How about this; if we close above 4235 on the S&P 500, I would see a continued, yawning grind higher as we saw earlier today. If we close back inside the balance range and below that level, I will shift to “prove it to me” with the bulls.

It is late here, so I am signing off for the night, comfortable taking no position until the picture clarifies.

As of this moment, the NASDAQ 100 is not much above our exit point yesterday, and that is a bit disappointing for a “breakout.” Maybe the close will be more pleasing.

Internals have deteriorated steadily from the open, another disappointment. This morning really looked like the market could do the trick. So far, my contrarian stance was warranted, and that is a bit of a surprise too.

A.F. Thornton

Navigator™ Signals for Day Traders

Mid-Day Update – 6/10/2021

AF Thornton 0 Comment

I cannot call this one right now. We looked above and failed. That normally means a move back down to the bottom of balance – 4205. And if we cannot maintain a break out above 4232 on the unemployment and inflation figures, what will be the catalyst to take us higher? This morning was another WWSHD – at least in my view. Now, we have climbed back to the top of the range. 

So I believe it best to wait for the close. The additional MGI (market-generated information) will be helpful. If we go back into the range, or below it, with the entire world looking at the same breakout levels, it will not bode well. This does not have to happen, but be aware of it.

Add all of this to yesterday’s comments. Low VIX, low put/call ratio – no fear. Complacency plus a key level – that is the issue today.

A.F. Thornton

Founder's Trading Journal

Pre-Market Update – 6/10/2021

AF Thornton 0 Comment

Solid breakout on the S&P 500 with strong internals. 

The initial move includes some short-covering, we will see if price is accepted in this area. 

The NASDAQ 100 has broken out above its near-term high, but remains below the all-time high. If price is accepted here, the head and shoulders pattern to reverse higher is solidified. 

I am continuing to lighten on my personal positions in the rally. I want the weekend to make any further decisions.

Energy and tech are leading. That is unusual as of late. Financials are laggards thus far.

Stay tuned. 

Navigator™ Signals for Day Traders Navigator™ Signals for Swing Traders

Pre-Market Outlook – 6/10/2021

AF Thornton 0 Comment

When one is half Irish as I am, I find myself always on the lookout for Leprechauns. And just because I am paranoid does not mean that they won’t steal my gold. Leprechauns come in many forms.

At least one of them has been around trying to prevent me from launching our Founder’s Group live trading room. The trades I provide to this special group of exceptionally qualified traders are something we have been looking forward to sharing in real-time. Three solid years of work and trading went into creating our discipline, strategies, and algorithms. We continuously improve them.

We were ready to go; then tragedy struck with my father-in-law rapidly deteriorating and passing after his second China Virus shot. As a result, I will be in Greece until early July – and then back again soon after. On this beautiful (but remote) Island, Gig-speed Internet is a fond memory from the States. They will be going straight to 5g, but it still is a few months out.

I cannot broadcast with something akin to dial-up – which is the out-of-the-box service here. Even my Sprint cell phone Internet is faster than the home WiFi service here.

Truly, I am amazed at how well what I do have works. I certainly would not trade a one-minute chart, but 5-minute charts seem to do fine. For now, I will begin the new service by substituting with three daily updates – plus an end-of-day wrap. However, I need to make one more adjustment for the service to have a chance at working.

If we were live in a trading room, I would constantly be sharing my thoughts. If we did a buy or sell, the “why” would be obvious. In the current circumstances, not so much.

Yesterday, by the time the Founder’s Group had sold its NASDAQ 100 position, it took me another 15-20 minutes to write up the “why” and send it out with charts. By that time, the price had moved another 30 points against the trade. What is the point of that?

And this is not the first time that has happened. That is one reason I have not published the investment performance recently. It can render false hope if traders cannot truly achieve it.

So from here on out, I will merely publish “buy” or “sell” and the relevant instrument. I will not explain until later in the day. Most likely, you will glean where I am going by reading the updates.

You have been around long enough to know that my decisions are correct at least 80% of the time and the results have been excellent. Stops, as long as you set and monitor them, take care of the rest.

Had you been able to execute close to the signals, you would be up nearly 400% year-to-date – starting with our humble $10,000 account at the beginning of the year. $10,000 is now $40,000. Last year’s returns were close to 900%. $10,000 became $90,000.

I am also working on a text alert system if I cannot figure out a way to run Pro-Trading Room from the Island. I will likely be spending most of my time here in Kefalonia over the next year, so I will find a solution. Many, many opportunities are opening up here as I am able to span so many time zones.

Also, I will be issuing passwords to the new service, as we do not want the information to be available to the public. I will send you your unique password as soon as it becomes available.

So the market continues to favor the bulls. Still, I published my very short-term concerns yesterday regarding the unusual complacency levels here as we continue to congregate around the all-time highs.

I view this lack of fear and respect for risk in the context of the 18-month cycle as being quite mature. The treasury/stock market ratio also has a negative divergence, as do the number of stocks over their 20 and 50-day moving averages. Leadership yesterday shifted to defensive names.

Consider that the rally in treasuries might actually relate to defensive posturing rather than any vote on higher or lower interest rates.

For all of these reasons, the Founder’s Group went back to cash yesterday. We will give up some gains if a positive break-out occurs this morning, but we will gladly make the sacrifice in light of reasonable indications that the breakout could be a bull trap and fail.

The inflation numbers came out slightly higher than expected, and it is a historically high number for recent times regardless. So far, the S&P 500 has rocked in about a 20-point range, taking out yesterday’s low, the overnight low, and the overnight high (all within minutes after the release). 

Since we have moved below yesterday’s range, traders may want to retest that level in the regular session today. As far as balance goes, nothing has been resolved and it would be difficult to know what additional catalyst the market requires to make its ultimate, directional move. We will, therefore, learn a lot in today’s time frame.

Today’s Strategy

Today is the reverse of yesterday. Look for a possible test of the overnight low, and treat it is a go/no go situation. I would treat the top of the range similarly – if we get there. Any acceptance below the overnight low would be negative and my line in the sand for the day. If the overnight low holds, the scenario remains tipped to the bulls.

Good luck today.

A.F. Thornton

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