Category Navigator™ Signals for Day Traders

Navigator™ Signals for Day Traders

Pre-Market Outlook

AF Thornton 0 Comment
Hourly Chart - 24-Hr S&P 500 Index Futures

If the bears get a reversal down this week, it would be from the 3rd leg up in a wedge top. May 7 and June 14 were the 1st two tops.

If the reversal down was strong, traders would expect a 2nd leg down. They would then wonder if the yearlong rally was finally ending and converting into a trading range.

Even though there should be a 15 – 20% correction this year after such a climactic rally, the bulls will buy it. The bull trend has been so strong that traders will expect a test back up to the prior high.

Therefore, the downside risk over the next few months is probably 20%. Any selloff should convert the bull trend into a trading range and not a bear trend.

After several months in a trading range, there would be a 40% chance of a trend reversal (into a bear trend) on the daily chart.

Today’s Plan

We continue forward with a number of untested, nuanced levels stacking up below us. At the same time, we see short- term buyers stepping in where they would be expected which is a sign these traders continue to be in control.

Note the overnight low at 4268.50 coming right into the Friday’s Point of Control as a very recent example.

The S&P 500 achieved another new high in Globex. Such highs are always less secure.

On any weakness,  downside targets should be as easy as glancing at the Key Levels on the chart above, not the least of which are the back to back prominent VPOC’s at 4257.50 and 4230.87. The market is ripe (and getting riper) for a liquidation break that will repair some of these structures.

Early indications give little clue as to how prices will react on the open. The better trades may develop later rather than earlier today. There is a lot of blue sky above the highs, but note the top wedge and channel lines that must be conquered.

As the Globex low came down to the POC and rejected, watch this area as potential trigger for lower price action, should it be retested. Think of it as a weak low and a good bull/bear line for today.

Remember that a liquidation break will occur on faster tempo then we’ve had recently. If the market trades down very slow then sellers are probably not very active.

A.F. Thornton

Navigator™ Signals for Day Traders

Mid-Day Update

AF Thornton 0 Comment

But for the Weekly Expected Move High...

Not so bad this morning, right? All-time highs, at least for a nanosecond. Tick distribution has been mostly positive. A/D lines and breadth look constructive. The Cumulative Tick is hanging in there. More volume is going into the stocks going up than down.

Basically, we have a Gap and Hold on slow tempo – mostly bullish. There could be a powerful reversal pattern forming. So what the heck is there to complain about? Ok, the put/call ratio shows complacency. So what else is new?

There is just one problem. That darn WEM high is drawing the price back down to 4256 (on the SPX cash) or about 4248.25 (to be exact) on the 24-hour futures contract. The WEM high is acting like honey to the flies – just as we suspected this morning. At least, that was the 70% probability.

The decline does have a falling wedge (reversal soon) look to it. There is no law against playing up above the WEM high, as long as the price gets home before sundown tomorrow. Always watch out for that lost glass slipper…

Bigger picture, I am watching the waning momentum illustrated at the bottom of the chart. Keep in mind; this two-hour candle is not closed yet, so the momentum still might break the downtrend. If it doesn’t, that could indicate a double top with the high from last week. Also, I do not see a true pivot lower yet on the 2-hour chart. I am still using the 2-hour as my master day-trading chart.

Let’s see what they can do with the afternoon drive. My sense is that if the market can hold here, we might have a chance to move up to the top red trendline on the chart connecting the recent highs early next week. Don’t forget; we roll into the end of the calendar quarter next week. That could get interesting as well. It is always something.

My next update will be after the close, unless something significant unfolds.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook – 6/23/2021

AF Thornton 0 Comment

While momentum buyers have been in control the past few sessions, the S&P 500 index has hit its Weekly Expected Move (“WEM”) high for the week and will likely be rangebound through Friday, with the WEM level around 4250 acting as a magnet. The index may be able to squeak out a new all-time high above 4258, but it would have to punch through the WEM high at 4250, and there is a 70% probability the index will end the week at or below that level.

It also appears that whatever fear Fed Chairman Powell and Fed Governor Bullard may have temporarily injected into the market, traders are discounting/ignoring the coming QE “taper”  in a big way.

Globex activity failed to test the single prints of yesterday’s regular session. And yesterday’s distribution came down to the same level as the overnight low and rallied from there. Between yesterday and Monday, there is a lot of emotional trading (short-covering) and poor structure below the current level for the market to repair and carry forward potentially.

Last night’s overnight distribution also stopped sellers just shy of yesterday’s Point of Control (POC) at 4230.75. Markets that test visual and mechanical (not to mention nuanced) references like this are controlled by short-term traders rather than longer-term investors. This is not necessarily negative or unsustainable. If anything, one might see it as bullish as this faction of traders has not proven to be easily shaken and can stay in charge for long stretches.

Coming into today’s session, we have a key level above us that is noteworthy and could be the key to higher prices should it be taken out. The overnight high at 4248.25 stopped right at the same price where two recent day sessions also topped out. Use this as a potential go/no-go break-out level, keeping the WEM high at 4250 on your radar too.

Yesterday’s single prints also should be entered into the larger narrative, even if they aren’t exactly key levels today.

Assume buyers are in control and will continue to be today. Pullback buys are probably the best strategy unless the market signals otherwise. Watch the 30-minute range first. Also, after two trend days, a range day is in the cards.

Any breach of the overnight high level puts the all-time high at 4258 into play. That all-time high was made in an overnight session which makes it less secure. The market will likely pull back to the WEM high on a pivot lower even if the index breaks out. The NASDAQ 100 is almost at its WEM high as well.

A.F. Thornton

Navigator™ Signals for Day Traders

Mid-Day Report – 6/22/2021

AF Thornton 0 Comment

The NASDAQ 100 had managed to best the overnight high and yesterday’s high to achieve a new, all-time high (at least intraday). So far, price is finding acceptance in the NASDAQ 100 expanded range. The S&P 500 has achieved the same besting of the ONH and yesterday’s high, but not the all-time high.

The Founder’s Group has maintained its small, initial short position and is looking to add to it late today, depending on how the rest of the day goes. We were very close to getting stopped out on the last hourly bar – but squeaked through thus far.

The price movement has been impressive, but the internals are lousy. Nothing has changed significantly in the macro picture outlined in our View from the Top discussion earlier this week. If I am wrong on a slightly bearish call here, it will be because we are being undermined by the capitalization math of the tech stocks. If that turns out to be the case, then I will move from the index itself to a narrower target like the sector or some sector leaders. That is my personal, unofficial position for the Founders Group.

The Navigator swing strategy remains 100% cash for now. 

For day traders, we did have another nice breakout trade from the initial 30-min range today, just like yesterday. I will post it at the end of the day.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook – 6/22/2021

AF Thornton 0 Comment

I feel like I am living in three different worlds at the moment. First, there is the NASDAQ 100, growth stock, and tech world where all seems well. Then there are nine out of the 11 S&P 500 sectors that have been correcting for a month. Finally, there is the S&P 500 index itself trying to ride the fence.

Was yesterday a “key reversal?” Did one Fed Governor’s comments Friday send the market reeling, only to recover yesterday on seemingly opposing comments from a different Fed governor? Did the publication of Fed Chairman Powell’s proposed Congressional testimony overnight help preserve yesterday’s gains? Was Friday just another one-off bounce to the 50-day line and back? 

When I look across the correcting sectors, I would argue for yesterday’s action to be a dead cat bounce. Those are the bounces that suck amateurs back into the market while the professionals sell their inventory to them and then pound the market down. Of course, nothing is ever quite that simple.

In the chart above, the most optimistic scenario is that we just keep going today and challenge the old highs on the S&P 500. The middle ground is that we continue to form the reversal pattern mentioned yesterday and outlined on the hourly chart above. The pessimistic scenario is that we retraced a little more than half the sell-off and we continue down to new lows.

The Founders Group took a small, unofficial short position at 4215 on the index yesterday. Unofficial means that this is not a formal, announced Navigator trade. We are simply sharing our thinking out loud.

Sometimes, you want to nibble at establishing a short position when the index is ripping higher as the premium is rich enough to give you an extra boost. The initial stop was the old high, but now we have lowered that to a close above the Navigator trigger line. The trigger line is dynamic, currently 4225 at this writing. As far as we are concerned, this was a low-risk entry point for a short (if nothing else) with a reasonable stop.

If my conviction was high, I would be more aggressive, but the jury is still out a bit on whether the NASDAQ 100 and growth will pull us out of the broad market, stealth correction. Or, alternatively, will the broad market eventually pull the narrow growth=style group down to new lows. Let’s just see what happens and let price guide us.

24-Hour S&P 500 Index Futures - Volume / Market Profiles

Today’s Plan

The size of yesterday’s reversal was a bit of a surprise to the bears, leading to poor structure in the distribution range, which was roughly 60% single prints. These singles are caused by panic short-covering.

Today’s session will be all about whether or not these higher prices are accepted or not. As of now, they have been accepted in the overnight session – but see the discussion above.

Continue to carry the single prints forward until they are tested. Holding above them is bullish and nips the odds of heading lower. Testing them increases those odds. I will be watching how the market handles the overnight high at 4226.25, settlement (also the value area high at 4219), and 4202 which is the top of the single prints.

It’s common after an expansion of range to balance a bit which is what we could have in today’s session. As of now, overnight activity is already doing so and the regular sessions often follow the tone of the overnight. If so, assume responsive trade. As mentioned above, only acceptance below the top of the single prints brings potential for change.

Navigator™ Signals for Day Traders

Mid-Day Outlook – 6/21/2021

AF Thornton 0 Comment

If you followed the morning plan, today was textbook of the 30-min breakout range I described. Strong internals, strong breakout, but to me it is a shorting opportunity as I believe that the trend is now down.

If you are in the bearish camp, as I am, this is where you can start to short the market. You can buy at the money puts, as I will. I am starting here. I am starting with the S&P 500, but you could get more bang for the buck from the NASDAQ 100. If either index goes higher, you can do more but start conservatively. Your stop is a new closing high in either index. You can go out to the July 16th monthly expirations or beyond. July 20th would be a perfect candidate for the 18-month cycle trough – but calling it to the day is nearly impossible – but it is in the zone. 

After the first down leg (which I believe ended Friday), you can expect the market to retrace most of it before it rolls over again. Call premiums are still high if you want to sell calls, but consider a vertical spread so you have some protection. I am not a fan of selling a naked call.

As in life there are no guarantees. When you buy a put, your risk is what you paid for it. As always, remember I can be wrong and certainly have been wrong at times. You have to make your own decisions.

Start slow.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook – 6/21/2021

AF Thornton 0 Comment

Neighborhood Watch Chart

24-Hr S&P 500 Index Futures - 2-Hour Candles

Let’s start with the 2-hour candle chart above. I have been using a 2-hour chart as my master chart for day trading lately. I will change that from time to time, but it is working well for now. In this chart, I define the neighborhood where the market will hang out this week. You know what they say. You need to know your neighborhood, and trading is no different.

What is nice is that the neighborhood (highlighted in gray above) is defined by the Weekly Expected Move. There is a 70% probability of staying within the Weekly Expected Move range each week. In fact, multiple billions are betting that price will stay inside this range. Also, each week, there is a high probability that the price will tag one end of the range. Once you have established the week’s direction, the corresponding end of the move is your ultimate target.

I will always do my best to help you prioritize the support and resistance you will encounter each day. In so doing, I look at the market from two perspectives. First, we have the traditional chart perspective as outlined in the normal price chart above. Second, we will look at the market/volume profile perspective, which measures volume and time at a price.

In creating your chart, then, start by calculating the Weekly Expected Move and drawing it in. Then, using monthly, weekly and daily charts, draw in any major support or resistance that you will encounter in the range. I usually market these on the right with an “M,” “W,” or “D.” Also, look for important moving averages you may encounter in the week’s range from the monthly, weekly, and daily charts.

Normally, you will contend merely with the 5-day line from the daily chart. In a larger correction (such as the one unfolding now), you may encounter the daily 21, daily 50, and weekly 21.

I draw or program all of this into my 2-hour chart. As stated above, I like my 2-hour chart to at least be readable. Even if it appears cluttered at first, I can step down to a 5 or 15-minute trading chart which will be uncluttered but have all the relevant lines I need to day trade.

Also, recall from our discussion last week, you always want to paint yesterday’s high and low and the overnight high and low (if you are trading the futures chart). Initially, traders will move the market towards these key levels to test strength or weakness for direction. You can pivot at one of these levels or breakthrough it as the case may be. Breaks can be fake-outs – so monitoring for acceptance and continuation at the new levels is important. Often, you are applying one or more of the setup rules I point out pre-market.

Today’s Plan – Micro Narrative

This morning, the market will open with overnight inventory balanced and prices in the upper 1/3 of Friday’s range. Having said that, overnight range expanded Friday’s range lower overnight, so carry that forward today as well. About half of the overnight trading is above and half below Friday’s settlement. In such cases, nothing tips us as to the market’s initial direction. Accordingly, I will mark the top and bottom of the first 30-minutes and take a trade in the direction of the first breakout, but only after the market pulls back from the initial breakout. I look for a price pivot on the pullback. A good target, assuming nothing else is in the way, is double the range. This is not easy and can be tricky at times. The market can change direction several times before it settles down. Usually, by 10:30 am EST, there is a 70% probability that the high or low of the day has been established.

Overnight we have somewhat of a “V” bottom. That leaves the potential for a reversal pattern to go higher. All of Friday’s identified “support” levels will now act as resistance if the market attempts to go higher. If the market can take out the overnight high at 4177.50, I would target the former breakdown low around 4185.50, all the way up to the 21-day and downtrend line from the top, which both congregate around 4200. Be cognizant, though, that the market could not punch through the 50-day line on Friday, which is about the same level as the overnight high at 4177.50. That level could act as a magnet or center line to prices today, but that is a wild guess.

On the downside, target Friday’s settlement at 4151.25, also the overnight halfback. Then focus on the overnight low at 4126.75.

As stated before, the default direction of the market every day is sideways or rangebound once a range is established. Market internals can help you determine this. Mixed internals usually mean rangebound or what we call “responsive” trading. You buy and/or short when you get to the end of the daily range and pivot. The safest trade is to get out at the middle of the range. That is where running a daily Volume Weighted Average Price (VWAP) line can be helpful. It gives you the middle in rangebound conditions. You can run standard deviation bands on the indicator to help identify the range boundaries.

I have highlighted the WEM range in the gray box above. So if you see the gray highlight in a 5-minute chart later today, you will know what it is. As a side note, the safest calculation for the WEM is the hand calculation on the SPX Cash Index. The cash index is also the best place to calculate your support and resistance. There is a lot of premium in the new September futures contract – so the cash index levels will not correspond well to the futures. It turns out that the SPX cash index actually did pound against the expected move on Friday, before the index rolled over. I missed that occurrence in the cash index because I was not allowing for the extra premium in the new futures contract.

I will publish a quick primer on determining a price turn with some precision later this week. It is unwise to put on trades simply because you are at support or resistance. There is a method to confirm a turn. Once you know it, you can watch the price to determine its probability of pivoting before you commit to the move. And as stated before, some support and resistance are more important than others. Usually, that will be where multiple support and resistance zones congregate.

Last week’s decline from the Fed meeting is impulsive and has exceeded the typical, symmetrical a-b-c wave. The “c” portion of the wave extended, increasing the probability that the market’s top is in. The market ended Friday very oversold on the intraday charts, so a bounce this morning is not surprising. However, the S&P 500 index is not yet oversold on the daily charts, so caution is warranted for longs.

Good luck today. I don’t trade Mondays typically, as I often state. Weird behavior often follows weekends, as it follows a Friday of quadruple witching expiration.

My fingers are tired from typing anyway this morning. The next update will come out about Noon EST. Have a great trading day.

A.F. Thornton

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

Pre-Market 6/18/2021

AF Thornton 0 Comment

As indicated yesterday, I am not trading today, nor would I with quadruple witching (monthly and quarterly options and futures expiration). There will be no commentary today as it is an important religious holiday here in Greece. Since just about everyone on this island is either a relative by blood or marriage to my wonderful wife, appearances are important.

The Navigator Swing Strategy remains 100% cash as it has been for the past week or so. As to day trading today, as previously set forth in these pages weird things can happen on quadruple witching days. As a perfect example, we see now (at 8:33 EST – the time of this writing) the S&P 500 making another pass at the WEM low –  putting in a brand new (post-Fed Meeting) low at 4173.50. I hand calculate the WEM low to be 4188 – while the computer calculation is 4189. The point is that many people will lose money today if the S&P 500 futures close below the WEM low level.

I was forbidden from sneaking another trade to or from the WEM low here, but I will sneak in a few comments. In this area, between say 4165 and 4188, we have the important rising intermediate trendline at 4193, the Fed Day reversal low at 4183, the 50-day EMA at 4176, and the 6/3 pivot low at 4165. That is a lot of support.

But for today only – I would key in on the 4188-89 WEM options expiration low. There is nothing else to probabilistically cradle the market below 4188-89 after expiration this afternoon. The WEM low will act as a magnet.

While the Weekly Expected Move low holds the market 80% of the time, on the occasions when it doesn’t, especially on an expiration Friday, we could experience a waterfall decline of sorts as market makers rush to neutralize their losses by selling S&P 500 futures contracts. That would be the exception to the rule. 

Otherwise, I would expect the market to move back to the 4188-89 level or higher before expiration at the close today – from wherever the market decides to pivot higher after this latest or any further sell-offs later today.

You don’t blindly buy the WEM low. You buy the pivot from the ultimate low or lows the market achieves today (maybe using a 15-minute chart as your primary analysis for the turn). So in one scenario, you may be buying close to the WEM low and continuing higher above it, with a successful retest of the Fed Day low around 4183 in place. Also, however, you could be riding a buy trade from a much lower level back up to the WEM low at 4188-89 by the close. Do you see how this works? Treat the WEM low as a magnet as long as the S&P 500 is trading below it.

Beyond that, the market needs to close above the rising, intermediate trendline currently around 4193 to keep the intermediate trend alive. The S&P 500’s negative divergence (meaning the broad market is not confirming the new high in the NASDAQ 100 by a long shot) is concerning. 

But for the NASDAQ 100 firing its last shot higher yesterday, I would be betting that the intermediate trend is finally rolling over. I will have more to say over the weekend, as I am not 100% confident in the analysis yet, but rolling over is my leaning.

Trading much below the 6/3 low today, which sits at 4165.25, could trigger the outlier, waterfall decline from which the market will not recover back to the WEM low. Admittedly, this is something we rarely experience. For now, traders could be running the stops under the Fed Day reversal low at 4183 – only to load up inventory to bring the market right back to the 4188-89 level to take profits late in the day. Right now, the market looks to be forming a falling wedge pattern to reverse higher on the 24-Hour futures data.

With yesterday’s settlement all the way back up at 4212, we would be dealing with a gap this morning (and perhaps a true gap if we open below yesterday’s low at 4183). If so, GAP rules would apply.

Also, keep in mind that we would be opening outside our recent balance area, which has the southern boundary at 4205, with the 5-day EMA just above there at 4209 and the 21-day EMA just below at 4204.

Summarizing then, a close below the 5-day EMA (4209), 21-day EMA (4204), 50-day EMA (4176) and the intermediate trendline itself (4192) nips the intermediate trend. It definitively shifts our strategy from buying dips to shorting rallies for swing trades. Day trades have to be considered day by day.

Best of luck if you decide to trade today, and enjoy your weekend.

A.F. Thornton

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

Fed Update – 6/21/2021

AF Thornton 0 Comment
S&P 500 24-Hour Index Futures - 2-hr Candles

The Fed sounded dovish (no apparent policy changes), and the market is unhappy so far. This is the misstep I worried about that would seem illogical at first blush. We like easy monetary policy, right? Unless inflation gets out of the box, which it has.

The price did not even seem to vacillate as usual. Instead, it just sold off right to the Gap area and Weekly Expected Move Low. The WEM Low and our downside target was 4189. The low so far is 4190.25. Ok, I missed it by 1.25 cents. Nobody is perfect.

Let’s see if anything is walked back in the news conference. The WEM low and the 21-day EMA are holding the market thus far, but the wedge is broken. Of course, anything is possible, but it is reasonable to conclude that the intermediate correction we expect is underway. The close will define where we sit, which depends on where the market stands.

Stay tuned – the next update will come after the close.

Subscribe!

Free Blog content and videos delivered to your email.

Health and Wealth Podcast Coming Soon!

We value your privacy, never sell your information, and detest spam!