Category Navigator™ Signals for Day Traders

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

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

Navigator™ Signals for Day Traders

Pre-Market Outlook – 6/9/2021

AF Thornton 0 Comment

Persistence Beats Resistance?

Sometimes I think even Barnum and Baily would be jealous of the circus that goes on inside my head. We have a full moon on Thursday. Does it affect the market? Most of the time – yes. Hospital emergency rooms fill up too.

Then we roll from June into the September futures contracts on the same day. The September S&P 500 futures contract currently trades about 10 points below May. Go figure. Coincidence? Maybe. Regardless, these extraneous factors can be tricky.

The S&P 500 has been beating on the overhead resistance around 4233 or so. The all-time (intraday) high is 4238.25. There is an old saying – persistence beats resistance. There is a 75% chance the S&P 500 will break out, but the other 25% can kill you. As I said last week, it is like Grandma slapping my hand in the cookie jar every time the S&P 500 tries to soar. Yesterday was no exception, but Grandpa cannot seem to pound the market down either.

The overnight traders (remember it is daytime where they are) often love to break the market out in Globex and take away the candy from the Americans in the regular session. Thus far, they have not managed to do so, so the S&P 500 is inside yesterday’s range. I do like the sell in the morning and buy in the afternoon action the past few days. That is more bullish than bearish. Also, the value area (where 70% of the volume occurred) is unchanged for three days in a row. That is undoubtedly not bearish.

So, where does that leave our plan for the day? Ditto yesterday. We are trading inside of yesterday’s range which still reflects a balancing market. If we do break out, it is a go/no go situation. Watch internals for support or not. 

We either need the majority in on the game or the FAANGMAN+T group to carry the water for everyone else. Today, like yesterday, is a bit like a look above under balance rules. Monitor for acceptance and continuation or not, as the case may be. Yesterday’s mid-day lows (4424 on the S&P 500 futures and 13829.25 on the NASDAQ 100) are my line in the sand today. My bias is positive above those levels.

Good luck today!

A.F. Thornton

Navigator™ Signals for Day Traders

Mid-Day Update – 6/8/2021

AF Thornton 0 Comment

They are not making it easy today, and it reminds me a bit of yesterday. Yesterday, the market was weak all morning but left us with a happy finish. Selling in the morning and buying into the close is bullish. Interestingly, the S&P 500 and NASDAQ 100 are swapping leadership back and forth this morning. It is a bit like the wife directing me to place the furniture.

We had a two-step liquidation break off the open. The pop-down helped clear out the weak hands (it almost got mine). The market went right back into that dastardly balance range. Not again???

While the price flirted below 4022 (on the S&P 500), “value” (70% of the volume location) is unchanged from yesterday. The situation, then, remains positive and still calls for a hat tip favoring the bulls, though ever so slightly. 

Don’t get me wrong; the failed breakout thus far is a disappointment. But today is far from over. I will use the 11:30 am EST lows as my line in the sand for the rest of the day.

I do not see anything newsworthy to mention. The IWM (Russell 2000) has hit its WEM high, so I am done there for the week. Both the NASDAQ 100 and S&P 500 have room to run, but it is a hard-fought battle. That is not a surprise at these levels.

Could we possibly be forming a double top on the S&P 500 with the NASDAQ 100 coming in a bit lower? Sure, but I would not call it yet. I am bothered by the shallow levels we see on the put/call ratio. The surging put/call ratio and negative sentiment gave me the confidence to go in and stay put a few weeks ago. I wouldn’t say I like it when the crowd is complacent. It always makes me want to go the other way.

Perhaps offsetting the complacency, 10-year rates continue to behave, down slightly to the 1.5% level today. As well, sometimes they launch the trading algorithms mid-day, and the gamma squeeze will help the market wind steadily higher. Let’s see.

If we maintain the lows, my bias remains long, and I will make final decisions in the last 30-minutes of trading. As usual, I will post any changes.

I think traders are selling all morning in Chicago and New York, and then the hedge funds are jumping in over lunch. Isn’t this fun? I think I might have suggested you to take the summer off. You know what they say, “sell in May and go away.”

It is 7:30 pm here in Kefalonia, Greece as I write this, with a beautiful sunset over the Ionian Sea. While I am not here on the best of occasions, it would be nice to open a bottle of wine on the beach. But the U.S. stock market is open until 11:00 pm!

As always, stay tuned.

A.F. Thornton

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

Pre-Market Outlook – 6/8/2021

AF Thornton 0 Comment

Breakout, Double-Top, or More Chop?

The market gods were smiling with forgiveness yesterday. When I confessed my sins on these pages, providence lifted my burdens. So even though I missed the initial moves off the 21-day lines in the indexes last week, the powers above brought the market halfway down Friday’s bar to give me another chance. It was as if a kind hand dropped from the clouds, opening up with the next opportunity.

For the Founder’s Group and the Navigator Swing Strategy, I put us into the NASDAQ 100 at 13,733. I saw a bit more conviction and relative strength there than the S&P 500. The index followed through with a double bottom and positive momentum divergence on the intraday chart. The NASDAQ 100 is moving higher in Globex at this writing. In fact, we are more than 100 points or about $2,000 per contract ahead of our entry, and breaking the neckline of a bottoming head and shoulders pattern that is now reversing higher and should take us up to test the all-time highs, if not higher. We will now use the 5-day stop line as we recently did on our S&P 500 position.

Yet, there is another lesson in these past few sessions that I would like to share. It happens often enough that you might want to place this one in your notebook. It can happen in any time frame. And while I mentioned I am not a pattern trader, I still don’t ignore them. Patterns can help us see the markets in different ways, and even set price projections when the patterns take. A great website for learning patterns and their possibilities is Bulkowski’s PatternTrader.com.

The lesson starts with last Thursday’s labeling of the NASDAQ 100. I had identified a potential head and shoulders topping pattern and labeled it as you will see in the first chart below. Of course, it was a qualified opinion. I often opine in such a way. But let’s face it, I am of no use if I am constantly saying “it might be this” or “it might be that.” And in further confession to the heavenly powers that govern these markets, the pattern did have a negative influence on my decisions last week no matter what I said or how much I was fooling myself.

When we are stopped out on the 5-day line, an Algo sell signal is painting, Tesla and Apple are breaking down, and we are in a large down bar, a topping pattern would merely seem like icing on the cake. I take my stop, head to the beach, and take Friday off, booking the profits and ever confident in my forecast. Thank heavens I didn’t stick around and short the market!

NASDAQ 100 Futures - From the Perspective it is Topping

But it is never quite so easy, is it? I have achieved my trading success by combing unrelenting curiosity with constantly questioning the current consensus. Frequently, a topping head and shoulders pattern (or a bottoming head and shoulders pattern) can morph into the same design but smaller and in the opposite direction. This morphing has often happened to me – and it should be in your notebook. I now always consider the possibility.

NASDAQ 100 Futures - From the Perspective it is Bottoming

So there you have it, the reversal’s reversal. Perhaps we will coin that phrase. And with the overnight action breaking out decisively, the NASDAQ 100 seems well on its way to challenging its old high. The pattern projects a move to 14,600, but even if we make it up to the old high at 14,064, the Weekly Expected Move high is at 14,038. That is a rough combo to take out before Friday. Perhaps we could do so next week. Also, remember that even as we break the neckline of the bottoming head and shoulders reversal pattern today, the index could fall back and retest the neckline before it decisively moves higher.

I suppose another item bears mentioning. Last week, the cyclically sensitive sectors such as energy, metals, financials, and industrials seemed to be rocking the universe. Yet this latest move has been all about the interest-sensitive growth stocks, responding to a somewhat unexpected rally in the bond market accompanied by falling 10-year rates. Who would have thought – only a few weeks ago?

Please make no mistake; interest rates will rule sector allocation as we advance and rates will most likely be moving higher. We should let growth do its thing here, but after the cyclical stocks and sectors rest a bit, they are still very much on my radar. Recall my comments from last week, set alerts for these cyclical sectors and stocks around their 21 and 50-day lines, depending on each instruments’ unique behavior. Perhaps the back and forth between cyclical and growth stocks will be with us for some time as the markets move forward.

I might highlight one more element of successful trading if you will kindly indulge me. No matter what happens in trading, you must be willing to jump right back on the horse to succeed. And no question committed students can and will succeed if they are engaged. I am not saying it is easy to do so, but I will constantly harp on this point.

I missed Friday’s move, but I waited patiently for the next opportunity. It came sooner rather than later, but that should not matter. Successful traders (and investors) are market sociopaths. They have no conscience but nearly an automated response to conditions as they present, right or wrong positive or negative.

Today's Day-Trading Plan

Hard to believe, but the S&P 500 futures tested 4215 last night once again and survived. I also noticed that some European indexes, including the German Dax Index, are already trading at new post-pandemic highs, aided by a strong Euro. Actually, at an exchange rate of 1.22 Euros to the Dollar, I am keeping my money in Euros while I am over here. It stings!

At this writing, both the NASDAQ 100 and S&P 500 will open above yesterday’s range and near the candle top.  A true gap higher is possible, and gap rules would apply if the true gap presents. Inventory is balanced, so there is no typical incentive to fade a gap – making a gap-and-go scenario more likely. If we make it to the old highs (only a hair above us on the S&P 500), the market will present us with a go/no go situation. Monitor carefully for continuation and be on alert for the bull trap. I don’t know how to tell you to avoid it – but if I had two contracts, I would sell one at the old high and get my stop to break even on the other to keep it as a runner for a continuation of the breakout.

On both the S&P 500 and the NASDAQ 100, don’t lose sight of the WEM highs at 4280 and 14,038, respectively. Even with a true gap higher on the open, the gap won’t be large enough to engender shock and awe, providing less potential for early trade given that there is no overnight inventory imbalance. The better trades might develop later rather than earlier in today’s session.

Upside references and targets are visual and mechanical for all. The all-time highs are the apparent targets on strength, monitoring for continuation after that. On weakness, watch the back-to-back settlements around 4226 on the S&P 500 to see if sellers get more active below them. I would not even consider the short side of anything unless we were below those levels. Continue to carry forward the gap below us we discussed yesterday.

A.F. Thornton, 

With Sincere Gratitude to Providence

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

Pre-Market Outlook Update

AF Thornton 0 Comment
S&P 500 Futures - 5-Minute Candles

As expected, the market is balancing back into Friday’s range so far this morning. Maybe I have not lost my touch after all. The S&P 500 has twice tested the top of the old range at 4215. It needs to bounce on this second touch for me to stay positive. Tick distribution is favorable so far, and the cumulative tick has been building positive as well. So it is not as if the market is going down; it just isn’t going up.

There is nothing particularly negative at the moment. The (now apparent) news-driven gains from Friday have stalled. Perhaps we are still missing a catalyst after all. I do like the positive momentum divergence on the morning low on the 5-minute RTH chart.

The Founder’s Group has taken a position in the NASDAQ 100 at 13,733. The reversal down pattern now has a turnaround up pattern on the right side, if it takes. We are running a 15 point stop – using a little discretion to give the trade some room.

Growth stocks are strong this morning, as is the IWM (Russell 2000). The S&P 500 Advance/Decline line is about even. It is hard to get the breakout the bulls want without solid internals. Mixed internals rule the day thus far.

I would put odds at 60% that we still break to new highs in the next few days and about 40% that we don’t. Of course, that is more of an educated guess than anything else.

We shall see if the market will take a run at the highs mid-day or perhaps on this afternoon’s post-lunch drive. The put/call ratio is low, indicating complacency here, which is unhelpful.

It was important to determine early on that we would be balancing this morning. That way, you don’t become overly negative about your existing long positions.

As outlined in the morning’s commentary, I think the tone changes if we drop below 4209 and into Friday’s gap area. So carry that forward in your narrative.

Watch for the bull trap as well. The leprechauns may run us up and above the old highs this afternoon, only to take our gold while they run the stops and bring it back into range. Today is a quiet day so far, and that is when the leprechauns come out to play.

Stay tuned.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook 6/7/2021

AF Thornton 0 Comment

Be sure to review the Top-Down analysis published earlier this morning. Not a lot has changed in the bigger picture from last week, except that we are now back at the top of the trading range, with bulls hoping for a breakout.

Except for a few ticks, the overnight range is within Friday’s range. The inability to break out of Friday’s range tells us that the market is in balance for now.

The overnight balance often carries over into the regular session. We always want to think in terms of probabilities – and that is the most probable course.

The all-time high right above us does complicate the probabilities. Market makers could try to run the buy-stops above the range to capture the order flow.

Pay attention to internals and FANGMAN+T. Strength with either or both could support a breakout.

Friday’s market profile resulted in a double distribution. The overnight halfback is the exact point where the upper one ends, and the lower one begins. Treat each profile as a different day. Acceptance in the upper one is more bullish than acceptance in the lower one. To put it another way, watch where value develops today.

The all-time high could easily be in play today, and traders should also note that the overnight high and Friday’s high are almost identical. That sets up a potential go/no-go level on the upside.

Given the overnight tone, assume further balance if the market cannot move out of the overnight and Friday range. Potential is there for higher over the overnight high, targeting the all-time high.

There is an unfilled gap below us from Thurs/Fri of last week. This gap should remain unfilled for the time being if the bullish sentiment from late last week is to hold. Filling it has the potential to change the tone. Continue to carry it forward as long as it is unfilled.

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