Category Navigator™ Signals for Day Traders

Navigator™ Signals for Day Traders

Morning Outlook – 4/22/2021

AF Thornton 0 Comment

It is hard to believe that we are almost through another week. 

Yesterday saw buyers recapture control, at least temporarily, but not to the level that we formed a full pivot higher on the daily chart. This morning will be a flat opening just inside yesterday’s range – in other words, balance. Overnight distribution is small and wide in the context of yesterday’s trending day higher. For now, overnight traders are accepting the higher prices associated with yesterday’s close.

The halfback at 4142.50 is my key line in the sand today for bull/bear bias. Buyers need to hold this halfway point in yesterday’s range. If they can hold above the overnight high at 4167.25 (also near yesterday’s high), so much the better. As a side note, halfbacks become important when there is a wide daily range, especially on a trending day supported by strong internals, such as yesterday.

On the upside, we have the overnight high and yesterday’s high at about the same level. That’s a visual and mechanical breakout point for many traders. Monitor for continuation on any break above there.

Do not be surprised if the market stays balanced and trades inside yesterday’s range today. As mentioned yesterday, we have tagged the expected move on the downside for the S&P 500, so that likely puts a floor underneath the market until options expiration tomorrow. Use the internals to guide you in this regard. Anemic ticks and an S&P 500 A/D line between -100 and +100 will be more supportive of balance than trend.

Acceptance of prices below yesterday’s halfback would change the tone back to negative, in my view. We are still holding Gold in the Swing Strategy, but my finger is on the trigger.

Good luck today.

A.F. Thornton

Navigator™ Signals for Day Traders

Morning Outlook – Update 4/21/2021

AF Thornton 0 Comment

Market internals have been powerful today, supporting each break higher and past overnight highs. I will publish an illustration later. This is nearly a textbook day to illustrate how strong internals support breaks to higher levels. The NASDAQ 100 pattern is analogous to the S&P 500, but a bit weaker.

We will see if the afternoon drive (that should start in the next 15 minutes) can support breaks above yesterday’s highs. There is a better chance on the S&P 500 than the NASDAQ 100. If such a break does occur, we may have a pivot that could finish this leg from March 24th with a double top or possibly slight new highs. We nearly tagged the low end of the weekly expected move already, so the downside might be contained for now. 

As demonstrated in the chart published in this morning’s writing, price action might carry us into the May 8th topping zone, which I have identified as the “ideal” position for the 18-month cycle peak. “Ideal” is in quotes because it is rare that the markets deliver much that is ideal or to our precise liking. But as with horseshoes and hand grenades, close is good enough.

I am unsure that our gold position would buck a significant stock market downtrend – though I try to keep an open mind. I am trying to decide whether to nail our substantial profits at the close today so stay tuned.

A.F. Thornton

Navigator™ Signals for Day Traders

Morning Outlook – 4/21/2021

AF Thornton 0 Comment

In my way of thinking, analysis of the market starts with the S&P 500 index. Think of it as the mothership. You can extrapolate to any other index, sector, or stock from that reference point. It is the most heavily traded equity index globally – and therefore reflects all known information at any given point in time.

The next level of my analysis begins with the price. I strip everything else off my screen. What is the price action telling me? In day trading, my price analysis starts with the daily chart. I think of it as my master chart – and I day trade in the direction of the daily chart (except at pivot points).

If I were to advise someone on getting started for day trading, I would require them to take a course like one of the courses offered by Al Brooks. Mr. Brooks has written three thick treatises on price action. Virtually everything else you see or hear about in technical analysis is a derivative of price. A derivative of price is just that – a derivative. To that extent, any indicator is somewhat secondary in reliability. An indicator is supposed to refine what the price action is already doing and telling us.

I would then want to understand the amount of time spent and the volume occurring at any particular price. I like to frame it in terms of what I call “value,” something I learned from one of my mentors, Jim Dalton. Value is defined as where the S&P 500 spends 70% of its time and experiences 70% of the volume. Often the information is similar for time and volume. The index typically spends the most time and has the most volume around the same price. When it doesn’t, that is important market-generated information. 

The markets are auctions. Price is merely an advertising mechanism when you consider the auction process more deeply. Analyzing where the S&P 500 spends the most time and has the most volume gives context to the price mechanism. Thus, it is more important to know if “value” is rising or falling than price. Is the Point of Control (where the most time is spent or the most volume occurs) rising or falling? Is it at the top or bottom of the day’s price range?

This morning, I am noticing that the S&P 500 price action on the daily chart is overlapping instead of impulsive. In other words, the daily candles overlap each other. Overlapping price action tends to be corrective in nature. Impulsive action – where the daily candle cannot get into the previous day’s range – tends to lead to a trend reversal. We don’t see that yet.

With that premise in hand, all we can say for now is that we are experiencing a mean reversion back to home base – the 21-day Exponential Moving Average. That average sits at about 4070 on the current month’s S&P 500 futures contract. That is a reasonable first target for the correction at hand. We will see how the index develops from there.

Many of my secondary indicators, such as the Rate of Change, S&P 500 Relative Performance to Junk Bonds. Investor Asset Flows, Corporate Bond Spreads, Trading Volume, and Market Breadth are still positive for the longer-term trend. But, as I said yesterday, every large correction starts with a smaller one.

The Navigator Algorithm, which combines the above-described variables and more, is in a sell signal. That is why our swing strategy remains 90% cash and 10% gold. Gold was the only green on the screens yesterday. Everything else was red.

The only question is whether these few days of index retreat are a simple mean reversion or the beginning of the nominal 18-month cycle correction. Likely, we are observing both. However, one more leg higher may still be possible.

Sequentially, you can count the S&P 500 as a Wave 4 consolidation, with a Wave 5 still to come. You can conclude this by looking at the chart of the S&P 500 index above and realizing that this latest advance is longer than the first rally proceeding from the March 2021 lows. If the wave was equal to the first, perhaps it could be considered complete.

This morning, we will be opening in yesterday’s range with a balanced, overnight inventory. We are currently in the middle of the overnight range. The short-term bias remains bearish, and there is no clear indication of direction at the open, so early trade is inadvisable.

Let the market settle in and follow the usual sequence depending on the direction the market first tests (e.g., overnight high or low, yesterday’s high or low, etc.).

The last two sessions have been characterized by sellers in control, with snap-back rallies later in the afternoon as sellers have been reluctant to accept further, lower prices.

Yet, prices are moving away from all-time highs and trading in a “void” of support structures out to the left, with plenty of distance left below to our key moving averages. 

This leaves us little to go on as far as where buyers should regain control. Always focus on the key levels in the 100 handle block when this presents. Focus especially on the 50-point increments.

Overnight activity is fully within yesterday’s range and fully enclosed within the value area. I am carrying forward that overnight prices were not able to make new lows. As such, yesterday’s low will be the key line in the sand today.

Good luck today,

A.F. Thornton

Navigator™ Signals for Day Traders

Morning Outlook – 4/20/2021

AF Thornton 0 Comment

Another six inches of snow on my doorstep accompanies a true gap lower this morning, although we are not that far from yesterday’s low at this writing. I could not help but reflect that Global warming continues to blanket Colorado with spring snow, just like masks prevent the China virus from spreading. I ask you, what would global cooling do? But alas, I digress, and I better be careful not to question the current Marxist orthodoxy, lest these pages are canceled.

Although gap rules are in play, overnight inventory is actually balanced, muting a full stampede of panicked traders at the open. Current prices are ticking in the lower third of the overnight range, so the primary question is whether Traders will test the overnight lows or highs first.

Yesterday’s break did what it was supposed to do: repair the two recent weak lows and move towards the April 14th volume points of control. Overnight activity has tested that VPOC, but reliable repair doesn’t happen until regular session prices trade there.

In the bigger picture, yesterday gave us a lot of market-generated information in the way that sellers continued to try and press their bets into the afternoon but got little traction. That was encouraging. Although overnight prices are now lower, this is still a carry forward as the tone of yesterday’s session has a lot more weight than the overnight session.

However, to be bullish would require me to ignore the Navigator sell signals and sell trigger violations. There is little, if any, chance I would do so. As such, I remain neutral to bearish, with the caveat that stocks are priced for perfection right now. Some backing and filling would be healthy, but it would not take much to upset the apple cart. Context also tells me that the larger cycles are due to present at any time. Let’s face it, every major correction starts with a minor one, but longer-term conclusions are premature as yet.

If there has been one thing that frustrates me about the markets from time to time, a correction will start minor, fooling you into believing it is not gaining any traction, only to accelerate after a week or two. This is the other side of the coin of sudden downbursts that take out a few weeks of gain immediately. I have never been able to create an indicator to capture this in advance or give us an edge. That is why the context of the cycles and sentiment (to a lesser degree) can be so helpful. ANYTHING is possible here, in the context of a potential peak in the nominal 18-month cycle. Ignore that cycle at your peril.

As pointed out above, we are well off the overnight low, and overnight inventory is balanced. This gives us little direction for early trade. I will focus on whether or not prices can break back up into yesterday’s range. My bias would be long inside the range and short outside of it. Yesterday’s lows are the key bull/bear threshold for all of the major indices.

Any acceptance back within the range that looks to have legs (good internals and tempo) should point you to take your key levels sequentially and monitor for continuation.

Only acceptance below the overnight low would signal enough weakness for more tradable shorts to the downside. As always, monitor for continuation and pay close attention to see if the context is supporting.

Good luck today,

A.F. Thornton

Navigator™ Signals for Day Traders

Morning Outlook – Update – 4/19/2021

AF Thornton 0 Comment

Thus far today, we have put in a lower high and lower low on the daily chart, the first negative pivot since this last run started in early April. Add that to your narrative as negative. 

We are also tripping the Algo sell trigger, turning the daily candle red, as you can see if you click on the chart above. We also have solid Navigator sell signals independent of the Algo trigger (see red and yellow sell arrows). The polarity trigger is still holding, but I have to say that I am less than optimistic about its future. The trigger level for the polarity switch is 4127.41. The S&P 500 needs to close above 4151.76 to turn the Algo Trigger candle back to blue (blue encourages us to be long – orange is short).

The intraday chart looks like it is trying to wedge into a low. The price action is sloppy enough not to rule out another push down to Thursday’s low. That is where I will begin to cover my short positions for a nice gain. I should have done the shorts at the money – then I would be retired this morning. Oh well, I bank what I can. 

This is exactly what I have been warning about – a day that starts clobbering through previous gains like a knife through butter. It is too early to conclude anything beyond what the Navigator system communicated so eloquently – the market is super overbought, and the institutions are not interested in buying here. That puts the market on borrowed time until the price hits a level that attracts them. 

Whether this is the nominal 18-month cycle peak will take more price action and data to conclude with certainty. All we need to know for now is that it could be, and that gives us context to interpret the chart in front of us.

Perhaps more worrisome, the volume is picking up today – indicating that some institutions are participating – but they are selling, not buying. There is a slew of important earnings reports this week, and that may add to the confusion.

Maybe we should take the week off? Let it all sort out. It might be better to use options – stay with the bigger picture as I did over the weekend. Day trading could be treacherous in the current conditions. In either event, the winds are blowing south. Market leaders today are all defensive, underscoring a change in the weather.

Be careful!

A.F. Thornton

Navigator™ Signals for Day Traders

Epilogue and Morning Outlook 4/19/2021

AF Thornton 0 Comment

The market is an aging beauty, though the trend has been clearly higher. In an unusual move for me, on Friday afternoon, I shorted some out-of-the-money weekly options (expiring this coming Friday on both indexes). I say unusual because I rarely hold anything but swing positions over the weekend. 

I believe that the market is aging because we have been experiencing diminishing volume for some time and recent, rapid liquidation breaks. Higher prices are both cutting off and discouraging activity. In other words, there are fewer and fewer takers as the markets try to climb higher. 

This activity is expected. For context, we have been discussing an imminent peak in the nominal 18-month cycle. Dumb money sentiment is elevated once again. 

On specifics, our algorithms are confirming a top is near as well. Click on and take a look at the above chart and what the Navigator system is telling us. We had an “E” signal for exhaustion a little over a week ago. That signal tends to lead peaks by about a week. We now have an “sOB” signal on the chart signifying that the market is Super Over-Bought. That signal is rare, but what follows tends to be quite unpleasant.

The first red tag on the system status labels reads “Trend Reversal Imminent.” If you look at the faint dynamic channel lines, we are about to tag the uppermost channel. Most importantly, we are sitting right above the Algo sell trigger – it would not take much negative price action to trip it.

We can also infer that the buyers at the table right now are in one of two categories. They are either short-term momentum traders (otherwise known as weak hands), or they are market makers who have to buy to neutralize their portfolios after they sell calls. I call the latter gamma squeezing. After all, how many people do you know that go running to their brokers “hey broker, the market is at the highest price it has ever been in the history of time – get me in now!”

How else do I know who is at the table right now? Momentum traders tip their hand in where they execute. They tend to be location sensitive, buying at various key levels, such as moving averages, half-backs, Fibonacci levels, etc. I know them well because I am one of them, at least as far as day trading goes. 

Institutions do their research and then position themselves as rapidly as possible (sensitive mostly to their trades not moving the market). In fact, more and more these players work in what are termed “dark pools” off the exchanges and hidden from public view. The point is, they are not location-sensitive – like momentum and day traders. The institutions are planning to hold their investments over several years – so a few points here and there are irrelevant to them.

But as far as the day trading and momentum traders go, last week, the market experienced two rapid selloffs followed by equally rapid recoveries. This is often a sign of deteriorating strength. Responsive traders (responding to lower prices) are only becoming active if they can get a deal. The resulting recoveries were not supported by volume – another sign the institutions are absent. 

Short-covering drove the recoveries as well. Traders sensing the deteriorating advance, short the market – but too soon. While they may be right eventually, when they are early as here, they may get stopped out. As they get stopped out, their short-covering fuels even higher prices.

Last night (Sunday night), I focused on Friday afternoon’s weak lows of 4168.50 on the S&P 500 and 13996 on the Nasdaq 100.  The fact these lows did not hold is the first chink in the armor for this morning. 

Then, I shifted my focus is to Friday’s lows – 13954 on the NASDAQ 100 and 4162 on the S&P 500. The S&P has already breached that low, and the NASDAQ 100 is right on top of its low at this writing. Now I am monitoring for continuation to see if there will be acceptance and range extension below these levels. If so, then the value (the range where 70% of the volume occurs) has the potential to move lower, and that can be the first sign that the market is finally topping.

If I had to call it to the day – I would be expecting the market to top around May 8th. So I am looking at the described activities as early markers. I will take some short-term profits on my puts as soon as I see a true pivot higher if that should occur today.

Any acceptance below Friday’s low should shift your bias to negative. If the markets can pivot from this area and hold the lows (maybe after running some stops below), the value can remain overlapping to higher, and we may get a few more days before a final peak. 

The market is getting a blow-off to look to it – as we have seen several times since the March 2020 lows. Keep in mind my previous points – when the market fell after the blow-offs. It erased several weeks of gains in a single session.

Good luck today,

A.F. Thornton

Navigator™ Signals for Day Traders

Morning Outlook – 4/16/2021

AF Thornton 0 Comment

April showers are supposed to bring May flowers, so does that count for four inches of snow this morning? Living in the Rocky Mountains has its strange moments.

I will put out more details over the weekend, but the Navigator Swing Strategy remains 90% in cash and 10% in Gold. We were so leveraged (and made so much money) coming up to the old highs in both indexes, that we have not felt compelled to jump back in as yet. 

The Gold was a contrary play that appears to be paying off. There has been a subtle shift to risk-off assets in the past 48-hours. Treasury bonds rallied inexplicably yesterday – given we were coming off the highest consumer inflation reported in the past 10 years. If one turns their attention to Ukraine, perhaps the Russian troops mounting on the border could explain the rise. The US is telegraphing a lot of weakness right now to China and Russia. I would not be surprised to see both countries move on Ukraine and Taiwan simultaneously.

Meanwhile, back at the day screens, keep the macro picture and the pending nominal 18-month cycle peak in mind. The back-to-back overnight patterns and continual new all-time highs tell us that momentum buyers remain firmly in control. Don’t fight it – do what works until it doesn’t.

The overnight lows are weak. Should they be tested, assume the potential for lower price action and monitor for continuation. Then think sequentially in terms of key signposts.

I don’t trade Fridays – but best wishes for a prosperous day.

A.F. Thornton

Navigator™ Signals for Day Traders

Morning Outlook 4/14/2021

AF Thornton 0 Comment

Mailchimp, our primary email publisher, had an outage this morning and was just restored. This delayed our morning forecast from being emailed. However, if you don’t see an outlook before the open in your email, don’t hesitate to check our website at www.bluprintquantitative.tempurl.host. Click the “Morning Outlook for Day Traders” category and the outlook will be there, even if the email forwarding service is down. This is the first time we have experienced this, so hopefully it will be the last. The outlook is published regardless. The original outlook is in italics below. I might as well update it, now that we have some market data behind us.

Overnight distribution is relatively balanced so the issue this morning is whether or not we can trade out of the range on increased tempo and stronger internals in either direction. Both extremes of the overnight range have potential go/no-go breakout implications.

Buyers remain firmly in control. The market is acting exactly as it should when it is deeming accelerating prices to be fair. A liquidation break would be healthy at some point to further strengthen the market. Investor focus will be shifting to earnings now.

If the break is higher, monitor for continuation and look for contextual underpinnings to be confirming. Should it be lower, expect the same if there is to be any tradable follow-through and target yesterday’s points of control.

Your edge is your market-generated information and narrative. Your M.G.I. is comprised of price events that happen and price events that should happen but don’t.

Now for the update. the NASDAQ 100 got the liquidation break anticipated, and this is healthy. It is coming into the top of its recent breakout range at about 13850. If a buy signal otherwise presents for you in this area early enough today, it may be a good place to go long for the rest of the day. We are not there yet, but the decline is accelerating vertically which usually indicates exhaustion. Incidentally, the XLE is looking interesting on the daily chart, with the potential double bottom in place.

The S&P 500 is holding up better, boosted by energy and financials, on the heel of some nice bank earnings this morning. Earnings announcements will have a greater influence as we move forward over the next few weeks, the end to which likely will bring us the nominal 18-month cycle peak. Today smacks a bit of the XLE and XLF climbing at the expense of the NASDAQ 100 – but we will see of that is more than a one-day wonder.

A.F. Thornton


Navigator™ Signals for Day Traders

Morning Outlook – 4/13/2021

AF Thornton 0 Comment

I would have kept it simple today, as everything continued to be balanced yesterday and overnight. Responsive trade from the overnight highs and lows (and going with a breakout in either direction supported by the internals) would have been the best advice. That advice still holds for the S&P 500, though a sudden surge in the NASDAQ 100 at this writing may tilt the S&P 500 bias in favor of a break out to the upside (see below). I am now looking for sideways to higher in the S&P 500 today.

As I was writing, the NASDAQ 100 pushed above its balance/consolidation range and looked to be where the action is. It is now slated to gap open with a true gap, and gap rules will apply. This gap puts the NASDAQ 100 into the new, all-time high territory. Perhaps the S&P 500 index will follow suit – but so far looks to be significantly underperforming the NASDAQ 100. I will be trading the NASDAQ 100 today as a result.

The NASDAQ 100 breaking to all-time highs adds some excitement to this final leg before the nominal 18-month top sets between now and mid-May. We typically get a dip into mid-month (the next payroll contributions) here, and the 40-day cycle dip is due any time, so continue to keep that on your radar screens. I am still finding lots of good stock swing trades – so it is hard to reconcile the good setups I keep finding with anything other than a minor dip this week.

Yesterday’s action continued to bolster our bullish narrative – so best wishes for a good trading day.

A.F. Thornton

Navigator™ Signals for Day Traders

Epilogue – 4/12/21

AF Thornton 0 Comment

Both the NASDAQ 100 and S&P 500 Indexes stuck right to my script yesterday, delivering another balanced day and profile inside Friday’s ranges. The best trades were right from the edges as predicted. Holding their own following multiple up days in a row, a balanced day of consolidation adds to the bullish narrative for now. 

But the same cautions abide, as we expect a minor dip into mid-month, and we continue to be on alert for the 18-month cycle peak sometime between now and May 15th. We will know it when we see it.

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