Interim Update Revisited – 3/10/2022

Subscribers just cashed in a 50 point S&P 500 Futures Trade basde on Interim Alert on this Chart
Subscribers just cashed in a 50 point S&P 500 Futures Trade basde on Interim Alert on this Chart

Subscribers closed out a 50 point S&P 500 Futures Trade from the red circle a few minutes ago. I posted an alert when we made the trade here. We entered my green zone and then tagged the Weekly Expected Move low.

Some other inside baseball was that I knew there were a lot of puts expiring tomorrow. Due to Vanna (time decay), the crowd needs to cash those chips in ASAP or roll them. Otherwise, profits go “poof.”

The dealers have to buy the index futures when the crowd sells puts to accommodate them. That boosts the index.

Nothing is foolproof, but it was a nice combo. And you saw it here from trade inception.

Afternoon notes will be out in a few hours. I start at 2:30 am PST and I need a break…

A.F. Thornton

Sell Stops Hit

Our sell stops triggered a nice profit at 436.50 on what looks like a look above and fail per Balance Rules. Trick and company tried a fake-out at the open, but the markets have been in a non-stop Gamma sell spiral since.

I am out for a few hours but will keep checking in for more opportunities. If we have to return to the bottom of the range, it is 4275. More negatively, the failure of this rally to follow through above the daily mean is a bad omen.

As always, I will keep an open mind. Even with fear indicators at correction highs, they are not at panic levels, which may be what is required to take us any higher.

A.F. Thornton

Adjustment – Leveraged Accounts

S&P 500 Index Continuous Futures 5-Minute Chart - At Resistance
S&P 500 Index Continuous Futures 5-Minute Chart - At Resistance

The Founder’s Group just exited the Emini Futures for Leveraged Accounts at 4382.50 and will replace it with a 100% position in the SPY. The swap deleverages the strategy for the rest of the day, locks in short-term profits, and keeps the market strategy. We will keep stops just below the SPY halfback at 434.25.

We don’t like to hold futures overnight in these circumstances. When we have a quick 56 point gain having reached our second resistance target on the day, we take the profit but stay in the market (unleveraged) consistent with the larger picture unfolding.

The S&P 500 is right at this morning’s 2nd resistance level at 4380, the Volatility Trigger, and last week’s high. The climb has a slight wedge look to it, so we may get some selling before it can break through the resistance.

The easy gain is over. The market must now work through the resistance up to the 21-day line. But if the market manages to close above yesterday’s futures high at 4399, it would achieve both a daily pivot and a weekly pivot, closing above last week’s high at 4391.25.

Also, a break through the Volatility Trigger shifts dealer focus back to positive Gamma. Instead of making losses worse because the dealers have to sell futures, the Dealers will turn around to buying dips and selling rallies to neutralize portfolio deltas. The shift also will reduce volatility.

I would be even more encouraged if I see traders buying more call positions out on the spectrum and reducing the put positions congregating at 4000. Chairman Powell’s announcement that he will stick with a quarter-point raise at the next meeting should provide some certainty that will discourage short interest.

A.F. Thornton

New Buy

This morning, the Founders Group took a 50% long position at 433.25 on the SPY for Swing Trade Accounts. We used an S&P 500 Emini Futures at 4326.50 for leveraged accounts. Stops are set at 431.50 on the SPY and 4315 on the Futures.

We have Navigator Algorithm buy signals, the first of which came at 4267.50 on 2/25. As we would have been holding over the weekend in the middle of the Russia/Ukraine conflict, we waited for an entry on Monday. We took a position Monday, but we were stopped out just above break-even in yesterday’s volatility.

We now have a secondary buy signal this morning, and we will try once again. We will move our stops to break even as soon as possible.

The market is volatile and tricky and not for the faint of heart. From a psychological standpoint, the buys are among the most difficult of my career. That is why we affectionately call it the “puke point.” Stops are our saving grace.

A.F. Thornton

Interim Holiday Update

There is no perfect vacation for a trader. So let me drop a quick note.

The trading range I had expected is well underway. And we did bounce on the “Options Expiration” pivot I talked about on Sunday night.

The Navigator shifted back to a buy signal at 4531.75 on Monday morning. You can see the turn on the daily chart above, and we saw some follow-through yesterday and today. Here is a granular look at the buy signal and turn:

The Founders Group is on vacation, so we are not partaking in the run these past few days. As we say at the office, there is always another train leaving the station.

We are now at the top of the trading range – or close to it. Given the brick wall that we have seen at 4700 these past four weeks, it is doubtful we will see a breakout. Also, we are near the Weekly Expected Move High of 4708 on the cash index.

That we might not break out is just an opinion, of course. But the statistical probability of a breakout failure is 80%. We will see how it goes, but I would not be surprised to see another loop back down. Price action always rules opinion anyway.

A lot of this price movement is short covering. Sentiment got too negative for further declines, as I pointed out last Sunday. And we always have to be mindful of manipulation in light, holiday volume. So it is not advisable to jump in at the top of this range.

Perhaps the market is in the process of forming an ascending triangle.

We know from history that when Fed policy begins to shift, the market tends to stall into a trading range. Markets don’t typically roll from bull to bear immediately. Usually, a trading range precedes the transition.

Anyway, this market has yet to violate the recent bull uptrend and may find support again on the trendline if we loop back down. Therein lies your makings of an ascending triangle.

The bullish price action belies all this talk of crashes and such that I read. Nevertheless, I fully expect considerably more volatility in 2022 than we have experienced recently.

I hope this quick update keeps you alert as we get ready for the new year.

Again, Merry Christmas and Happy New Year

A.F. Thornton

Swing Buys – 12/15/2021

I know I said I wouldn’t, nor did I want to monitor anything over Christmas, but the Founders Group is back to a 40% position in each of SPY, and DIA January ATM calls for a total of 80%. As Chairman Powell spoke, we entered the calls when the SPY was 463.73, and the IWM was 356.25, respectively. As I had suspected, the Fed was a bit more aggressive than anticipated, so the market is happy for now. Welcome, Santa Claus!

Since this is a swing position, you can enter at the close today or even on a small pullback tomorrow. The market is racing on short-covering at the moment, so it makes sense to wait for the short-covering to calm down. You may be able to enter in the morning.

I am hoping we can hold these positions for a few weeks. With the Fed meeting out of the way, there is not much negativity between now and year-end.

A.F. Thornton


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