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Navigator™ Signals for Day Traders

Pre-Market Outlook 11/2/2021

AF Thornton 0 Comment

Look for the trading range between 4690 and 4720 to maintain in the next few sessions. Overnight inventory is net short, so that we might see a brief short-covering rally at the open. And yesterday’s price action did not get too far above Friday, with value (where 70% of the volume occurred) overlapping Friday’s volume.

In simple terms, the market slowed down a bit near the roundie (4600). This behavior is not necessarily negative nor unexpected. The Fed meeting starts today, and the announcement on interest rates and whether the Fed continues their bond-buying program (Quantitative Easing) comes tomorrow afternoon.

Perhaps a bit surprising to me is that the market has rallied hard into the meeting and announcement. The consensus expects the Fed to leave rates alone but announce a tapering of the Quantitative Easing program. Normally that would be negative for the markets. One must believe that the insiders know that the Fed will not change its policies, or the market likes the news. Another possibility is that evidence of a slowing economy takes the pressure off the Fed in the short term. So the party might go on for a couple of more hours. Who knows?

Otherwise, this is a good area to pause. We have achieved all of my original targets from the October low. So the upside is blue sky and somewhat undefended.

The first gateway to the north is the overnight high at 4610, which opens the door to yesterday’s high at 4612.75. Finally, 4619.75 is the Globex high from Sunday night. Conquer that, and happy days are here again.

I get a bit more nervous if we give up the roundie at 4600. That level is the true battle here. We have double POCs right below that level which should provide support. If they don’t, I think the idea of a sell-off for a couple of days becomes realistic. I will be using yesterday’s regular session low at 4586.50 as the line in the sand today. I will be short-term bearish below that line.

A.F. Thornton

Navigator™ Signals for Day Traders

Inside the Numbers

AF Thornton 0 Comment

2:18: So they’re almost home to 458.00. Between 458.15 and 457.79 is the spot.

Aggressive traders can expect a bounce from that spot.

It’s a scalp, not a marriage…

We’re running out of time on the clock, so understand if it goes against you and the time is running out, you either have to take the hit or hold and hope.

The exact reason why trades taken too late come with added risk…

Below 457.79 on candle closes and it’s wrong.

Back as needed.

2:09: Some traders can see the writing on the wall…

They’re either going to reach 458 give or take right into the closing bell, or…

Just float around the rest of the day…

Still watching just in case…

Back as needed…

1:52: The same support and important spot from this morning around 458.00 give or take should be important again if reached…

Should get a bounce unless it happens near the end of day, then anything goes…

1:29: Around, above and below the big phat round number is all they’re doing – at present…

Back as needed…

1:12: Where are they now?

They’re climbing the first-hour breakdown candle toward the high…

Maybe it’s a wedge pattern and they come back down after running said test in the neighborhood of the highs…

However, that high is also the all-time high from this morning…

Therefore, I’m not in the camp of betting they’ll come down into the close with a couple of hours left on the clock…

Just sayin’

It’s quiet and they’ve been in the light volume float mode since the early morning shakeout operation…

Back as needed…

12:42: Update…

They got back to 460 as prescribed… (459.97 high thus far…)

They’ll likely get a little higher but should peter out sooner than later for a while…

Back as needed.

11:03 Staying above 458.70 keeps the bulls working back to the big phat round number of 460.00 or higher, at some point…

Still back after lunchtime…

11:01: They really needed to get to 458 and below for another trade at present…

Now they’re bouncing away, so it’s not the same…

This is the bounce we would have been looking for…

Just didn’t get to my number…

Back after lunchtime or before if something crazy is happening…

10:57: At a spike of 458 it will be showtime again for the bulls to play defense…

Big spot.

10:37: If they drop em’…

They will likely run down and spike through 458.00.

And, if they do there should be a snapback…

Candle closes below 457.60 and the bears are in control and lower prices would be on the docket…

Back as needed…

10:30: No change for now…

They’ll move, but until they’re above one place or below another, it’s a chop shop formation…

Back as needed…

10:24: 458.00 is support.

The candle closes below and the bears pick up the fumble…

460.00 is resistance (give or take…)

In between is a chop shop formation…

10:09: And by the way…

That’s what we call “A Shakeout Operation…”

10:08: Next order of business is back to the magnetic 460.00…

Above and below and back to…

So far, that’s what’s going on…

10:05: Low of 458.20 low against 458 give or take.

Kind of on the line of give or take…

Either way, nice bounce from that area…

They’ve moved em’ quick all of a sudden…

We’ll get some opportunities as the storyline develops…

10:02: 458 give or take is the next spot where if a test is run, there should be a reaction in the other direction…

9:51: Traders long need to book profit along the way…

459.95 is the key…

Above on candle closes and she can run some…

Until she does, tests and rests are on the table…

9:50: Ran down to 459.25 and now lower.

It’s showtime for the bulls to play defense.

Below 458.00 on candle closes and it’s not bullish in the short run…

9:44: In the spirit of no surprises…

They’re doing the thing around 460.00 – back and forth…

Opportunity is scarce…

It’s a floater at present.

Back as needed…

9:36: 459.25 (give or take) should be a bounce number…

If reached on a straight shot…

9:33: Very quiet open…

In patience mode…

Remember, they’ll trade away from and then come back to 460.00…

9:16: We’ll let em’ go for a while at the open…

They’re hanging around SPY 460.00- the big phat round number…

Expect some back and forth above and below…

Remember – it’s magnetic…

EarlyThoughts

Happy Monday…

last week ended with a ramp-up right into the close…

Follow-through is what we’re seeing to start the first day of the month…

We talked about the big phat round numbers and the inverse head & shoulders pattern…

No surprises, they did the thing…

As for the numbers…

The SPY is trading at new all-time highs which is also known as “No Mans Land…”

It’s not a “hop on the bus” scenario…

It’s not a “short the market with both hands” scenario…

It’s a wait to see what happens and what develops throughout the day scenario…

The gap left open from last week is 459.25.

There will be support and a bull-bear battle before they get to the gap…

We’ve got the big phat round number of 460.00 which should be tested sooner than later….

As for Stocks on the Move…

It’s a light day in terms of pre-market activity.

We have no choice but to accept the tape Mrs. Market provides….

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

Interim Update – Sell

AF Thornton 0 Comment

The Founders Group just sold its 10% futures position at 4536.25 for a gain of 170.75 points per contract. This is the culmination of the “Cradle Trade” identified back on October 13th, barely a week ago. We have reached the Weekly Expected Move and our original target.

The market has behaved extremely bullishly. Nevertheless, pigs get fat and hogs get slaughtered. I don’t want to be the hog.

Tomorrow is options expiration and I am taking the day off, so there will be no pre-market outlook. The next publication will be Sunday.

A.F. Thornton

Navigator™ Signals for Day Traders

View from the Top and Morning Outlook – 10/18/2021

AF Thornton 0 Comment
In this discussion, I cover the “G Force” rally of the past few sessions and its sustainability. Also, when all the political ‘blame’ dust clears, Millennials coming of age may be the real force behind the current housing inflationary spiral just as the boomers were in the 1970s. Millennials are a bigger group than their parents were. Then I give the day trading parameters for today’s session which is likely to be a balancing day with responsive trading as the best strategy. You can click the link below and go to the website for details. Skip to the bottom for the day trading discussion.

Intermediate Trend Status

Last week, Captain Kirk (William Shatner) of Star Trek fame had his first actual space and weightlessness experience at age 90. He said the weightlessness experience was indescribably awesome, but he felt his “age” when the G-Forces hit him as he left Earth’s atmosphere. And this reminded me of the rally off the 80-day cycle low and “Cradle Trade” last Wednesday. Let’s call this the “G-Force Rally.” If you were short, the skin likely was blown off your face. Of course, you weren’t short because you tuned in to these pages. 

The Founder’s Group continues to hold its 10% S&P 500 Futures position but is looking to switch back into 25% SPY calls at the appropriate time. We want to sell the futures high and buy the SPY calls when the index drops slightly. Who wouldn’t? We will see how it goes.

Is the rally sustainable? Are new highs possible? Are they probable? The short answer is yes. For now, this looks like the seasonal September/October dip, which happened on the 80-day cycle trough for this particular year. 

As to the intermediate picture, I still favor the trading range hypothesis. The next G-Force downside comes on the next cycle trough for the 20-week loop, which is due late in the year. I will hone in on the date as we get closer to the cycle peak. For now, realize that this larger cycle, most likely peaking in November, may influence a trading range, with headwinds for significant new highs. As mentioned before, the 60-week bull channel that preceded the latest dip typically resolves with a trading range. But has anything about this Fed-induced blow-off been typical?

Notably, the July 19th low remained below the recent pivot. This leaves open the possibility that the 18-month cycle dip did anchor in July. That would be bullish. But it does not explain why the NASDAQ 100 went to new lows on this dip. 

I think it best to work the smaller cycles and keep an open mind to a more considerable decline as if the 18-month correction is still ahead. That is the more foolproof way to handle the issue. 

Longer cycles are always problematic to nail because of the principle of variation. If the window for the bottom can vary by 3%, that can be a month or more on each side of the projected trough, giving us a three-month window. Three months is mainly useless to target and trade a potential low in the markets.

A Quick Comment on Inflation

The inflation of the 1970s, especially in housing prices, had a lot to do with the Baby Boomers coming of age and starting to buy their first homes. The Millennials are now in a similar position. Millennials are a bigger group. 

There is such a blame game in this country, and I don’t hear anyone talking about this. Letting in 2 million or more illegals this year, whether you agree with the policy or not, also puts a lot of demand on everything from housing, cars, and food. Are politics and blame so important that nobody is talking about these demographic issues? Stay tuned.

Is the inflation transitory or here to stay? Look no further than the Washington Post this weekend for your answer. One of the lead articles is “Inflation Can Be a Good Thing.” The Washington Post to the current administration is like the Global Times is to the Chinese CCP. When the Post’s narrative shifts to “inflation is good,” when of course, it isn’t, you know inflation is not going away soon. Higher interest rates are likely to follow.

Speaking of the Chinese CCP and Global Times, did you catch the Chinese test of their new, “undetectable,” low orbit, hypersonic missile last week? Do you think we are going to challenge their storming and taking over Taiwan? Do you think the timing of the missile test is a coincidence? Stay alert.

Neil Howe On The Fourth Turning: How Bad Will It Get, How Long Will It Last & What Comes Next?

There is nothing like hearing from the author of The Fourth Turning, Neil Howe, himself. He has not given a public interview in a while. His co-author died a decade ago, and I wonder if either Mr. Howe or Mr. Strauss could have imagined how accurate their forecast would be when they co-wrote “Generations” in 1993 and the follow-up “The Fourth Turning” in 1997. Here is the interview link to Part I. You will find Part II here. The discussion is a bit complicated, to be sure. But it is worth your time.

In his latest interview, Mr. Howes had a few salient comments on our current predicament. First, he says that few people remain of the generation that knew how to handle a crisis. Doesn’t that just hit the nail on the head? Those left of the “Greatest Generation” are in their 90s or older.

He made another observation that could explain a few things we are experiencing as well. He said that liberal democracy is a delicate system that relies on progress. The Millennials may be the first generation in our country’s history that is not doing better than their parents. Spoiled rotten for sure, but democracy “regressing” may very well be a danger to its survival. If it isn’t working for Millennials due to the gross and rampant corruption in Washington D.C. and the wealth gap that results, is it surprising that Millennials are unhappy with the system?

And this goes back to my experience with a lot of things in life. There is always a lot of finger-pointing in politics and plenty of blame to go around. Presidents can make things a bit better or worse at the margins, at least as far as economics go. But most take the helm with much more significant and uncontrollable forces that were set in motion long before they got there. There is a bit of luck involved as to when they arrive and leave.

But as I predicted, the narrative is shifting once again as the market recovers from its gargantuan (tongue-in-cheek) 6% September/October correction. The supply disruption “end-of-the-world” narrative is shifting to “look at all the great demand.” I always get a chuckle out of all of this.

Millennials coming of age; millions of illegals crossing the border; don’t all of these people have to live somewhere, eat, and buy toilet paper as mentioned above? Could the explanation for demand and supply imbalance inflation be that simple? In a word, yes.

I don’t mean to let the current administration off the hook for their insane energy or immigration policies. And their vaccination mandate will go down in history as one of the biggest and most insidious blunders ever imposed on a society. But sometimes, it pays to cut through the noise and look for more straightforward explanations.

Today’s Day Trading Plan

Our Globex cousins tested the top and bottom of Friday’s range and got nowhere. So the market will open inside Friday’s range and is likely to balance a bit after the considerable run-up from Wednesday’s low. Look for responsive trading today. Use a VWAP and Volume Profile to establish a center, top, and bottom range.

Friday’s low at 4455 is also the top of Friday’s gap, and Globex traders could not invade the hole by much last night. We know that gaps eventually fill, but the longer it takes, the more bullish the market is. 

If we drop below 4455 and it becomes resistance, target the bottom of the gap at 4431.25. Otherwise, look for responsive trading around the VWAP today. Watch tone and tempo. How the market handles Friday’s gap will give us a lot of good macro information for the intermediate picture. And there is another gap further down, but let’s leave that for another discussion, should it become necessary.

Conclusions

Nothing has changed in the big picture. This era will, eventually, meet its maker. Too much-unearned wealth in undisciplined hands. Too much debt. Pick your poison. Humpty Dumpty sat on a wall…

Have a great day.

A.F. Thornton 

Navigator™ Signals for Swing Traders

Interim Update – 10/13/2021

AF Thornton 0 Comment
This update describes my go-to long anchor trade, which may now be developing on the daily chart. There was nothing to do today, and confirmation requires the market to close above yesterday and today’s highs at 4365. If you want to explore the issues in detail, click the image above to go to the website.

At its core, all of our investment and trading algorithms incorporate two factors. The first and most important is price action. Price action is a science in and of itself. I continue to encourage people to consider Al Brooks’ trading courses and books on price action. There is no better teacher I know, and he leaves no stone unturned. You might want to load up on coffee first, and sequester yourself for a few months, but it is well worth the effort.

Everything else is context. Investors and traders must interpret all price action in context. Cycles and investor sentiment play a role. Volume colors the interpretation. Seasonality can be crucial to accurate forecasts. Of course, there are other vital issues like strength, breadth, and momentum. Then there are the algorithms; they are checklists of all of these issues prioritized into a computer program. 

If I were to combine price action and context into an ideal trade setup, my favorite long trade is developing and notated on the daily S&P 500 Futures chart above. The timeframe does not matter – I see the trade on the 5-minute charts all the time. But the trade does not often present on a daily, weekly, or monthly chart. When it does, as it is on the daily chart now, It is a powerful setup and has a high probability of success.

The setup starts with a short-covering rally off a swing low as price demonstrated on October 6th and 7th. The price rises and closes above the Navigator Algo trigger. A yellow buy arrow paints on the cross. Also, the price closes above the 20-period Future Line of Demarcation (“FLD” see J.M. Hurst’s work on Sentient Trader) and makes an equal measured move above it. I discussed this development a week ago on these pages. (Lately, the price has just blasted off the swing low, forcing traders to chase it. The trade never has a chance to materialize).

Then, the price comes back down to test the low. We get the green arrow as we tuck into the FLD and Navigator Algo trigger line and bounce. Of course, this means that the former low holds on the retest, as confirmed by a pivot. That is the buy. As of the close today, we can check almost all the boxes on the S&P 500 index daily chart, except the confirmed pivot. 

Taking out the last two session highs (10/11 and 10/12) at 4365 for a few hours and into the close would cement the pivot as a final buy confirmation. That also conquers the 5-day line (our stop line from yesterday) at 4360. 

But the price would also have to fight through the 21-day line (4375), 50-day line (4385), and the roundie/downtrend line (4400). That is no small task, and I would not blame anyone for just riding the trade to any one of those levels and getting out. However, the upside projection target is 4450 for the braver among us. From there, the price could even challenge the old highs. Is that even possible? More on this below.

It is noteworthy that should all of this transpire, a reverse head and shoulders pattern would present on the daily chart with a projection to new highs. One can only hope so if taking the long trade, but it is a bit too early to speculate. For now, carry the potential forward in your narrative.

Below us, the 21-week line at 4318 is the mean for weekly prices and support. The weekly mean gave us the recent lows, cradling the price and cementing the potential double bottom. Notably, the 21-week line often provides support in an intermediate decline.

What about context? We are coming into monthly options expiration Friday, marking a zone (slightly before or after) for recent swing lows. After four down days, the market finally registers oversold, quite an accomplishment over the past year. 

Add this too: longer-term fear indicators are at bullishly pessimistic levels we have not seen in a year. The news is dire. Vaccine opposition, supply chain problems, inflation, etc. As Ben Franklin once said – “buy on the cannons, sell on the trumpets.” 

Seasonally, we often see significant lows established in October. As well, the 80-day cycle low appears to be in place as of October 7th.

Naturally, I am licking my wounds a bit for getting stopped out yesterday (10/11), but that is irrelevant now. You fail in this endeavor unless you move on. Flexibility is the key. Anyway, stops have saved my bacon on more than one occasion, so I never regret them. Successful trading and Investing is about applying the probabilities and managing risk. 

How could new highs even be possible? I never know, but the market always finds a reason. How about spectacular third-quarter earnings – as they begin to roll out in the next few weeks? No doubt, they will be caveated by forward “inflation/supply chain problem” guidance. But the market focuses on good news when it wants to go up. FOMO kicks in as each milestone mentioned above is achieved on the daily chart.

If the market achieves new highs, I will attribute it to continued and accommodative Fed policy. Don’t get caught up in the tapering or any other talk. Fed chatter will be plentiful. Take your cues from action, not words – and price.

Could this long trade fail? Of course. There is a 30% to 40% chance. That is not small. If so, the 200-day line is a good target. We reset rather than regret. No whining.

The Founders Group will consider getting aggressively long on any sustained move above yesterday’s high – at least for a swing trade. Now you know why.

A.F. Thornton

Navigator™ Signals for Swing Traders

New Buy – 10/8/2021

AF Thornton 0 Comment

The Founders Group just added another 5% to its swing position in 11/19 Expiration SPY 440 calls when the SPY itself was trading at 438.50. This brings our total position to 15%.

Recall that we have been in a Navigator Algo buy signal since yesterday morning. However, given the run-up that triggered it, we are trying to accumulate our position slowly on pullbacks.

Even though we have a buy signal, and we believe that the short-term downtrend has broken, we are not out of the woods yet. Our near-term objective remains 4460 on the futures and just under 445 on the SPY.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook 10/8/2021

AF Thornton 0 Comment

Yesterday started out as a barn burner but ended a bit like a gap and crap, as we affectionately label such behavior. Traders partially (but nearly completely) filled the gap above us. But we still have yesterday’s gap higher below us, and we know all gaps like to be eventually filled.

Globex sellers explored the gap below us overnight at least down to 4382.25, then retested the level after the monthly payroll report this morning. In neither case were our Globex selling cousins able to get much footing. That puts a checkmark in the bullish column this morning. Opening above 4400 counts in the bullish column as well.

Today’s story will mostly be about whether we can stay in yesterday’s range above the gap and the ONL at 4382.25 or not. I am bullish above the ONL, less bullish below it, and running for the hills below yesterday’s gap bottom at 4355.75.

I don’t trade on Friday but will take a peek at the close to determine whether to hold our 10% position in SPY calls or add to it. I don’t see anything else to give us much of a clue about the open. It might be better to let the tape settle in before committing to anything.

A.F. Thornton

Navigator™ Signals for Swing Traders

Interim Alert – 10/7/2021

AF Thornton 0 Comment

The market is finally taking a bit of a breather from the morning rip-your-face-off short-covering rally. It just shot up at the open and stalled as predicted. This is often the case with large gaps, followed by late afternoon profit-taking by the daytime crowd.

As to establishing a swing position, I will see how things look right before the close. We may test the top of the gap, also the 21-day line on the RTH data around 4388. That would be a good place to begin establishing a swing position if we get a nice pivot.

For now, I am treating the Navigator Algo signal as a buy signal but still looking to cautiously establish a swing position on pullbacks and at key levels. I am targeting 10% November monthly SPY at-the-money calls if the pivot materializes.

The Navigator Algorithm can give us the signal, but it cannot predict the run. We have to use our other work to help us with targets and determine whether this is merely a run-up to the top of the down-channel or a true trend reversal. The jury is still out on that score.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook – 10/7/2021

AF Thornton 0 Comment

Sometimes the overnight markets frustrate me (unless I am in Europe and can get one up on the U.S.). I feel a bit robbed by our Globex cousins this morning, but we are opening with a Navigator algorithm buy signal nonetheless if the market does not immediately reverse. It is usually best to give the market a few hours to confirm the signal when taking the cue before the close. With the large gap higher this morning, it may be difficult to find a good entry point today unless you are willing to ride some volatility in your position over the next few days before profits materialize.

The opening will be a true gap higher, launched from a successful retest of recent lows. Gap rules will apply. It is very positive that we are rising out of a cyclical inflection point in the midst of very negative sentiment and opening above the weekly and daily means. At the same time, we are slammed right up against the downtrend line, making this a tricky buy point, with an initial measured move target of 4460. That is only 50 points higher from here IF that will be the end of the rally.

In the recent past, the market has moved right to the target with short-covering and FOMO. It might still do that, but the character of the market has changed. For example, this is the first time the target has fallen short of the old highs in the past year. My expectation continues to be that this move will form the top of a trading range even if it tags the old high.

We will take a 50% position in the S&P 500 using dips on the hourly charts. In a large gap higher like this today, the market will typically stall in a tight trading range all day, so new positions may require patience to find our entry points, and I will keep you posted.

Initial targets should be the overnight high at 4397.75, then the bottom of the gap at 4406.25, and finally the top of the gap at 4425. As mentioned above, the measured move target is 4460, and then there are about 100 points from there to the old highs.

Stay tuned.

A.F. Thornton

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