Category Founder’s Trading Journal

• Good Evening:
• Futures have recovered to 3790 after opening above 3800, then trading to 3740. For today we see resistance at 3800, then 3835—support shows at 3760, 3725, then 3700. The DEM Implied Move is quite high at 1.3%, which reflects the Gamma that expired on Friday.
• My work told me to expect the bounce from 10/13 at 3507. And the price actually bounced at 3502 – only a few points off the target. But prices remained in the recently formed balance zone between 3600 and 3800 on Friday, with 3700 as the mid-point. 
• Combine this with the street being lopsidedly short (with the highest cash positions in a long time), and I still think the “pain” trade is higher. The question is whether the price is ready to break out now and tag our first target at 3916. Or does it take one more spill into the lower end of the balance zone and then return to the top and break higher?
• I am leaning towards the latter scenario, as the price appears to be finalizing three pushes from the low, forming a leading diagonal on the daily chart. Diagonals often lead to components of head and shoulders chart patterns; in this case, it would be a right shoulder to reverse higher. Concurrently, this would provide some accurate upside targets.
• The possibility motivated the Founder’s Group to take a swing position at 3684.25 on Friday. And our trailing stop remains 3976.50 at this writing. 
• We would have been stopped out last night at our original, lower stop price from Friday. Fortunately (and sometimes, unfortunately), you cannot place a formal stop on options, nor can you sell SPY options on weekends or during Globex hours, and we are better off for it this morning.
• Many of the 24-hour price highs have come overnight before selling ensues in regular hours.
• If prices break above the 3600 – 3800 zone, it is easier to contemplate a move to the first Fib target at 3916. The Balance Range projection (200 points) is even higher, near 4000. 
• Similarly, if the price breaks below the bottom of the zone at 3600, we can project a move to new lows near 3400 or worse. Balance Rules are a good guide in that respect.
• Another key to the rally case is maintaining prices above the 21-day mean at 3724, the 5-day line at 3737, and the Algo trigger at 3648. These are moving targets throughout the day, but if we could tolerate a dip into the Algo Trigger, the price would form a perfect right shoulder reversal pattern to go higher. 
• The minimum projection from the pattern would shift to the 200-day line and the highest regional volume node between 4120-4140. I don’t want to get too far ahead of my skis, and there would be a few humps between our 3800ish range top and a trip to test the 200-day line.
• And what would motivate this rally amid Nuclear War threats, record Inflation, and the fastest rise in yields in our history? 
• First, there are hardly any potential sellers remaining; save the retail crowd. Then there will be the short-covering. And FOMO will kick in as year-end approaches. Stock buybacks resume next week. And post-November 8th, maybe we will have thrown the bastards out of office.
• Note to self; it could take them months to count the vote in this modern republic.
• A reversal would also be consistent with a launch of the 20-week cycle, expected to be weaker than usual with the bear market overlay.
• Note that following moving average lines like the five and 21-day lines in a sideways range is admittedly treacherous – but let’s see how it goes. 
• And If I am accurately interpreting the wave action, once this 20-week cycle rolls over, regardless of when or where it starts, a series of multifractal “3” waves will get underway as we travel to the nominal 18-month cycle low, currently scheduled to arrive around 2/25/2023. 
• Third waves are the worst waves we encounter in bear markets, especially in a multi-generational cycle, such as the nominal 90-year cycle that defines this period.
• I expect this 20-week cycle wave to resolve with a bearish left translation, though the pattern allows for more rallying. But we will be about one-third of the way through the wave by early December, the ideal time for a bearish wave to peak.
• I wish I knew what to tell you to do now. At best, I can set the stage. But In times like these, I prefer to observe the price action in real time. A patient investor might wait until we call a bottom to the bear – likely next spring. 
• Or, pay attention to the next Navigator Swing signal, likely to come off the right shoulder mentioned above around October 28th.
• And don’t forget the Founder’s Room motto I first heard from Tom over at Bookmap. From time to time, we feature Tom in the Founder’s Room. The motto is, “If this, then that. If not, then what? That is the only plan that makes sense, especially in a bear market. Have a plan that considers both sides of the market. A plan helps you stay objective.
• Much of the option open interest at 3700 expired Friday. After reviewing the CME statistics last night, here are my thoughts: 
• The board has currently been “reset,” so to speak. We now kick off a November OPEX (Monthly Options Expiration) cycle; we look for new large options positions to form over the coming weeks. With that, the market should start to tighten around key options levels.
• To that end, there were several shifts in key levels after Friday OPEX:
  • First – the largest gamma level shifts up to 4000 from 3700. This rise, like a higher DEM today, syncs with my view that markets will unpin from the 3700 area this week.
  • Second, the Call Wall shifted to 3900, which now starts as our overhead target into Nov OPEX.
  • Finally, the Vol Trigger is at 3725, and as stated on Friday – should the SPX trade above that level, our algos hold a bullish stance.
  • Since the Oct OPEX positions are gone, we see the range from 3835 down to 3700 as quite fluid due to light open interest. Accordingly, over the next session or two, I anticipate options positions building right below the 3900 Call Wall or right above the 3600 Put Wall, with implied volatility reinforcing market behavior – meaning higher prices lead to lower volatility and vice versa.
  • With traders net short here, declines tend to “grind down” with jumpy upside moves. This behavior is the mirror image of call-heavy, bullish markets (like last year).
  • The options feedback look is increasingly important as the “Meme Crowd” and hedge funds continue driving daily Gamma squeezes in the ES and NQ using DTE (one Day To Expiration) options.
  • Seasonally, the market usually picks up momentum on the way to midterm elections. The market could also rally into the Fed meeting in early November. 
• The Fed flinched slightly in a New York Times leak on Friday morning when the market looked a bit scary. We know there was a big meeting of the powers that be. And we also know that OUR Fed bailed out Credit Swiss to the tune of $11 billion. 
• When you consider all the money rolling out the U.S. doors these days, wouldn’t you rather be one of our customers than a taxpayer?
• And thanks to inflation, the U.S. had the highest tax receipts ever this past year. AND THEY STILL RAN A $1.4 TRILLION DEFICIT! How will that $31 trillion debt payment look at 5% instead of 0% interest?
• So we survived another day Friday without capitulation – but I am not sure the Fed leak was sufficient to drive anything other than a bear market rally.
• What I am more certain of is that the Uniparty will TRY to drive a rally to support incumbents in the election ahead. I suspect the big Friday meeting had discussions to that effect.
• Besides last Friday and Monday being among the lunar “Dark Days,” where past stock market panics have bottomed, Tuesday is a solar eclipse. That should be enough for the astrologers to bring us a low, right?
• Is there anything to this astrology trading? I just learned about it, and we will find out if the market puts in an intermediate low here. Even then, the celestial relationships might still be a coincidence. 
• By the way, there is a lunar eclipse on Election Day if you can believe it. If we will all be “lunatics” on Election Day, then we are no worse off than the people on the ballot. 
• Nor does the Fed seem to have control of the treasury market at the moment, with Japan and China dumping our treasuries like they are kryptonite. That does not help the case for stabilizing the fastest and largest interest rate rise in American history. 
• The interest rate on U.S. Treasuries closed well over 4% last week, and the chart looks like a hockey stick.
• And then there was the big news today that “someone” will set off a dirty bomb in Ukraine this coming week. I have been waiting for the October surprise, and maybe this is it.
  If so, this should be followed here by mobilization of the U.S. military, a draft, martial law, and a suspension of the U.S. elections. Wouldn’t that be convenient?
• A nuke in Ukraine would likely cause a flight to safety (I am referring to renewed demand for treasuries, not my plane flight to Antarctica).
• There is precedence for stocks to rally even in the face of higher rates, but I wouldn’t say I like the probabilities that it would rally beyond what I discussed above. At the same time, you don’t have to lose much to test a low-risk-to-stop short position at the top of a range. So if you are bearish, keep a short around 3800 in mind.
• So I am on the fence about another spill or whether the market rallies from here for another month or so before the final nose dive.
• I would also note how similar the current spill looks to the first sell-off in the stock market that topped in 1963 and went sideways for 16 years. At the comparative juncture, the 1963 market rallied back up to the top of the range in 1966 before a 50% decline into 1974. I  posted a perspective chart with a few notes above.
• On a separate note, many of you know I lost my father-in-law and mother to the Covid vaccines in the past year. The side effects killed them. Remember it was “The Disease of the Unvaccinated?” Everyone had to be vaccinated to protect others, not just themselves. 
• This past week, we discovered that Big Pharma knew the vaccines did nothing to prevent transmission and likely enhanced transmission from the vaccinated. Pfizer’s testimony to the European Parliament this past week confirmed it. And my loved ones died from the exact side effects that Pfizer failed to disclose. They tried to seal all the vaccine trial documentation for 55 years! Fortunately, the judge who got the case wasn’t corrupt and refused Pfizer’s request.
• Do you know why I never took the vaccines? Instinct! The Orwell Regime pushed them too hard – with the Davos Crowd supporting them. It wasn’t normal. No government has ever forced a vaccine down their citizens’ throats like this. What was their motive?
• The vaccine has killed or injured many (otherwise healthy) people. There will be many more for years to come – likely in the multiple millions. You will be stunned as the evidence comes forward. The CDC and NIH have been hiding it. The vaccines are a complete fraud, and it is hard to believe it wasn’t intentional.
• India used Ivermectin and Hydroxychloroquine prophylactically in a province of 200 million people and maintained a fractional incidence of the disease.
• I immediately recovered when I finally used both inexpensive treatments after getting the virus.
• The vaccine’s real story is slowly coming out – and it should terrify every patriotic American.
• Please go to this Website  [https://freedomplatform.tv/the-real-anthony-fauci-the-movie/] and watch this disturbing documentary about Anthony Fauci and his crimes produced and narrated by Robert Kennedy Jr. The documentary tracks Mr. Kennedy’s recent book of the same name. The documentary is free for another few days. Be sure to pass the link to your friends and family.
• Sadly, like every other institution in this Country, our medical system is badly corrupted and broken.
• You will be shocked at what you will learn in this documentary. Every word in the movie and book is footnoted and double-footnoted to back it up.
• We have to vote anyone associated with this nightmare out of office this November, regardless of whether their name has a “D” or an “R” behind it. They need to go, or our nation is doomed.
• And the only way to change the captured and corrupt government agencies and their leaders is to send these actors to jail. Their actions are on par with the Nazis in Germany, and these actors deserve Nuremberg-like trials.

A.F. Thornton