Founder's Trading Journal

Reminiscing – 10/19/2022

Oct 19, 2022 AF Thornton 0 Comment

Good Morning:

Today is not the first time I pulled my head up from my computers and rejoined the real world. Where have I been? – I always think to myself. It reminds me of finals week back in college. Law School was worse – with 100% of your grade dependent on one, final test.
And I am a little punchy after working three days straight with little or no sleep, helping a friend with some legal issues, my old wheelhouse.
There is so little time to reminisce, as this trading thing can swallow you whole.
And then it struck me this morning – 10 months into the year. It was the date today that triggered it. Today is the 35th anniversary of the 1987 stock market crash. It seems like yesterday.
The crash anniversary also meant that I had forgotten another important milestone. I forgot that this year is also the 35th anniversary of my leaving the comfort of a large law firm as a budding securities attorney. It was the year I stepped into the fray of the banking and money management world.
It is not like forgetting your anniversary or your wife’s birthday. But it is still crazy that I forgot.
It was April 1987 when I took the plunge. I started an investment advisory firm that would eventually grow into a bank, trust company, brokerage firm, hedge fund, and family of common trust funds.
But at October 19, 1987, the new company had barely started.
I remember sitting in the barber’s chair in Scottsdale, Arizona, on that fateful day – October 19, 1987 – as the news came over the radio that the Dow had dropped 25% in one day.
All I could think was, “smart move, you idiot.” I imagined the groveling I would have to do to get my old job back.
Everyone in the law firm was always talking about how bad the law profession was (which is true) and why they needed to leave. The grass was always greener on the client side.
We saw our clients as “stupid” – but making so much money! “I can do that,” we would naively pronounce. Look at my pedigree! That loudmouth, uncouth client never even graduated from high school.
You see, lawyers both envy their clients and live vicariously through them. Who you were as a lawyer depended on who your clients might be.
We had some big clients, and I worked on the first Mortgage Backed Bonds that utimately took down the financial system in 2008. My life has been kind of like Forest Gump. Lots of serendipity.
But having your worth defined by your clients reminded me of being in high school, defined by my parents instead of my own accomplishments. I wanted neither to be defined by my clients or my parents (another story).
And lawyers – the puffy know-it-alls we were – always want to give you business advice – like they ever had any real business experience! Worse, we billed them for it.
And those who did leave the law firm for the other side usually failed and returned in defeat.
And that always gave a sense of comfort to those who stayed behind.
And in my psychotic mind, I suspected the crew back at the firm was waiting for me to fail too. It is just how it is – human nature – not like the old gang was evil or anything. In fact, they were very supportive.
But I left because I decided if I were to put in 2000+ billable hours a year, it would be for myself and my family, not as a grunt on someone else’s gravy train.
But when I look back, I now realize that I left because I was too stupid to know better and know what any entrepreneur truly encounters in the real world. Ignorance is bliss, as they say.
These thoughts raced through my brain on that fateful 1987 day, as I contemplated my first business failure in the barber’s chair. I was still young I thought – only 28 and time to recover.
In retrospect, the good news was that I had very few clients, and they owned mostly municipal bonds. I have been blessed many times in life.
The other good news was that everyone else’s investment clients were unhappy. The clients were looking for a new, pretty face. Unhappy clients were ripe for the taking back then, and I still had a pretty face and an unblemished track record. Well, sort of pretty anyway.
The moral of the story is that there is always opportunity in adversity, and maybe your first impression will be wrong.
Life went on, and I comfortably retired at age 39.
But I could not know the future on that fateful day, and I swore there had to be a better way to manage money than to watch your investments decimated in crashes or bear markets.
Born skeptical, I always figured someone knew in advance and likely made a fortune. I wanted to find out how they did it.
That day birthed the Navigator Algorithms that you see on these pages today.
I had one more bout of market failure after 1987 that nearly ruined me financially, physically, and emotionally. So the journey has never been easy. I am saving that story for the proverbial book.
And, like many of us, my life has never been easy or normal. But I will save that for the book, too.
There is much talk of a crash even now and possibly next week.
Those that add astrology to their investment work say that we are in a so-called “Dark Window,” similar to 1987.
The Dark Window is a rare alignment of planets that have been present at every stock market crash in history, particularly 1987 and 1929. That window opens this Friday and lasts for a week.
One of my favorite websites in the world is SpuriousCorrelations.com. Head over there if you ever need a good laugh. They site many “spurious” correlations and coincidences.
So is this planet alignment thing just a spurious correlation, too? And I know that there is hidden order and math in the Universe – it drives the success of our algorithms. I discovered these equations nearly 20-years ago.
So before we completely dismiss the “Dark Window” theory, and for the most part I think we should, take a look at the chart below of the cycle of full moons overlayed on the daily S&P 500 chart:

S&P 500 Continuous Futures - Full Moon Cycle Lines

Coincidence? Maybe. But then there is that Mercury alignment thing:

S&P 500 Continuous Futures
Cycle Lines Where Mercury Aligns with Earth and the Sun

Do the “Dark Window” people have a point? I suppose we will find out next week.
Am I saying that I incorporating planet alignments into the Navigator Algorithms? Well, I guess that has to remain proprietary, right? Now he has lost it, you think to yourself as you laugh out loud. I digress.
For now, you will see from the first chart above of the 1987 Dow Jones Industrial Average that the crash bounced from the 200-week line, just as our market is doing now. And 1987 was a full-blown crash – not so orderly as our bear market.
And I am also reminded that Black Swan events trigger crashes, which are as rare as Black Swan events. But I would be the first to admit that plenty of Black Swan events are circling.
And my best guess is that we are in the eye of the hurricane right now – between the defeat of Ukraine and something starting in Taiwan. Earnings have been surprisingly good in some cases, and interest rates could be peaking – at least for now.
But we don’t want to endure a crash. In 1987, prices did not find acceptance above 1987’s peak until 1992. I am too impatient to live through that.
Five years is a long time to get your money back – especially if you plan to retire in 1988.
And the period between the 1929 peak, and 1955’s final acceptance of prices above it, was equally long and miserable.
Nor does the eventual recovery of these crashes include the thousands of people who sold at the bottom. That is human nature too.
But I am as confident as I can be that after 35 years of development and tweaking, the Navigator Algorithms will keep us out of harm’s way.
For now, short-dated options are bringing us a lot of volatility. Almost 40% of yesterday’s SPX volume traded in yesterday’s expiration. Traders are using options as futures substitutes, as many firms recently raised margin requirements. That happens near the bottom too.
With monthly expiration fast approaching on Friday, there is huge open interest at the Put Wall at 3600, the mid-price at 3700, and the Call Wall at 3800. The price will become sticky around these large, open interest strikes until Friday.
We opened around the 3700 strike, and I view that level as the key to holding and still completing the leading diagonal pattern pointing to 3800 and highlighted in last night’s video. S
o 3700 or so is a good place for a stop, give or take a few points. Then one could step aside until after Friday’s expiration if the stop is triggered.
And for now, the 3800 or so target remains if the market goes on to complete the pattern.
So, major levels are little changed from yesterday. We see resistance at 3757, then 3800. Support shows at 3711 to 3700, then 3651. For us, 3700 must hold to stay in the swing trade.

I will enjoy my 35th anniversary today of entering the most difficult and rewarding endeavor I have encountered in this lifetime – trading in the equity markets.

Of those who start to trade for a living, few complete the journey successfully. For me, it was all about dogged determination. I am a plodder and work harder than the gifted ones to earn my A’s.

And make no mistake, this journey had many dark and bright days, weeks, and months. Losses are the tuition you pay for this education.

But I am still here, sharing my experiences with you. I hope, in some small way, it helps you with your trading journey.

A.F. Thornton 10/19/2022

Founder's Trading Journal

Interim Update 2 – 10/18/2022

Oct 18, 2022 AF Thornton 0 Comment

Good Evening:

Res Ipsa Loquiter – the Thing Speaks for Itself.
Now, where do we get out?
I am looking to scale out between 3800 and 3820 – all else being equal.

Enjoy the video!

A.F. Thornton

Founder's Trading Journal

Interim Update – 10/18/2022

Oct 18, 2022 AF Thornton 0 Comment

Good Morning:

Before I forget, I want to mention two of the best sources I know right now for unfiltered, objective Global News.
First, let me mention Alex Christoforou [https://rumble.com/c/AlexChristoforou]. Alex roams around Athens, Greece, Nicosia, Cypress, or wherever else he may be, with his GoPro camera giving you straightforward, unfiltered, and compelling analysis while touring beautiful historical sites. He is a true, old-school journalist in a time where everything is propaganda.
My second suggestion is Redacted [https://rumble.com/c/Redacted]. You will likely remember Clayton Morris from Fox News. He and his wife, Natalie, have joined the ex-pat community in Portugal. They do a daily broadcast at 4 pm EST, and I never miss it. The couple always records the broadcast for later viewing. Once again, objective, unfiltered, old-school journalism.
I provide Rumble addresses for both news sources because they have been suspended from YouTube several times for departing from the prevailing “narrative.” That is how you know you can trust them. They won’t be on YouTube much longer, as nobody is who tells the truth.
Now, on to the stock market. Besides seeing the most upticks in several years at yesterday’s NYSE Open, we now have a huge gap open in Globex last night, and the market has yet to stop rallying. We have not seen a Globex Gap open of that size in a long time.
At this writing, the market will open in New York with a 272-point gain in NASDAQ, 627 point gain in the Dow, and 80 point gain in the S&P 500. All of the major indexes have gained more than 2% overnight. The Asians and Europeans are experiencing the same “Pain Trade” as the Americans as they all puke up their puts. The following chart tells the story.

The Put/Call Ratio Screamed "Pain Trade Ahead" on Friday

What does the chart above tell us? Retail traders were shorting the market in historic numbers – AT THE BOTTOM. And it is likely that some hedge funds and institutions were doing the same. They are all running for the exits now as if someone yelled fire in a crowded theater.
And here is another chart that lends some perspective:

Typically - The 200-Week Moving Average Only Fails in A Full-Blown Recession

Naturally, the Orwell Administration has redefined the term “Recession,” but with the GDP Now forecasting growth in the third quarter, the economy is sputtering but not quite there yet. War is good for business – do you see how that works?
In our decision matrix, we deal with probabilities and look for low-risk entry points. This is why I had mentioned the 200-week line Sunday evening.
And, since everyone will be looking for an excuse why the market is rallying (until it stops), how about this?

Peak Inflation and Interest Rates, Anyone?

We will have some deeper analysis for subscribers later today.
For now, resistance shows at 3875, then 3895. Support shows at 3700, then 3649. The Put Wall has rolled up to 3600 (from 3500), statistically a bullish signal.
We also see the Vol Trigger & Zero Gamma points sliding lower, which suggests calls building. Like the last rally, call-building is necessary to sustain the rally and pick up where the short-covering leaves off.
I still see a bullish edge into Friday’s OPEX, due to Vanna tailwinds and Charm. This idea strengthens if/while the S&P remains above 3700 support (the highest Gamma Strike). Large puts <=3700 also tilt the board in favor of bulls as these Puts decay into Friday’s expiration.
Needless to say, Gap Rules are applicable this morning, especially Numbers 2 and 4.
Overnight inventory is obviously 100% long, so there might be some profit-taking from our overnight brethren at the Open.
I will be in the trading room today, though day trading could be treacherous in this runaway environment.
I will join the room about 15-20 minutes after the opening.
Buy dips to the five-day line – at least for now.

A.F. Thornton

Founder's Trading Journal

Founder’s Trading Journal – 10/16/2022

Oct 17, 2022 AF Thornton 0 Comment

S&P 500 Index Continuous Futures / Friday’s Close – 3597.50 / -84.25 pts (-2.29%)

Published Sunday Evening

Navigator Swing Strategy™

20-Week Cycle Bottoming

Navigator Algorithm™ Trends

S&P 500 Index - Navigator Algorithm

Navigator Trading Sandboxes™

Click here to learn about Trading Sandboxes and how they work. The table below lists the granular price obstacles a trader will encounter inside the expected move ranges. The DEM and WEM help us narrow our focus for the day and week ahead. We also included a few important price levels outside the range boundaries – for the less probable occasions when the price exceeds the edges. The table reflects the key trading levels for Monday, 10/17/2022.

To successfully navigate this data, traders need to monitor the price auction with volume profile histograms for the day and a cumulative profile aggregating the last 10-20 sessions. As price travels north or south from level to level, volume tapers off at reversal points, and the process begins anew in the opposite direction. Professionals call this “price discovery.”

Founder's Journal and Trading Notes

Below are a few relevant excerpts for today from A.F. Thornton’s trading journal. Check out the full notes with a paid Subscription, which also includes access to Mr. Thornton’s live charts in the Founders Trading Room. The full journal contains Mr. Thornton’s daily trading plan and reflections on his daily gains and losses.

References to “the Market” below mean the S&P 500 Index. The quoted numbers are from the front month E-Mini Continuous Futures Contract (now December 2022).

A few excerpts on today and what to expect tomorrow...

Good Evening:

Volatility is in the air again this week. For Monday alone, the options market is pricing in +/- 60 points from Friday’s close (3597.50) for a 120-point day range. For the week, the options market is pricing in +/- 130 points from Friday’s close for a 260-point week range.
The Founder’s Group continued to scale into long positions between 3610 and 3685 on Thursday and Friday after Thursday’s Navigator Algorithm Buy Signal kicked in.
Technically, the signal painted just above 3600 on Thursday. But as we said then, the price did not confirm the buy signal unless the market closed above 3655, and it did.
From there, our job was to scale in on pullbacks, and we got plenty of that on Friday. Our stop remains a few ticks under our proprietary Algo trigger line, which also moved around quite a bit on Thursday and Friday.
Thursday was a day like no other. The turn was predictable, only a few points off our projected 20-week cycle low at 3509. The actual low was 3502.
Still, the magnitude of the bounce was unbelievable. A day like Thursday has occurred only three times in history, and the market gained at least 10% in the ensuing weeks each time.
For our purposes, Thursday saw a rare, bullish engulfing candle and true pivot on the daily chart, further confirming the buy signal and adding to the bounce case.
As you will see from the first chart above, we could predict the timing of the low using cycle algorithms and projections. When the price crossed the 20-week FLD (Future Line of Demarcation), we projected the distance from the last cycle peak to the break to predict the low. The predictions are generally accurate within a small price variance.
The 20-week cycle low (3502) should be in place. However, traders might push the market down to retest it before the market can seriously bounce.
It is in the eye of the beholder whether Thursday was a successful retest of the June low, negating a retest of Thursday’s low before the price rebounds. As is typical on Fridays, the market left us hanging on the ambiguous edge of resolving the issue.
What I would expect now, excluding the plethora of exogenous global events which could derail any prediction, is a bounce out of the 20-week cycle trough and then an eventual resumption of the bear. The 20-week cycle will likely have bearish, left translation in its wave structure.
Price targets for the 20-week are 3817.50, then 3915.50, then 4012.50. We may not make it that far, so I will be scaling out, starting at the first target, while also maintaining our trailing stops.
The price should continue to the 18-month low forecast for early March 2023.
Conceptually related to the 18-month cycle low, the price is also bouncing off the 200-Week Moving Average, where most oversized corrections and cyclical bear markets end (2016 and 2018 are good examples).
Coincidentally, not far below 3502 lies the 4-year cycle FLD. Generally, if the market starts closing below the 4-year cycle FLD, you can measure from the all-time high to the break and project it down to forecast the ultimate low.
On the first chart above, I took a theoretical break at 3502, resulting in 1306.25 points from the January market top to the break. Projecting 1306.25, down from the theoretical break at 3502, gives the price a downside target of 2195.75, very near the China Virus Crash lows in March 2020.
Time-wise, that low is not due until the summer of 2024. And we have a rest stop at the 18-month cycle low in early March 2023 to keep us busy until then.
Still, we have to consider that the price could get to the projected target early (like the 18-month cycle low forecast for early March), with the “time” element resolving with a retest of the March low on the 4-year low forecast for the summer of 2024. There are many examples of these variations if you study past bear markets.
The point is the 4-year cycle FLD is what separates bear markets like 1929, 1973-74, 2000, and 2008 from the rest of the crowd. What kind of bear will this be? From everything I see right now, I would bet on an eventual break of the 4-year FLD and 200-week Moving Average like 2000 and 2008-2009.
But let’s at least look for a rest stop at 3375 or so before the 4-year low sets down.
Anyway, it is all theoretical as we have not violated the 4-Year FLD as yet. I want you to be aware of the prospects.
And what we have now is a cascade of cycles nesting on each other, which is a rare occurrence, normally leading to a pause, if not an outright bounce.
As I always advise, avoid the “all or nothing” thinking. Go to the Latest Stock Market Forecast in the Categories menu to your right. I wrote that macro forecast originally in January and updated it in March. Nothing has changed. We could be entering a trading range market just like the similar period in the 1970s. That would support lows here and a sideways market for a while, like the 1966-1982 market. It is not my base case, but I keep it in the back of my mind.
The point is we have 600% plus gains this year because we follow the price and algorithms wherever they want to take us, and we try our best to leave our bias in the hallway before we step into the office.
And need I remind you that everything I told you more than two years ago has come to pass? I said inflation would come roaring back. I told you that a “Fourth Turning” was coming, referred you to the 1997 book, told you it would be miserable, and even featured an interview with Neil Howe, the co-author of this seminal work, on these pages. I told you about the World Economic Forum and the Great Reset to Collectivism and Authoritarianism. And finally, I told you not to fear the China Virus – fear the shot.
My partner thought I had lost it several years ago, and I am sure many of you felt the same. Yet, now you know I wasn’t crazy as we continue to suffer the consequences of President Orwell and all of his WEF handlers.
Nothing has changed. We are in an existential battle for the freedoms and values we have taken for granted. Every conspiracy theory I have ever heard seems to be coming true. We are watching history unfold in real-time right in front of our eyes.
By the way, did you know we are also invading Haiti? Look over here… You cannot make this stuff up. And what might the market do if Zelensky and Ukraine give up the fight? There is little left of the Ukraine Army (or our taxpayer funds).

A.F. Thornton

BluPrint’s business model for retail services is sharing the buy/cover short and sell/short signals generated by our proprietary Navigator Algorithms™ for the S&P 500 index. Subscribers can implement the signals with the SPY ETF, SPX or SPY options, S&P 500 EMini (and micro) futures, or a combination of these instruments as the context warrants.

Futures and options are leveraged instruments that involve high risk, volatility, leverage, and loss. They have different characteristics with comparative advantages and disadvantages. With leveraged futures, you could lose more than your original investment. Past performance does not guarantee that you will achieve similar results, nor do we.

A.F. Thornton is not a financial advisor, nor is he your financial advisor. He only expresses his opinion based on his experience. Your financial situation and experience may be different. This blog is for educational and inspirational purposes only. Your investments are solely your responsibility. You must conduct your own research.

* Clients are advised to scale in on pullbacks when a closing price is significantly above the algo signal generated on that day.

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Founder's Trading Journal

Interim Update -10/13/2022

Oct 14, 2022 AF Thornton 0 Comment

“How about this – a spike low and rebound tomorrow? Then a retest right on the 20-week cycle and options expiration around the 21st?”

A.F. Thornton – Last Paragraph Yesterday’s Blog

Good Evening:

Don’t you hate someone who said I told you so? It was not my most probable guess for today – but apparently, it was what the doctor ordered.
Not that I made as much money as I could have. There turned out to be more profits left in the puts we cashed in yesterday, but only if we were quick to the draw this morning.
And I could have entered lower on the long side even for some day trades today. I had a good pre-market trade, but that was it today. In a sense, I am haunted by not wanting to give back our incredible year-to-date gains in a wrong-headed move. I need to get over that.
Besides, the Navigator Swing Buy signal was the focus of the day, and the spike low. We had been close the last few days, and it finally kicked into high gear at 3601.
Then the waiting game began. We had to see if traders would accept prices above 3600. A reversal before the close could have erased the buy arrow. I have seen that happen more than once.
So we set the parameter as a buy as long as the market closed above 3651, and it did.
There were any number of ways to enter with a stop, etc. But we will use the close at 3681.75 as our official entry.
We will buy pullbacks to the 5-day line until another sell signal presents. For now, the Founder’s Group has their stop set at 3645.50 in case we need to give the price some breathing room tomorrow. Be advised that we will change that on a dime if need be.
Closes below the five-day line are a good stop proxy if you have no other strategy.
We move our stop around, preferably up throughout the day, but you need a subscription for that information. For now, at least you have a general idea of what we are doing.
If you have been following the Blog, there should be no surprises about this low, and there is no point in rehashing why we had been looking for it.
Could it be THE low? Ollie Ollie in Come Free?
Sure, it could be, but I seriously doubt it. Think of it more as taking a break at camp as we continue to repel down the mountain.
And what about that retest? Or was this a retest? I will better assess that over the weekend. A good follow-through day would make the analysis moot.
And anyway, the Navigator Algorithm knows, and it will tell us what to do next. We will keep it tight – using 60-minute RTH and 120-minute ETH charts rather than the daily chart to monitor the signals.
Next stop? Break the downtrend line (happening in Globex already), then revisit the mean at 3740. Solid support lies at 3651, and we start running into resistance at 3770, assuming we can clear the mean at 3740.
Regression to the mean is all about this: the “rubber band” principle. We just snapped back after getting too far below the mean on the daily chart.
If you did nothing but run a 21-period line in just about any time frame and study it, you would find this an easier process than you might otherwise believe.
That is how I start my weekend reviews. A plain candlestick daily and weekly chart with the 21-period line only – nothing else.
Of course, I also want to know if a new moon is due and how Mars aligns with Mercury and Venus.
Just kidding – I wanted to see if you were still paying attention.

Have a great weekend – the next Blog will come on Sunday evening or Monday morning for non-subscribers.

A.F. Thornton

P.S. Why would the market rally here other than short-covering? The reasons always become apparent in time. Anyway, it is much too early to draw any conclusions and the bond market still looks like a Mac truck (electric of course) ran into it. Remember – “it’s the bond market, stupid” and electric vehicles have a lot of torque.

Founder's Trading Journal