Category Founder’s Trading Journal

Founder's Trading Journal

The Walk-Back- 6/21/2021

AF Thornton 0 Comment

In the news conference, Chairman Powell walked back and clarified the dovish stance outlined in the initial release. First, he clarified that rates would remain near zero – dovish. That is when the sell-off first abated.

Then, Powell indicated that the Fed would start selling some mortgage-back securities – which contracts the balance sheet and moves away from Quantitative Easing. This, along with introducing the tapering topic and more governors becoming hawkish, was enough to calm the hawks without alarming the doves.

So the market has recovered quite a bit from the initial decline. And that is why you have to give the market some time to digest all of this, sometimes even the entire next session.

Most notably, leadership completely reversed from tech to financials, which indicates that higher rates are ahead. The 10-year rate confirmed the same.

I will reserve my deeper analysis for the pre-market outlook tomorrow. So far, there is nothing extraordinary to concern us with today’s decision, except for a market that likely needs to take a rest, and this is just as good of an excuse as any. I must also assess a possible leadership change.

News often distorts the market, and today was no exception. Let’s see how we close and how the market behaves tomorrow.

Let me also harp again on the Weekly Expected Moves that I calculate every Friday for the week that follows. I specifically mentioned the WEM Low this morning – and the likelihood we would tag it in any move to the south. Once again, it was the WEM Low that caught the market in this decline. 

That is vital information to have and know. I picked up $2,500 off the low in a nice trade with a couple of S&P 500 mini futures contracts. That made spinning my wheels all day worthwhile.

Have a wonderful evening.

A.F. Thornton

Founder's Trading Journal

Special Update – 6/21/2021

AF Thornton 0 Comment

The SKEW index, which measures smart money tail risk, just hit the highest level in its history at 161.35. While not a perfect timing indicator, this is not to be taken lightly. It could portend a Fed misstep, but what would that be? If the Fed fails to pull back on QE – is that a negative or a positive? Is the market looking for a hawkish or dovish Fed? This is not an easy call, but the price should tell us, and why I prefer to trade tomorrow.

Founder's Trading Journal

End of Day – 6/11/2021

AF Thornton 0 Comment

Sure, it is approaching 11:00 pm here on a Friday night, but I would having trouble staying awake with this market regardless. Remember Pete and repeat? They are back again today.

Nothing is resolved in terms of balance. The cluster of support around the 4220 – 4225 area caught the fall, as I suspected it might this morning. It may have saved the “look above and fail” trip to 4205. Time will tell.

We called the low of the day within minutes after it was in – 14 contracts traded was the key. That is where volume and market profile can help. The “V” drive was a nice long.

Settlement is likely to be at the same level as most of the past week.

All doubts in a bull market should be resolved in favor of the bull. We can start there and update the narrative over the weekend.

Enjoy the time off for a few days. I am glad the snooze fest is over this week.

A.F. Thornton

Founder's Trading Journal

Mid-Day Outlook – 6/11/2012

AF Thornton 0 Comment

Yawn. While it has been a slow road today, the market has thus far survived the tests previously discussed and congregating around the 4225 – 4227 area. Investors traded only 14 contracts on the S&P 500 at the 4221.50 low, which could be the low of the day.

Perhaps there will be some action at the close, but nothing is resolved. The market remains in balance and largely in the same value area as the past week. Tempo is slow, internals are mixed, and that won’t drive a trend.

There is a nice “V” off the lows and into the 4228.30 settlement from yesterday. With another small dip forming a right shoulder, we may have a long trade before the close. I did take a nice short off the 4236 area this morning, but my confidence level was not high enough to convey it. I used two micros and made $50. Again, yawn.

I would take a long trade if it presents, but I want to be out for the last 30-minutes of trade on a Friday. I think it is up to the bears to press their case here. We can criticize the breakout failure, but we have not broken down either – at least yet.

Stay tuned,

A.F. Thornton

Founder's Trading Journal

Pre-Market Update – 6/10/2021

AF Thornton 0 Comment

Solid breakout on the S&P 500 with strong internals. 

The initial move includes some short-covering, we will see if price is accepted in this area. 

The NASDAQ 100 has broken out above its near-term high, but remains below the all-time high. If price is accepted here, the head and shoulders pattern to reverse higher is solidified. 

I am continuing to lighten on my personal positions in the rally. I want the weekend to make any further decisions.

Energy and tech are leading. That is unusual as of late. Financials are laggards thus far.

Stay tuned. 

Founder's Trading Journal

Late Day Update and Sell Signal – Charts Added

AF Thornton 0 Comment
Put/Call Ratio Over S&P 500 Index - Arrows Mark Ratio in Similar Position
VIX Volatility (Fear) Index Over S&P 500 Index - Lowest Level Since Pandemic Lows

The Founder’s Group just closed its position in the NASDAQ 100 at 13870.50. My concern is the extreme complacency developed in the past 24 hours – most notably reflected in the put/call ratio. It is at the lowest end of its year-long Pandemic range. 

Typically, the indicator is not as good at picking tops as picking troughs. Still, the current level is exceptionally low today, indicating a disturbing sense of security in all that we see. Every time the ratio hit these levels in the past year, the market topped – at least short term. If a double top does develop, it will seem obvious (in 20/20 hindsight).

Also, we got out as the afternoon drive rolled over at a lower peak than this morning. Sell in the morning / buy in the afternoon is fine. Sell in the morning, sell in the afternoon is not so fine.

Tomorrow, we get the inflation numbers. While there is likely to be no surprise, it may nevertheless be a catalyst for what happens next. I am acting out of a superabundance of caution in making this decision this afternoon. The risk here warrants a more vigilant,  protective strategy.  Also worth noting is the VIX volatility (fear) index hit its lowest level in a year yesterday at 15.15. While the crowd is not giddy, they may well be asleep at the wheel. With the SKEW at record levels as well, tail risk is as high as its been recently.

This decision does not negate any of my previous comments. Likely, the market will break out here. But we had a nice profit in our NASDAQ 100 position, and I can always re-enter.

Sometimes, the return of our capital can be just as significant as the return on our money. Tomorrow may be one of those moments. Again, the odds still favor the break higher. Nevertheless, I am always willing to look dumb as long as I lock in a profit.

Another possibility is that the inflation reports drive a rally that the professionals use to liquidate their positions. Keep that in mind as well – kind of the bull trap I have been mentioning. 

Tomorrow promises to be exciting – assuming we are on the right side of it.

A.F. Thornton

Founder's Trading Journal

Mid-Day Update – 6/9/2021

AF Thornton 0 Comment

Yawn. Sorry to say it. The words are getting well-worn. More balancing action today. What will it take to break the curse? I am not sure, but it is, indeed, getting old.

Responsive trade from the Value Area Highs and Lows is all that is working today in the indexes. Once again, the value area is essentially unchanged from yesterday. Once again, the overnight action inside yesterday’s range accurately predicted more balancing. There is, however, plenty of action under the surface if you look for it.

Growth and tech still lead for now. I am surprised the NASDAQ 100 has not performed better, given that the 10-year rate tucked under the critical 1.5% level today.

We still need a catalyst. Let’s see what the afternoon drive brings. It starts in an hour or so.

Stay tuned.

A.F. Thornton

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