Epilogue – 9/29/2020

Good Evening:

Our morning long did not stick, but we were well-positioned, entering at 3632.25. And then we were rewarded with 25 points as we exited on our trailing stop at 3658. It was tempting to try again as the market approached the close, but there wasn’t enough runway left, and the Founders Group did not want to hold overnight.

The question is whether Europe’s woes are ready to spill over to the U.S. now or later. And interestingly, the S&P 500 Index is pounding on the June low with no real success in sustaining a decisive break. Properly placed, a trade near the morning price is a low, risk-to-stop trade entry point. We can still make money even if the rally fizzles.

Our algorithm is slowly but surely running through its list of buy alerts. But we have no comprehensive swing buy signal yet – even though it is close. And close only counts in horseshoes and hand grenades. Still, a short squeeze is getting closer even if the market goes a bit lower (and by all rights, the stock market should). And to further complicate matters, tomorrow gets dicey as the last day of the month and the calendar quarter.

We would love to work another swing buy signal with short-squeeze tailwinds. And everything looks to be set up—five sessions and no acceptance below the June lows. To us, it seems like the shorts are getting trapped. It pays to “think” and identify the “pain” trade. Right now, the pain trade is higher.

Ben Franklin once said you must buy on the canons and sell on the trumpets. Canons are firing, and the sentiment might be too bearish for further declines – at least for now. And even if nothing happens tomorrow, money managers have one final calendar quarter to try to recover from their terrible year-to-date performance. Their FOMO will kick into high gear on Monday.

I wish tomorrow weren’t Friday or the end of the calendar quarter. Money managers will be window-dressing before taking the plunge and putting real money to work on Monday. Their activities will likely fog my screens – at least for tomorrow. And then, will I want to be long all weekend? How about short if everything goes south?

Nobody said it would be easy. Let’s see how it all lines up.

A.F. Thornton