The Next Publication Will be January 3, 2022
Navigator™ Swing Strategy – 100% Cash / Navigator™ Day Trading Strategy – Below Key MAs – Bias is Short.
I have been working all weekend on my 2022 outlook. In a phrase, my conclusion is that we are rapidly running out of pavement. The best case I see is a trading range, with at least a 20% plus decline somewhere in the mix.
With the Fed pivot, low productivity, dragflation, and the pressure coming on energy costs, the picture looks a bit bleak for swing and/or position traders. Just the fact that the Fed will be tightening into economic weakness is enough to roil the markets. However, if you are a short-term trader, willing to trade both the long and short sides, it promises to be a phenomenal year with a lot of volatility.
We will be introducing several new services when we start up again in January. One of those services includes a live trading room several times a week. Given how that will impact my previously enjoyed freedoms, I am taking these last two weeks of the year off. So other than my 2022 outlook video, this will be the last formal outlook unless circumstances require emergency commentary.
Swing Traders
On Friday, we stopped out on our Dow and S&P 500 calls on sustained price action below the 5-day lines. We were out at 356.25 on the DIA and 463.50 on the SPY.
We had a substantial profit on the first third of the calls at the open on the morning after the Fed meeting on Thursday. But we were only slightly profitable on the remaining two-thirds of the positions.
The Dow was walloped by the CDC withdrawing its Johnson and Johnson Covid Vaccine recommendation over blood clots on Friday. JNJ is one of the 30 Dow stocks. I lost a father-in-law earlier this year to the vaccine and communicated the risks on these pages. I am mortified that it took this long to make the announcement.
The Fat Five tech stocks finally started to join the correction, negatively impacting the S&P 500 (as well as the NASDAQ 100). We stopped out when the SPY gapped open below the 5-day line. We gave it an hour or so before we pulled the trigger.
Keep in mind that the S&P 500 has been bottoming on the Monday/Tuesday after options expiration over the past six months or so. This could bring us the bottom of a trading range in the next few sessions.
So now what? Do the surviving JNJ vaccinated now have to further experiment with the Phizer and Moderna vaccines? Or should I call them gene therapies – since they really are not vaccines at all?
Interestingly, Dr. Robert Malone, who invented the mRNA technology, published a video over the weekend imploring parents not to give their children the Phizer and Moderna vaccines based on his technology. It is hard for the government to cover that up – when it came straight from the inventor himself.
Swing Traders should hold their powder dry until January. Unless there is an exceptional opportunity, I see big bars back and forth on the charts, which means big confusion. Big confusion usually leads to a trading range. We will see how it goes on Monday, but I will be traveling for the holidays, and you will be on your own. Take some time off – it is not worth the risk here.
Day Traders
I see bears shorting bull candles and bulls buying bear candles. That is not easy trading – as trends never have a chance to get underway. Also, we are heading into very light holiday trading – which allows a lot of hedge fund manipulation. That is why I’m not particularly eager to trade in light volume – as there can be a lot of sudden liquidation breaks. So be careful.
Key levels to watch for support include the uptrend lines from March, October, and last week’s low. The key reference above is 4700 on the S&P 500, almost becoming a fortress wall.
Sentiment indicators are still quite negative, which is normally bullish. So don’t become overly negative. Look for a trading range to set up for a while and trade the range if you are inclined to trade over the holiday weeks.
I highly recommend taking these last two weeks off and recharging your batteries. I am preparing for one of the toughest markets on record next year, and you should too.
Merry Christmas and Happy New Year,
A.F. Thornton