Good Morning:

• As I had suspected it would transpire, this rally is starting to look a bit like the sputtering launch last June. And this is still a bear market until proven otherwise – cycles tend to peak early.
• With the Weekly Expected Move high at 3700 this week, combined with monthly options expiration tomorrow, it does not seem like there is much room for higher prices until Monday. The cycle at hand should have taken us up to 3820, and it may yet. Thus far, however, there has been no follow-through buying after the short-covering finished.
• We took our stop yesterday at 3715 for the Navigator Swing Strategy, and we are now back to cash. We were heavily influenced by yesterday’s extraordinarily weak 20-year U.S. Treasury auction. It took a 4.35% yield to move the bonds – the highest for the series since its inception. 
• Foreign buyers were scarce compared to previous auctions. One can only wonder what happens if the U.S. Treasury auctions begin to fail. These auctions feed a monstrous debt and deficit spending, not to mention the ever-increasing interest on the debt.
• Let’s get through options expiration over the next few days, and we will do heavier-duty forecasting over the weekend.
• For now, we are in the middle of the range/strikes at 3700. We show 3800 as the top of the range and 3600 as the floor.
• Any time you try to position from the middle of a range, you had better be right. Your risk to a valid stop is 100 points in this case. 
• I still see the potential for another leg up in this rally, but the easy part is behind us, with the short-covering seemingly over.
• Now that we are back in cash and options expiration is influencing prices, I am taking a few much-needed days off today and Friday. The trading room will be closed absent an unexpected opportunity. Even on days off, I never take my eye off the ball.
• And we won’t be day trading for the next few days, as that is the general rule around monthly options expiration. Expiration often distorts price movement and can decimate typical day-trading setups.

Have a great weekend ahead!

A.F. Thornton