Interim Update – 10/25/2022

Good Morning:

• Futures were quiet overnight, holding 3800. Key levels from yesterday are little changed. Price will encounter resistance at 3800, 3824, and 3851. Support shows at 3756, then 3700. Reread yesterday’s update for context.

• Traders need to get on board with longer-dated calls to support this rally, especially as short-term sentiment indicators have moved back to neutral. 

• Volatility is starting to subside, a bullish signal for markets as the contraction invokes a Vanna tailwind.

• But there is little between 3800 and 3700 to support prices if they slide, and there is the potential of a right shoulder dip, as discussed yesterday. Then the rally could resume in earnest, and I would put 4100-4150 as an objective.

• But a little FOMO fever is developing as the trend-following CTA community flips to buy signals between 3800 and 3900. Also, stock buybacks continue next week.

• Global tensions could be the catalyst for any scary dip south. Otherwise, this rally leg should top in early December if the bear is to resume.

• And don’t forget that the Fed meets and will announce interest rate policy on November 2nd, with the midterm elections a week later. That could be the turn after a right shoulder dip.

• I will be in the Founder’s Room later this morning.

 A.F. Thornton