Good Morning:

• Futures were flat to 3850 ahead of the 8:30 AM ET GDP report. It has been floating around 3850 since the report’s release, along with the release of weekly unemployment claims.
• Key levels are unchanged from the past two days except for a higher Vol Trigger (3805).
• This metric sliding higher suggests an increase in put Gamma positions.
• I am looking for support today at 3834 and 3800. Below there, I see another support level at 3755. On the upside, we will likely continue encountering some major resistance at the 3900 (Call Wall).
• The positioning dynamics outlined in yesterday’s AM note still stand for today. We historically wouldn’t even mention a GDP reading, but now those readings (like CPI’s) are potential volatility triggers in this illiquid environment.
• The headline number is positive due to a flood of government spending in the last few months, typical of the Uniparty ahead of the midterms. Incincumbents want to keep their jobs.
• And I already discussed Treasury Secretary Janet Yellen’s hail mary pass to put a floor under the stock and bond markets to help minimize the Democrats’ walloping in a few weeks.
• Even typical Dem cheating cannot overcome their fate if the polls are accurate. And their cheating is limited by the local population counts – if they are losing in a landslide and they add too many phantom votes, the votes could exceed the local population as happened in a number of cases in 2020.
• By the way, don’t think Republicans don’t cheat too. I didn’t see them clambering for audits after the 2020 election, either. That is why I call them the Uniparty.
• Further, our critical support line (Vol Trigger) has been working its way higher along with the market. This migration is expected behavior and highlights that a break of 3800 leads to an air pocket underneath.
• I would also note that once again (as with Tuesday), the S&P charged into 3900, but the Call Wall did not move higher. Traders do not appear to be looking for more upside over that level right now – but we are early in the 20-week cycle.
• In addition to the usual interest rates and earnings concerns, the predominant theme has been the rise of DTE options trading and the extremely flat skew.
• To this point, put values are low relative to calls – which comes from call buying and put selling.
• The Founders Group exited their latest swing long position yesterday at 3895.75 on an hourly sell signal. We met our next intersecting price objective at 3900, derived from the 20-day cycle forecast on the daily chart. 
• The 3900 level also happened to be the 50% retracement of the August to October decline, where this second leg up had equality with the first from October 13th to October 17th.
• Also, we are rolling into month-end on Monday. Tomorrow is the weekly expiration, and the WEM high is 3936 – so be aware that the WEM high alone could stall gains today and tomorrow.
• Even in the most bullish of scenarios, nothing goes straight up.
• The pain trade is still higher, I am reticent to go to a swing short quite yet, and I would consider entering new long positions from the 5-day line at 3820.
• Also, remember that the “strong” GDP number and an improved stock market give the Fed flexibility to raise rates further.
• Here is my bottom line; we are in the eye of the hurricane as the 20-week cycle delivers what I expect to be a bear market rally that peaks between 4000 and 4100.
• Then everything reasserts itself from inflation to Taiwan before year-end.
• Don’t be confused by the GDP “head fake,” as the Uniparty throws out this brief “save” before mid-terms.
• And if the market rolls over this cycle from 3900, which is possible, look out below. If the bear is alive and well, the 20-week cycle would peak in early December. If not, then the peak comes early next year.
• On the bear sice, any slide accelerates below 3700 as we head into the air pocket.
• Get your parachutes ready – just in case. But everything tells me we are going up for now.

A.F. Thornton