Interim Update 11/3/2022

Good Morning:

• First and foremost, the Navigator Swing Strategy triggered a formal sell signal at 3878.75 yesterday. The alert formally closed out the 10/13 buy signal at 3595.
• Keep in mind that save for holding a few calls from 10/13, the Founders Group never sat tight in the signal, preferring to work the hourly chart signals on the way up. As noted a few days ago, we exited the last trade just above 3900.
• And there was no surprise yesterday; the Fed delivered bad news exactly as I thought they would. Given that the market expected the rate increase, it rallied initially, as expected.
• All appeared to be well until the Fed Chairman pulled the pin out of the grenade in one sentence during the press conference – “rates may have to go higher than we originally forecast”.
• No wonder President Orwell felt compelled to give another incoherent babble last night from a train station. His dystopian Nazi stage was unavailable.
• He sought to bring unity to the Country, especially against Republicans. He succeeded in unifying most of the Country against him and his globalist comrades in the Uniparty.
• Meanwhile, back at the ranch, futures are at overnight lows of 3727 at this writing and down from highs of 3780. Look for support in the 3710-3700 area, then 3650. Upside resistance shows at 3750, 3800, and 3834. We are looking for very high volatility today as post-FOMC macro adjustments are fueled by the onset of negative Gamma, increasing implied volatility, and large zero-day to expiration option flow.
• SPY 360 / SPX 3600 forms the Put Wall and downside target, as outlined yesterday. The bears have the football again. Higher implied volatility and negative Gamma will pressure the markets lower from here.
• I would flag the risk of a surprise, upside reversal. First, to get barely two weeks out of a nominal 20-week cycle turn is almost unprecedented. At this same juncture in past secular bear markets, the S&P 500 index usually rallied for eight to nine weeks, albeit not in a straight line. 
• Objectively, this could or should be a pullback of about half the gains recently achieved from 10/13. The Fed Chairman’s right jab could have exaggerated the normal retracement. I want to leave that on the table.
• The mirror image of that claim would be that this leg down is so ominous that the market could not sustain a two-week rally. I find that a hard pill to swallow. So I included a chart above with the larger and smaller components of the 20-week wave.
• The Put/Call ratio screamed too much short-term bearishness yesterday, and the VIX did not confirm the sell-off yesterday.
• We have unemployment claims this morning, the October employment report tomorrow, the CPI next week, and the mid-term elections next Tuesday. And especially regarding the elections, a Republican takeover of the house and Senate could trigger a temporary rally.
• Stay tuned; I will be in the trading room at 10:00 am EST. Gap Rules are on the table at the open.

A.F. Thornton