Retail Sales came out yesterday. The headline number was higher than expected – up +3.5%. Only two problems. The number was not adjusted for inflation and had another (becoming infamous) Biden Administration “seasonal adjustment.” What is the true number? Retail Sales were down -18%!
Then we go up to our friends to the north, Canada. All the major Canadian banks were offline most of the night? Why? There is some fear of hackers, but there is also a run on the banks. After King Trudeau declared his emergency powers to seize the funds supporting those mean truckers, ordinary Canadians started withdrawing their bank deposits and closing their accounts. What would you do in similar circumstances here? We call it the ‘Law of Unintended Consequences.” Others call it Karma.
Finally, we are told that shots were fired in Ukraine last night. At this point, I don’t know who or what to believe. But one thing I do believe is the price action. Oil prices gapped down yesterday from $96 back to $90 a barrel. That is the opposite of what prices would do in a breakout of the conflict. I will watch oil as my temperature gauge for Ukraine.
In the meantime, S&P Futures stayed in yesterday’s range overnight but are back down near yesterday’s low this morning, erasing the “Fed Minute” rally from yesterday afternoon. Futures are trading at 4440 at this writing.
There should be a positive drift back toward 4500 today and tomorrow due to the huge number of options expiring at that level at Friday’s monthly/weekly options expiration. But I would not exactly call this rocket fuel. A lot depends on these various exogenous events.
So our strategies remain 100% cash for now, but we are looking for a swing low contemporaneous with all of these crazy events.
Day Traders
There is a small reduction in volatility expectations from yesterday. We should see resistance at 4475 and 4500. Support lies at 4455 and 4406. Put decay and/or expiration should lead to Dealers buying rather than selling Delta.
The market seems to be balanced going into options expiration tomorrow. There is nothing to incentivize an opening trade. Wait for the picture to become clearer later today. Where value develops as the day unfolds may add insight into price direction or ranges. Watch the larger triangle pattern developing.
Use yesterday’s high and low as your breakout zone. I will use yesterday’s halfback around 4450 as my bull/bear threshold.
Watch all your key moving averages converging around 4450 as they will tend to override other support and resistance levels.
A.F. Thornton