Morning Notes – 3/18/2022

• As I had expected, this particular expiration supported the market because the sheer number of puts expiring forced short-covering over the past few sessions, giving the market Vanna tailwinds and a solid rally. 
• Another way to look at it is that the Fed meeting drew the usual options expiration dip forward a few days.
• But as I often say, short-covering is not the same as long-term buying and investing. Nor does the market typically experience “triple” bottoms.
• Thus far, there is no evidence of call buying, which would give me more confidence that we have a true correction end. If anything, this correction leg may have ended, but there could be more downside ahead of us.
• Next week, I will better understand the landscape as we monitor the follow-through from this latest swing low.
• I mentioned Wednesday evening that I wanted to take the Navigator Swing Trade™ accounts back to cash. I was concerned (and still am) about a trip back down to the WEM High at 4318 at expiration today. As well, I want to enjoy a peaceful weekend.
• So we sold the cash SPY position in the Navigator Swing Trade™ accounts at 440.75 at the close yesterday. We purchased the position only a few days earlier at 425.50.
• Recall that we had already deleveraged the leveraged accounts at Wednesday’s close, switching from futures to cash. The exchange gave the leveraged funds exceptional gains.
• Preliminarily, my analysis is that we are at the next inflection point to prove a sustainable rally.
• At the 3/15 swing low, the price bounced off the monthly mean (21-month line) but is still below the critical 5-month line. It is bumping up against the 21-week line and mean on the weekly chart. On the daily chart, price is challenging the primary downtrend line.
• In other words, we are close to confirming a turn and new intermediate uptrend, but not quite there yet. The NASDAQ 100 has broken its steeper downtrend, which is encouraging.
• Nevertheless, the S&P 500’s impressive performance since the 2/24 invasion low is undeniable. Indeed, this is one of the most fearful and negative sentiment lows of my career – certainly in the top five.
• Out tail risk remains inflation and Ukraine. Those are the knowns, but the unknowns always catch us off guard.
• I will keep an open mind and cover more detail in Sunday’s Navigator Oracle™ Weekly Update. It is difficult to draw too many conclusions while still in the the trenches.

Have a great weekend,

A.F. Thornton