Morning Notes – 3/22/2021

Good Morning:

• As outlined in Sunday’s Navigator Oracle™, the next target for the bulls is the February 2nd high at 4577 on the S&P 500 Futures and 458 on the SPY.
• Two closes above that high increase the odds of a retest of the all-time highs now adjusted to 4799.75 on the June continuous futures contract (roughly 480 on the SPY).
• In answer to the question in your mind, yes – new highs sound like total insanity. As long as we all believe that, new highs are possible.
• Getting past the hopium of higher prices, price also encountered resistance yesterday at the 200-day line and the weekly mean hanging around the high 4460s. I mentioned this likelihood Sunday as well.
• And market makers and dealers were likely still adjusting their books from Friday’s quarterly options and futures expiration. We will learn a lot more about market direction today.
• Another event bears mentioning about yesterday; Fed Chairman Powell was apparently displeased with the stock market holding on to its former luxury lifestyle.
• The master of zero and negative interest rates, profoundly negative real bond yields, and a deliberate policy of artificial wealth creation by fostering a financial asset bubble, stepped into the batter’s box.
• Powell (and his minions) hit the speaking circuit, jawboning the market with possibilities of 1/2 instead of 1/4 point rate increases at future meetings.
• True, some of yesterday’s partygoers headed to the porcelain goddess to puke for a few minutes, but they returned and started drinking again.
• The market finished massively unchanged.
• And call buyers were still absent, keeping us guessing about the path ahead. For the most part, though, we are in a neutral zone as to the influence of options on the market. Positive gamma kicks in above 4475 and negative gamma below 4400.
• With the Fed’s combination of currency and credit expansion and market suppression, the difference between state-controlled pricing and market reality has never been more significant.
• I still like my “don’t look down” analogy of working in an office on the top floor.
• Every time people fool themselves into thinking we have “corrected” enough or reverted to some historical mean, it’s time to look at the macroeconomic picture, zoom out, and welcome the expression “do look down.”
• And then, what can the Fed do about the price of food, medicine, gasoline, or rent anyway?
• The answer is nothing or next to nothing. Rate hikes will not impact such inelastic items.
• Even if Russia settled everything with Ukraine tomorrow, how do you unring the bell of sanctions?
• Once again, this global crisis gives us a fast-forward glimpse of what the world is becoming; fragmented, distrusting, and tense.
• The US thinks it has only sanctioned Russia and its banks. But time will reveal that our country has sanctioned the whole world – and we will pay for it (you and I) with higher prices and higher taxes, assuming we are still able.
• The next crop harvests are months out; what happens then due to global shortages of everything now?
• The situation at hand is very similar to what Covid revealed about the way we would buy things (online), where we will work from in the future (not in an office), and what gov’t really thinks of us (not much).
• The world cannot heal this overnight. We are experiencing fractured global trust, and fraying monetary policy will follow.
• I think about where the stock market is now, barely a few hundred points from the all-time peak market prices. Will I ever see these levels in my life again?
• All in all, gold should become an increasingly important reserve asset. But what about Bitcoin? Will it ever live up to its potential?
• The market tested yesterday’s high at 4473 overnight but remained below the level at this writing.
• The stock market is likely to open in the upper third of yesterday’s range.
• Today’s resistance is about the same as yesterday at 4480 and then 4500. Support lies at 4456 and then 4431.
• Our gamma adjusted daily volatility estimate is 0.82% (open/close) or roughly 36 points north or south of the open.
• Our orthodox close to close estimate is about 1.1%, adding 50 points north and south of yesterday’s close (4423 to 4500).
• We have Fed Governors speaking throughout the day again today – Williams (10:30 am EST), Mester (2:00 pm EST), and Daly (5:00 pm EST). The European Central Bank’s President LaGarde also speaks at 9:15 am EST. With so much Central Bank talk, it may not be a good idea to day trade, but at least watch the clock.
• The opening range trade (going with a breakout of the first 30-minute range) worked well yesterday.
• Overnight trading is balanced – so I would wait for the market to settle in and watch for the opening range trade again. I don’t see a trade right off the open today.
• Yesterday’s liquidation break should strengthen the market, taking out potential sellers.
• We’ve also now gone back to back with overnight sessions that have been almost fully within the RTH sessions, indicative of healthy balance at these higher levels.
• Price exploration lower has been minimal.
• Consider yesterday’s RTH range from 4415 to 4473 as neutral and go with the breakout.
• The overnight profile bulges at 4440 and 4466, so that is a hint as to buyer and seller location until the market decides to break one way or the other
• Morning charts are available to subscribers.

Have a successful trading day,

A.F. Thornton