Morning Notes - 4/22/2022 | Archimedes Methodologies

Plain English Summary

Our Navigator Swing Trader™ algorithm tells us to be out of the stock market right now. We use the S&P 500 Index as our proxy for the stock market – so when we discuss the “stock market” or the “market,” we mean that index. The algorithm has protected us all year. And each time we have entered the market and exited, the round trips have been profitable. It has been an excellent year for the Founders Group thus far.

When we are in cash like this, and the market is still downtrending, the algorithm (together with other factors we are monitoring) tells us when it is safe to go back in the proverbial water. And it is not safe quite yet.

Yesterday was another rough day, but a pattern developing in the market might lead to a short-term reversal of the downtrend. Patterns only work about half of the time, so I view them as a sign to pay attention to – rather than a certainty that they will predict anything. In the next few sessions, we will monitor whether the pattern unfolds positively or negatively as the negative sentiments about war, inflation, and higher interest rates reach a fever pitch in stock market news and narratives.

The most important event for markets is the upcoming Federal Reserve meeting starting May 3rd, where the Board of Governors will decide how much to raise short-term interest rates. We expect the stock market to begin solidifying its direction as we approach that date. In the meantime, the market could still go lower until the meeting and announcements are complete. Our Subscribers will receive alerts right on their smartphones when it is time to repurchase the index.

As always, swing traders/investors often follow the lead of our Founders Group. We tell them what we are doing, when, and how much. If you prefer to keep it simple, subscribe and follow our lead. And skip the rest of this discussion – best suited for our fellow technical geeks.

A.F. Thornton's Morning Notes

Good Morning:

I don’t want to be paranoid this morning, but what is up with a dozen major food processing plants in the U.S. sabotaged or burned to the ground since the beginning of the year?
Do you know how to conquer a country without nuking it? Cut off food and water.
With several hundred thousand people a month illegally entering this country, how do we know whether Chinese, Russian, Iranian, or other terrorists are already laying the groundwork for sabotaging our food and water supplies as retaliation for Ukraine and other grievances?
We have already been in World War III for some time, considering information/cyber and economic warfare with China and Russia. Perhaps Ukraine is the first kinetic outbreak.
These unfolding events keep me up at night.
Volatility remains high today, and negative Gamma will be higher today than yesterday. About 25% of the outstanding Gamma will expire with weekly OPEX at today’s close. I am expecting a 55-point range in either direction from the Open. Yesterday, we exceeded the estimate.
SPX 4400 (SPY 440) is the last strike with any green call Gamma, below is nothing but put Gamma, more volatility, and adverse market bias.
Resistance is at 4400-4420 (SPY440), then 4450. Support shows at 4335, then 4300.
U.S. Treasury Secretary Janet Yellen will speak later this morning which should be interesting, and some manufacturing reports are also coming out. We should also get some updated figures on oil rig counts. Otherwise, it will be a quiet day ahead.
The market is opening near last week’s SPX low around 4381. The close today will determine whether this week is another red candle one-time-framing lower to finish three in a row, a rare occurrence on the weekly chart. We typically see only two red candles in normal pullbacks. Three or more signify serious corrections.
Mostly, I am watching the Head and Shoulders Reversal Pattern on the daily chart to see if it will take. The odds of a successful reversal and meaningful move higher are 50/50.
Investor sentiment is negative enough to contemplate a rally from the tip of the right shoulder – but it is likely to be short-lived,
I will expand these concepts in the Navigator Oracle™ Weekly Letter on Sunday.

Have a Great Weekend!

A.F. Thornton

Morning Notes – 4/22/2022