Morning Notes – 5/5/2022

Good Morning:

• Be sure to review the Monthly Oracle just published to catch up on the big picture.
• The short-covering rally came in right on cue yesterday, and the Founder’s Group scalped a nice long trade from 4150 up to 4250, for almost 100 points.
• We only wish we had done more, and waited to sell at 4300. But we sold at the WEM high (4250) and the proverbial hogs sometimes get slaughtered.
• The Navigator Algorithm rolled into a buy signal on multiple time frames as anticipated Tuesday and yesterday. Unfortunately, the Algorithm isn’t smart enough to communicate where the signal will take us. The short-covering rally yesterday may be all we get.
• I won’t bring the Navigator Swing Strategy into the buy until we get a successful back test of the trigger line, so stay tuned.
• Today’s playground is about 90 points between 4225 and 4315.
• Both the 21-day line and the flip to positive delta are at 4300, so that will be key resistance. Acceptance and a couple of successive closes above 4300 would signal a potential move to the top of the trading range at 4600.
• Market makers and Dealers will be fighting to bring the market back down to the WEM high at 4250 before tomorrow’s close – so keep that in mind for the next few sessions.
• For the moment, the market is relatively neutral unless follow-through buying ensues, resulting in a few closes above 4300.
• Trading between now and Friday’s close is likely to be choppy and unrewarding. I know I am reticent to give back any of my profits yesterday and will likely not trade for the rest of the week.
• There is strong support now at 4200, and also 4000 at the extreme. Put protection is back to being moderately priced, so we will see if traders and institutions are more inclined to use the short-covering rally to sell current positions and buy more protection, or follow-through with some bargain hunting.
• I continue to view the current environment as treacherous, and one of the most challenging in a generation. It is not a great time to be wildcatting – so be careful.

A.F. Thornton