Morning Notes – 6/30/2022

• Note that the market will open below the WEM, and the options market priced the DEM at plus or minus 57 points today, for a range between 3669 and 3788.
• You would think that the options market could get it right on a day with so many options expiring – but the overnight market at this writing is already trading at 3760.75 – below the DEM low!
• That is also why I have built a Gamma adjusted database that calculates an expected move from the regular session open rather than yesterday’s close.
• I would set the Sandbox at plus or minus 50 points from today’s regular session open.
• I am not vouching for my sanity, but in the old days, we used to place the “walk-away” trade at the end of the calendar quarter.

• On the final calendar quarter trading day, the portfolio managers tend to run out of money after window dressing and marking up stocks in the morning.

• So, by noon to 1:00ish Central (Chicago) Time, the S&P 500 is susceptible to declining into the afternoon.

• We would look to set up a short position in the early to midafternoon as the professional money managers “walk away,” leaving the equities market ready for an afternoon fade.

• As with many trading setups, one still has to be aware of this tendency in context.

• And the context here is a rapidly deteriorating bear market – with a full retest of the June 17th low (3639) a bit more probable now than the potential “C” wave higher I discussed yesterday.
• I put the 2000-2003 bear market at the top of this writing to illustrate that leading diagonals, such as we see on the chart now, don’t always lead to big rallies.
• Here, our oversold market could stage a successful retest of the June 17th 3639 low and rally to 4000 from there, but bear markets are difficult to predict.
• I will be in the Trading Room for the first few hours today calling balls and strikes – but it is unwise to day trade today – unless something obvious slaps us in the face.
• Like the walkway trade?
• Today’s Red Letter economic reports will complicate matters – look for unemployment claims, consumer spending, consumer income, and the PCE inflation statistics (Fed Chair Powell’s favorite inflation gauges) all pre-market.
• Wait until next week! We return from the July 4th holiday weekend into a cluster of June reports sure to keep the volatility high. More on that tomorrow.
• Overnight trepidation about these reports may have set the tone for a Gap down at the open.
• Of course, any potential Gap down at this writing could easily reverse higher on one of these reports.
• And just to trip up any opening trade, the Chicago PMI comes out 15-minutes after the open.
• And, speaking of the open, overnight inventory is net short, and the market would open with a True Gap down at this writing, triggering Gap Rules this morning.
• There is a time to go long, a time to short, and a time to go fishing. If I did not need to spend a few hours in the trading room today, I would be going fishing.

A.F. Thornton