Morning Notes – 7/1/2022

Good Morning:

• What can we say about June, the second calendar quarter, and the year’s first half?
• It was the worst start for the general stock market in 50 years and the worst for the NASDAQ in history.
• And what does that tell us about the rest of the year? Absolutely nothing!
• We know that the next ten trading sessions are typically the most positive of the year, at least based on the last 21 years of data.
• And it would be so easy to trade the left side of our charts…
• Unfortunately, we must trade to the right.
• As you can see from the chart above, the market reversed from the cradle yesterday, as we have been expecting all week.
• But to confirm a pivot (and swing trade) higher, the market would need to close above Wednesday’s high at 3840.
• The market needs to stay above the cradle trigger at 3736 to keep the setup alive.
• If it can close above 3840 in this favorable seasonality, the market would then be able to enter the air pocket above 3910 for a quick trip to 4000 and possibly beyond.
• Otherwise, the market will likely retest the 3639 June low and eventually tag 3400 or so before starting the next rally leg.
• Nobody knows what comes next, so we will let the price action lead us where it wants to go.
• Rallies should still be categorized as “short covering” and subject to failure unless otherwise noted.
• Volatility should remain elevated until/unless the market closes above 4000, the price at which we see the next major resistance.
• Also, note that the 6/30 expiration removed large put positions and may expose the market to further downside into July unless hedging picks up in the next few sessions.
• July 15th and 20th will be important dates to mark on your calendar due to large equity and VIX expirations into the July 27th Fed meeting and interest rate decision.
• And be prepared for a slew of economic reports next week when we return from the three-day weekend.
• And then comes quarterly earnings…
• Note 3400 as significant long-term support (the February 2020 pre-covid crash high) and also where JP Morgan Chase has placed a sizable option collar position.

Have a great holiday weekend!

A.F. Thornton