Good Morning:
— 2024 Market Swings are generating profitable buy/sell signals, but I would prefer less trading, especially on our Daily Strategy.
— Aggressive accounts closed the first short trade of the year (carried over from December 29th) on January 8th at 4744.50 for 83.25 points.
— The commensurate January 8th long signal closed on January 12th for 81 points at 4825.50.
— The commensurate January 12th short signal (for aggressive accounts only) closed yesterday for 50.25 points at 4775.25.
— Yesterday’s long entry has an unrealized gain of 60 points at this writing.
— This brings the YTD total points to 274.50 for traders taking both Long and Short signals. Long-only traders are up 141 points. Compare this to 49.5 points for someone simply buying and holding the S&P 500 Index.
— In futures dollars, then, our $13,775 per contract L/S gain and $7050 Long-Only gain compares favorably to $247.50 for the buy-and-hold investor. For options traders, the gains are closer to $10,331 and $5288.
— Of course, past performance doesn’t necessarily portend the future and the year is young. This gives us plenty of time for some disappointing trades before the year is up, right? And what a year 2024 promises to be! There is a 100% guarantee that nothing works 100% of the time. And we all know that if you live by the numbers you can die by them too. Still. enjoy the moment.
— The NASDAQ 100 has already moved to new all-time highs and the S&P 500 is poised to follow and finally test its all-time highs today.
— This test is unusual as today is Monthly Options Expiration. I would have predicted that the market would pin around 4800 where a huge amount of Gamma expires (4830 on the futures). It may still pin that level all day, keeping us on the edge of our chairs until Monday when the market is finally loose of the 4800ish options chain and gamma.
— Our 4800 pinning forecast earlier this week helped our confidence in going long yesterday. But 80% of breakouts fail – which might be unhelpful to the odds today.
— Big picture, however, we pointed out the Cup and Handle breakout last December 8th, and the measured move eventually takes the market to 5400 plus. And there is a Head and Shoulders reversal pattern if the market breaks to new highs in the next few sessions that points to a 4840 target.
— The time element to achieve these big-picture price milestones is less predictable. Price might need to pound at new highs above 4840 a few times in the coming sessions before advancing. The short-term pattern would then resemble an ascending triangle. And price is over-extended at the top of its over-extended trend channel. So price might need time to climb the upper channel line to achieve the targets.
— It is rare to have everything always come up roses, so let’s set stops (at minimum) around break-even plus a few points or 4780.50 to allow for the pinning behavior expected today.
— And this market is not especially healthy with barely seven stocks (the so-called Magnificent 7) carrying all the returns. Either the soldiers present an opportunity to sift through some 2nd tier names slated to catch up. Or the Magnificent 7 will lead the market down to rip through the weak structure from the October 2023 lows and repair it.
A.F. Thornton