Archives 2021

The market closed right on our stop lines yesterday, dipped below overnight, and then came roaring back to go positive this morning. After the first hour, I will see where things stand to decide whether we add to positions or bail. What is clear for now is that there are sellers above 4400 and buyers below 4300.

The 80-day cycle launch has been weak thus far, with no follow-through. I am increasingly convinced that it may peak early with left translation, keeping the 18-month cycle in play. This also raises the possibility that the market may continue in a downward trajectory into late November.

Cycles or no cycles, the vaccine mandates contribute to supply chain disruptions as workers protest and outright give up jobs to avoid the jab. I cannot blame them. More and more evidence continues to surface that the jab is likely as risky as the disease itself and virtually ineffective against the Delta variant. The good news is that therapeutics are increasingly accepted and effective as the medical establishment slowly but surely emerges from its political fog.

Needless to say, this is a tough market to call at this stage. The overnight low at 4317.50 is the trapped door to lower prices. If 4300 fails, the market will show its ugly side.

The overnight high at 4365 is the door to higher prices and perhaps our target of 4450 or so. The roundie at 4400 must hold for the market to continue upward to establish the top of the trading range I have been expecting.

A.F. Thornton

The Founders Group is adding a 5% position in XLF at-the-money calls expiring on 11/19 in the Navigator swing strategy. The XLF price was $38.75 at the time of execution. In our case, we picked up the 39 calls expiring 11/19 39 at .94 each. This brings us to a 25% total invested position with the SPY calls.

Whether it is our SPY or XLF calls. we are using the 5-day EMA as our stop line. A close below that line, even for a few hours, would likely trigger our stop, and we will share our decision immediately on these pages.

A.F. Thornton

I was encouraged when Thursday and Friday held above the recent gap higher, but Globex traders filled it last night. They brought the market almost all the way back this morning, and Globex trading does not count for the most part.

Today will be about whether the market needs to retest the overnight low at 4355.75 or whether we can stay above it, which keeps us in the gap range. I would prefer that we close above 4376.25 which is Friday’s low. Price exploration below 4355.75 opens the door to lower prices and keeps the downtrend intact.

Watch behavior around the open for early clues. Profit-taking for the overnight crowd should be close to complete on their short positions.

Otherwise, nothing has changed in the big picture. New lows would mean that the 18-month cycle is marking down and July 19th was not the completion of the cycle. The initial target would be the 200-day line down around 4180 or so. Continuing higher would bring us to the top of a new trading range likely short of or coincident with the recent all-time highs.

A.F. Thornton

The Founders Group just added another 5% to its swing position in 11/19 Expiration SPY 440 calls when the SPY itself was trading at 438.25. This brings our total position to 20%.

Our target is 445 on the SPY.

A.F. Thornton

The Founders Group just added another 5% to its swing position in 11/19 Expiration SPY 440 calls when the SPY itself was trading at 438.50. This brings our total position to 15%.

Recall that we have been in a Navigator Algo buy signal since yesterday morning. However, given the run-up that triggered it, we are trying to accumulate our position slowly on pullbacks.

Even though we have a buy signal, and we believe that the short-term downtrend has broken, we are not out of the woods yet. Our near-term objective remains 4460 on the futures and just under 445 on the SPY.

A.F. Thornton

Yesterday started out as a barn burner but ended a bit like a gap and crap, as we affectionately label such behavior. Traders partially (but nearly completely) filled the gap above us. But we still have yesterday’s gap higher below us, and we know all gaps like to be eventually filled.

Globex sellers explored the gap below us overnight at least down to 4382.25, then retested the level after the monthly payroll report this morning. In neither case were our Globex selling cousins able to get much footing. That puts a checkmark in the bullish column this morning. Opening above 4400 counts in the bullish column as well.

Today’s story will mostly be about whether we can stay in yesterday’s range above the gap and the ONL at 4382.25 or not. I am bullish above the ONL, less bullish below it, and running for the hills below yesterday’s gap bottom at 4355.75.

I don’t trade on Friday but will take a peek at the close to determine whether to hold our 10% position in SPY calls or add to it. I don’t see anything else to give us much of a clue about the open. It might be better to let the tape settle in before committing to anything.

A.F. Thornton

The Founder’s Group just took an official swing position in SPY calls at 439.88 at the time of execution. We bought 11/19 at the money 440 calls. We took a 10% position for now. Remember that the calls are leveraged instruments, and we are still a bit cautious here. For now, we will use a stop of 438.75.

A.F. Thornton

The market is finally taking a bit of a breather from the morning rip-your-face-off short-covering rally. It just shot up at the open and stalled as predicted. This is often the case with large gaps, followed by late afternoon profit-taking by the daytime crowd.

As to establishing a swing position, I will see how things look right before the close. We may test the top of the gap, also the 21-day line on the RTH data around 4388. That would be a good place to begin establishing a swing position if we get a nice pivot.

For now, I am treating the Navigator Algo signal as a buy signal but still looking to cautiously establish a swing position on pullbacks and at key levels. I am targeting 10% November monthly SPY at-the-money calls if the pivot materializes.

The Navigator Algorithm can give us the signal, but it cannot predict the run. We have to use our other work to help us with targets and determine whether this is merely a run-up to the top of the down-channel or a true trend reversal. The jury is still out on that score.

A.F. Thornton

Sometimes the overnight markets frustrate me (unless I am in Europe and can get one up on the U.S.). I feel a bit robbed by our Globex cousins this morning, but we are opening with a Navigator algorithm buy signal nonetheless if the market does not immediately reverse. It is usually best to give the market a few hours to confirm the signal when taking the cue before the close. With the large gap higher this morning, it may be difficult to find a good entry point today unless you are willing to ride some volatility in your position over the next few days before profits materialize.

The opening will be a true gap higher, launched from a successful retest of recent lows. Gap rules will apply. It is very positive that we are rising out of a cyclical inflection point in the midst of very negative sentiment and opening above the weekly and daily means. At the same time, we are slammed right up against the downtrend line, making this a tricky buy point, with an initial measured move target of 4460. That is only 50 points higher from here IF that will be the end of the rally.

In the recent past, the market has moved right to the target with short-covering and FOMO. It might still do that, but the character of the market has changed. For example, this is the first time the target has fallen short of the old highs in the past year. My expectation continues to be that this move will form the top of a trading range even if it tags the old high.

We will take a 50% position in the S&P 500 using dips on the hourly charts. In a large gap higher like this today, the market will typically stall in a tight trading range all day, so new positions may require patience to find our entry points, and I will keep you posted.

Initial targets should be the overnight high at 4397.75, then the bottom of the gap at 4406.25, and finally the top of the gap at 4425. As mentioned above, the measured move target is 4460, and then there are about 100 points from there to the old highs.

Stay tuned.

A.F. Thornton

S&P 500 Futures – ETH Data

The market (as measured by our S&P 500 index proxy) has been battling to hold the weekly mean and managed to close above it today. I like the current negative sentiment and its interplay with the projected 80-day cycle low. In other words, there is a good context for an intermediate low.

There will always be a negative correlation between confirmation of an intermediate low and our returns. The more confirmation we have that the low is in place, the further we will typically be from the low when we enter. The further we enter away from the low, the greater the risk of a reversal to retest the break higher when we enter. If we are wrong about the low, the further away we enter also exacerbates the loss to our stop. Always bear these issues in mind.

Today’s close leaves price in the familiar teetering position. It not only sits at the weekly mean, but the price also approximates the August monthly low and the highs of the last few trading sessions. So this location is resistant, and I will need to see some upside follow-through to issue a buy signal coincident with a green Navigator Algo arrow. Nevertheless, the price action is encouraging today as was the strong close.

Keep in mind; I am not predicting or expecting the market to move up to new highs. A trading range is the most likely outcome from the break of the 60-week bull microchannel. At the very least, a move up to the top of the down trend line is possible. We will need to see the market eventually conquer that line as well, but first things first.

Risks abound, as they always do. China and a grab for Taiwan remain my biggest concern. But would they do that before they host the Winter Olympics in February? There is no way to quantify such black swan events except to keep your downside guarded should we issue a buy signal tomorrow.

Consider this your heads up, but we have come close to buy signals several times since we went to cash on September 10th. Though we came close, the signals never manifested completely.

Stay tuned,

A.F. Thornton