March 2022 | Archimedes Methodologies

Interim Alert – 3/10/2022

Mar 10, 2022 AF Thornton 0 Comment

S&P 500 Futures appear to be wedging (falling wedge) into the Weekly Expected Move low at 4200. Watch for a pivot and potential long from the green zone.

Founder's Trading Journal

Morning Notes – Key Trading Levels for 3-10-2022

Mar 10, 2022 AF Thornton 0 Comment

Founder's Trading Journal

Morning Notes – 3/10/2022

Mar 10, 2022 AF Thornton 0 Comment

Good Morning:

Day 14 – where is Fauci?
The U.S. economy is already teetering on fiscal and monetary cliffs.
The risks are now compounded by the war in Eastern Europe and record-high (even understated) inflation.
In February, the Consumer Price Index for All Urban Consumers rose 0.8 percent, seasonally adjusted, and 7.9 percent over the last 12 months. The number is in line with expectations but does not reflect the parabolic rise in food, energy, and industrial materials over the past few weeks.
The Fed has only a few choices at next week’s meeting.
The first choice is to keep monetary policy loose and risk an intractable rise of inflation and the complete loss of confidence and credibility of the central bank.
The second choice is to tighten monetary policy enough to deflate the massive bubbles in bonds, real estate, and equities.
Batten down the hatches as either choice will end in disaster for the stock market and the U.S. economy.
The piper must be paid from the Fed counterfeiting trillions of dollars to distort and obliterate free markets.
The song “Welcome to My Nightmare” keeps playing over and over in my head.

Do I cover my shorts now, or wait until next week’s Fed meeting and options expiration? Things that make you go hmmm. Dealer’s choice?
I cannot think of a comparable negative moment in my 35-year career other than 9/11.
So, I am going to cash in my shorts now and hopefully, get to put them back on at higher prices before the Fed meeting next week.
I am always reminded that Pigs get fat and hogs get slaughtered.

There is little change to key levels. Resistance remains at 4300 and 4320 (SPY 430 equivalent). Support comes in at 4146. Consider long positions with a target at 4400 should prices find acceptance above 4300.
While I would still be very careful putting on shorts here, my first target would be 4170.
With high implied volatility, it doesn’t take much to spark violent rallies. But I am still viewing rallies as “short covering” and subject to reversals until the S&P 500 index closes over 4300.
A closing over 4300 could lead to a reduction in volatility, but below 4300 I look for price action to remain fluid.
4400 remains a brick wall, should we get there. I will consider more shorts at that level.
I will publish other key levels after the Open.

A.F. Thornton

Founder's Trading Journal

Afternoon Notes – 3/9/2022

Mar 9, 2022 AF Thornton 0 Comment

Good Afternoon:

The Russia/Ukraine war rages on as the Biden Regime attempted to explain away the BioLabs that “didn’t exist” in Ukraine.
The White House recently deleted archived videos of President Obama at the BioWeapons facilities in Ukraine that the White House tried to deny existed until Victoria Nuland spilled the beans yesterday.
Meanwhile, President Clinton is resurrecting the Clinton Global Initiative. Either there must be a new grift operation ready to gear up with Ukraine aid from the U.S. Government, or Hillary must be preparing to throw her hat back in the ring for 2024. Maybe it’s both.
Clinton Cash by Peter Schweizer nailed the previous Clinton pay-for-play schemes.
“Ukraine crisis is bad, but ‘wait until you see’ flood of climate refugees,” Frozen Botox Face and Climate Czar John Kerry today as he stepped off his Lear Jet. The headlines write themselves.
Anyway, attention will now briefly revert to the inflation numbers coming out tomorrow morning. The numbers won’t include the explosion in commodities prices over the past week, but the last wholesale numbers were 10%. Either that boosts consumer prices commensurately, or earnings will shrink. You cannot have it both ways.
As predicted, the stock market produced a good relief rally ahead of the report. The market opened at 4249, the first resistance announced in today’s Morning Notes, then briefly rallied just under the second resistance at 4300 before crowning a bit into the close.
Today, commodities (including wheat and oil) took a well-deserved hiatus on some profit-taking.
It looked like the stock market action reflected some profit-taking and cautionary repositioning ahead of the CPI report.
While I saw some encouraging behavior in the S&P 500 yesterday, today, there was considerable shorting again around 4300, and it far exceeded any call buying.
I guess that on today’s gap higher, participants with a longer time horizon saw the move as an opportunity to sell/short at better prices; aggressive put buying and call selling persisted all day.
The market remains stuck in a high volatility box between 4100 and 4300.
No doubt, tomorrow’s report will be the catalyst to break the top of the range or retest the bottom.
But even with another rally day, there is a brick wall at 4400 that is unlikely to break until we get clarity from the Fed, and we pass through monthly expiration after that.
I would not be surprised to see the market pin around 4400 into monthly expiration.
Given participants’ put-heavy, negative-delta positioning, counterparties are pressuring underlying products through their hedging activities.
The market remains oversold and poised to deliver further gains if it can climb the wall of worry.
The WEM low remains strong support at 4200, and the Put/Wall at 4000 would also take the wind out of further declines.
My best judgment is that the market wants to go up the wedge before going down again. Tomorrow promises to be interesting!

A.F. Thornton

Founder's Trading Journal

Morning Notes – 3/9/2022 – Key Levels Update

Mar 9, 2022 AF Thornton 0 Comment

Founder's Trading Journal

Morning Notes – 3/9/2022

Mar 9, 2022 AF Thornton 0 Comment

Good Morning:

Yes, these genuinely are my raw notes – to answer a few emails. I keep a Word document open on my desk where I constantly jot down my thoughts and issues from my reading throughout the day. Other than running them through a spellchecker, my notes are raw.
No, I am not political, nor are these pages. I am a Libertarian and attribute equal blame for our economic and social predicament to both political parties – or the “Uniparty,” as I call them. As the old saying goes, “it takes two to Tango.”
I view the current struggle as the Globalists (most aptly represented by the World Economic Forum and Great Reset run by CEO Dr. Evil (Klaus Schwab) versus regular, hard-working people.
If I have a political viewpoint at all, my core philosophy would be “Follow the Money.” It takes the mystery out of most problems. So count me a member of the FTM party.
When the “R’s” are back in power, assuming there are elections this November, I will be an equal opportunity critic.
Anyway, I only care about politics and discuss the subject when it is impacting our trading, investing, and economic well-being. Nuclear War and my potential demise are always subjects I stay abreast of as well.
Cardinal Vigano, the former Vatican Papal Nuncio to the United States and one of the most intelligent people I know, nails the “real story” on Ukraine in an open letter. His views are not what you might expect.
BioLabs in Ukraine? The State Department has now confessed. No wonder Putin is angry. Here is the map.

And then there are the usual suspects associated with Ukraine…

So let’s get to it. The bottom line this morning is that the market is holding the rising Covid crash trendline, with the WEM low ar 4200 and the Put Wall sitting at 4000. The risk of a reflex rally far exceeds the risk of further declines here. A massive short-covering rally could be sparked at any moment.

We start this morning with Saudi Arabia, the UAE, and Brazil refusing to take Biden’s phone calls. $200 per barrel of oil is all but inevitable. Things that make you go hmmm…
Volume spiked yesterday – and it was a big candle – but mostly inside Friday’s range. In other words, in the scheme of the new normal volatility, the price did not move down like it usually would on such volume. Early signs of a pivot? Time for a reflex rally?
Consumer Staples nose-dived. Is risk back on? Or is this attributable to a temporary hit to consumer brands pulling out of Russia? Canceling an entire country can be expensive.
Overnight futures are putting in a very positive overnight candle. Sure, we are down at must-hold levels, and the WEM low is doing its job. But I can feel the rally risk in the air. Let’s see how this develops from here.
Don’t forget that after tomorrow’s inflation report and next Wednesday’s Fed Meeting and announcement, monthly options expiration follows on Friday the 18th. Previous monthly expirations have caused the most significant dips each month into the following Monday and Tuesday.
There is enough runway before the 18th if a rally got underway in the next few sessions. Otherwise, the market may ping pong down the falling wedge until monthly expiration. Then the market has room to stage a more sustained relief rally.
Let the price action guide you.
If you look carefully, the VIX started giving up on more panic during the final washout yesterday. Note the short-term out-performance by VIX.
That yield curve is flattening. Is a recession coming soon?

It’s been another crazy overnight session. We have a 100 S&P 500 point range with futures currently trading at 4240 up from the overnight low (also yesterday’s RTH low) at 4139.
Volatility will continue to be elevated as long as the S&P is under 4300.
This morning’s primary resistance lines are at 4249 and 4300. Support lines are at 4200 and 4076.
Eyes are on this morning’s European Central Bank meeting and their reaction to current events – it could be a sneak preview into next week’s Fed meeting.
From an options perspective, The considerable Open Interest at 4000 and 4300 frames the market. The market is fluid between the levels. If traders conquer 4300, there will be significant resistance above 4400.
The market is stalled below the overnight high and will open on the key, five-day line. The level is also near our first significant upside resistance level.
Overnight inventory is nearly 100% long – which could lead to an opening fade on profit-taking. While the market will gap higher from yesterday’s close, it is not a True Gap as it is still inside yesterday’s range.
My crucial line in the sand is the balance area low and yesterday’s RTH high at 4275. if [price punches through the level and there is continuation, I would be more short-term bullish. It may take a couple of attempts. tAs long as we stay below, assume the status quo.
I will update the levels and publish the RTH chart as soon as I have the opening price.

A.F. Thornton

Founder's Trading Journal

Afternoon Notes – 3-8-2022

Mar 8, 2022 AF Thornton 0 Comment

This chart shows the S&P 500 Futures - 5-minute RTH Chart . The chart shows how the price action reacted to the various key levels in the Founder's Morning notes. — This chart shows the S&P 500 Futures – 5-minute RTH Chart . The chart shows how the price action reacted to the various key levels in the Founder’s Morning notes.

Though it closed negative and on the lows, the market held its ground today and stayed within predicted ranges.
The old Balance Area low at 4275 acted as resistance to the first rally attempt, and then our preannounced 4228 acted as resistance to the second rally attempt.
Closing back on the lows was unhelpful.
Of course, closing on the long-term trendline is positive but keeps us guessing, as the market likes to do.
The market managed to stay inside our predicted ranges today, almost perfectly.
Today, the Nickel market broke after the metal doubled to $100,000 and deliveries failed.
The NASDAQ and Russell 2000 are now officially in bear markets, down over 20%.
The Biden Regime banned Russian Oil imports. Kudos for consistency. But they need to stop blaming high prices on the Ukraine Crisis.
The cost of oil had already doubled before the crisis due to executive orders hostile to fossil fuels signed in Biden’s first week in office. Biden is happy to see $7 per gallon gas to force the Green Energy boondoggle. If the Russians or Chinese take down our energy grid, I want gas power.
The Biden Regime not only caused oil prices and gasoline to double before the Ukraine crisis, but the oil price shock has threatened our national security and exacerbated the Ukraine effect.
An inflationary recession is coming soon to a theater near you.
What do you think happens to consumer spending when inflation eats into incomes? There is a reason that presidential ratings are highly correlated to gasoline prices! And all of this is happening when the Fed only just ended Q.E. and still has rates at zero.
So much for the reopening trade; travel stocks (AWAY) are plummeting on higher gasoline prices.
There have been rumors about U.S. Biolabs in Ukraine. The corporate media and administration first deflected the rumors as conspiracy and Q’Non theories.
The illustrious Victoria Nuland, the architect of all things Ukraine for the State Department and a key witness in the last Trump impeachment, admits today that the U.S. maintained multiple Biolabs in Ukraine.
The State Department is now concerned that the labs will fall into the hands of the Russians. Why? Aren’t they just making Aspirin?
Like Wuhan, the labs are black sites designed to circumvent U.S. laws and regulations. No wonder Putin is angry.
Once again, Ukraine is a George Soros operation through and through. What are these people doing?
By the way, where is Fauci? What happened to him? He hasn’t been on T.V. in days…

We need to watch Taiwan Semiconductor (TSM) as a potential China Invasion of Ukraine Barometer.

Taiwan Semiconductor (TSM), a great and profitable company producing many of our semiconductors, has lost 1/3 of its value. Does this portend China’s invasion? If the stock diverges from the semiconductor group (SOX), it may serve as a good China invasion barometer.

This is a weekly chart of the S&P 500 Index Futures revisiting this morning's chart and showing the the market closed on the trendline, so nothing has been resolved. — This is a weekly chart of the S&P 500 Index Futures revisiting this morning’s chart and showing the the market closed on the trendline, so nothing has been resolved.

Revisiting this morning’s chart, the market didn’t resolve anything today, closing on the lows again, but it held the trendline and Globex low. That is a net positive.
The reason could be, as predicted this morning, the WEM low prevented a more precipitous fall, but it also felt like a slight change to a more positive tone unfolded.
There appears to be some positive movement in resolving the Russia/Ukraine dispute. Time will tell.
Let me repeat – the risk of a rip-your-face-off rally on ANY resolution of the Russia-Ukraine conflict or supportive U.S. Government data releases is off the charts with $1 trillion in Put Option open interest. Even the intraday rally today was more extensive than we have been recently experiencing.
Be careful here. I would rather wait to establish some long positions than short at this juncture. If you do short, stops are critical.

A.F. Thornton

Founder's Trading Journal

Founder’s Morning Notes – Granular Daytime Frame Trading Levels

Mar 8, 2022 AF Thornton 0 Comment

If there is a single positive to note today, the Weekly Expected Move low is 4200. This critical lower boundary for Friday’s weekly options expiration has consistently caught the market in scary times, though nothing is perfect. Even when the market dips below the level, it acts as a magnet to draw in the price.

In times of extreme volatility and material violations, dealers and market makers may hedge (sell futures) on a return to the level. In such instances, the level may act as resistance and may become irrelevant by the end of the week. Irrelevance is rare, but it does happen from time to time.

Towards the beginning of the week, dealers and market-makers have the potential to lose billions if the market closes below that level on Friday. Even on the 2/24 swing low, the market came back above the WEM low after the scary spike down intraday.

Mentally, you have to put yourself in their shoes and use the WEM as an essential but not exclusive datapoint.

If it appears that the WEM low won’t hold, the decline will accelerate as dealers and market makers sell futures to neutralize their deltas.

The shaded areas above divide the day into quartiles based on the expected move for today calculated from the open. In my trading, I always try to establish longs in the first quartile and shorts in the last quartile.

I am using the broader expected move ranges today calculated from yesterday’s close to allow extra volatility.

Historically, the price stays within the broader boundaries 90% of the time (Daily Expected Move Upper and Lower 2). It stays within the narrower boundaries (Daily Expected Move Lower and Upper 1) 68% of the time.

Good luck today. Always remember, you don’t have to trade. If the market is haphazard or confusing to you, step aside. There will always be another train leaving the station.

Also, be careful in relying on patterns (such as wedges) and momentum indicators. Gamma spirals can be slow and methodical and will trigger false momentum diverges. That is why we call it “controlled demolition.” The same problems occurred on the upside. Use trendlines instead.

In many ways, we are experiencing the mirror image of the buoyant markets last year. Remember when the market would just lock into a tight, rising Gamma spiral? The current behavior is the other side of the coin.

A.F. Thornton

Founder's Trading Journal

Founder’s Morning Notes – 3/8/2022

Mar 8, 2022 AF Thornton 0 Comment

Good Morning:

We find ourselves hunting for a swing low again today.
In law, we learned that even though you may have been negligent in the car accident, the judge would assign fault to the person who had the last clear chance to avoid it.
Later on, they started apportioning fault between the drivers – so-called comparative negligence.
This morning, I need to exculpate myself from any fault here – ahead of time. The Founder’s Group has not had a single loss all year and held cash during the declines. Every single transaction has dawned on these pages.
If you are still in the market and don’t want to take a trip down to 3600, this is the stock market’s last stand and your last clear chance to avoid the accident – at least for now. It could also be a buying opportunity. That is why we call it an “inflection” point.
It is time to fold if the market does not hold the overnight low at 4138.75 today. Maybe it will be a short-term entry point for a swing trade if it holds. We will let you know later today.
Last night, the market impressively flipped higher from the Covid-19 trendline at 4138.75, which is why holding the low is the most critical task of the day ahead.
Will the market hold the levels today? Any other time I would say yes. The CNN Fear and Greed Index is now down to 11. I suppose it could tag zero – but there is no argument that we are in the zone for a swing low.

Suffice it to say that sentiment is locked and loaded for an important low, and if the low does not appear soon, it is because there is no modern precedent for where we find ourselves.
I would add to the lack of precedent that we don’t get a lot of practice at bear markets. It is hard to remember if the same issues arose in the last bear from 2007-2009. For sure, options had significantly less influence on the markets then.
Don’t forget my dictator investment strategy from yesterday’s afternoon notes. The risk of a rally on any good news from the war front is beyond extraordinary and far exceeds the risk of further losses.
The rally thought hit me in the middle of the night as I contemplated how the market could screw the most people at once. While everyone on the street smiles over their hedges, the strategy could backfire – as it usually does when the crowd is in a lopsided position.
It is back to our reference of the “mother of all short-covering rallies” when $1 trillion in Put Options head for the exits at once.
That keeps it simple today for the big picture, hold the overnight low at 4138.75 or bust – that is today’s market task.
The 3600 level could be tagged intraday on a spike low to wash out a few dealers, but it is a low probability.
And just because the market pivots here does not mean the bear goes into hibernation. Think of it more as a rest stop along the way to next week’s Fed meeting.

It was a volatile overnight session, and there weren’t any concrete headlines triggering the ES move to 4138.75– it just seems the market found a base at the trendline and then ripped higher as EU markets (and SPX options) re-opened.
Key resistance today is at 4228 and 4300. Support is at 4149, and a break of 4149 invokes a move to 4050.
A break of 4100 renders the stock market “oversold” from an options perspective.
Until the S&P 500 recaptures 4300, there is no reason for volatility to subside.
If things don’t make sense, and there is no news driving markets lower, remember that there are exogenous and tangential effects from parabolic moves in commodities and credit. Some of these markets are broken, and it isn’t easy to gauge the impact contemporaneously.
I will put out my granular level screen a little later this morning, but holding 4138.75 is the critical information for now.
Coming off a trending day, coupled with futures being divergent overnight, has me looking for more two-sided trade today.
Lately, though, overnight markets have been irrelevant.
I would also watch the halfback level today at 4253.50 as an essential line in the sand for potential tone change back to bullish. Maintaining acceptance below this level keeps the status quo – sellers in firm control. If the price manages to get above the halfback, monitor for continuation.
Watch the previous swing low at 4101.75 as a reference point if things go south again today.
Don’t forget that the February inflation numbers come out Thursday morning. The numbers won’t reflect the recent commodity spikes.

Happy Turnaround Tuesday? One can only hope…

A.F. Thornton

Founder's Trading Journal

Afternoon Notes – 3/7/2022

Mar 7, 2022 AF Thornton 0 Comment

Another day passes in post-apocalyptic America – and it keeps getting stranger. Wake me up when it is over.
So many things that make you go hmmm…
The Biden Regime still wants oil from Terrorists instead of Texans. Yes, oil from Iran, Venezuela, and Russia. That should empower these unfriendly regimes at $130 per barrel.
Wait, isn’t that what empowered Russia in the first place? Nice feedback loop!
And then there is the Iran nuclear deal redux. Russia is mediating it. If you can get past that fact alone, here is the top Russian negotiator bragging about how China, Russia, and Iran snookered the U.S. The interview is scary.
Russia receives all enriched Uranium from Iran’s nuclear programs in the new deal. Under the new “President Trump” provision, if a future U.S. President nixes the agreement again, Russia can return the enriched uranium to Iran for a bomb.
Three of the Biden Regime’s negotiators have walked out on the deal. It is terrible – but Biden is moving forward anyway. Billions returned to the terrorists again. Will they need another 747 Jumbo Jet of cash? Come on; you know that the pilots grabbed a few handfuls.
Thank heaven for the trustworthy and reliable Russians – so helpful!
And back to the stock market…
The stock market continues to look ill with the war on COVID, war on inequality, the war in Ukraine: oil price spike, military-sanctions escalation cycle, etc.
Financial market accidents threaten global recession, but it is still too early to position for the Fed/ECB pivot and QE5.
Almost every industrial metal has the same parabolic chart as oil and wheat. Wheat has been locked limit up for so long that it barely trades.

A nickel for your thoughts, anyone?

Have you been to the gas station lately? Houston, we have a problem…

Perhaps you can see now why it was such a brutal day on Wall Street.
But Subscribers who followed this morning’s plan should be donning a big smile this afternoon.
The Founder’s Group covered half of the short position at the ONL (4239) and the other half at 4200. There wasn’t enough runway left today to take another position. We considered a long position at the 4200 level, but the market looked too sick.
The most significant event today was the S&P 500 index closing below 4211. The level goes back a long way, and the violation is a bad omen. We also closed below that Put Wall and WEM low. I cautioned about that in the late morning update. Too much further, and Dealers will have to sell even more index futures to hedge their Friday expiration risk.
The largest concentration of options open interest is at 4000. The level should help catch the downward spiral.
My first target at 3600-3700 is where I expected a bounce before traveling to the middle of the long-term channel at 2500.
All of this could take a while – six months to a year.
Options Guru Brent Kochuba is calling this “Controlled Demolition.”Due to the inflation spikes and the upcoming Fed policy change anticipated for mid-March, the street was already hedged at the invasion. So few were caught with their pants down, as they would typically be when Russia invaded Ukraine.
Instead of a crash or spike lows, the overly hedged street experiences a controlled Gamma spiral down, with a few loops up.
Today was slow and frustrating – like watching the grass grow when we are used to quick rewards in our short positions.
Don’t discount spikes or crashes yet. Something tells me that everyone cannot hedge against losses. Something might break when everyone runs for the exits at once.
All those charts with spikes up represent broken markets. There will be more to come.
The next few monthly inflation charts promise something to behold, but what can the Fed do? Higher interest rates won’t help the problem and promise to trigger the next recession – which is coming anyway.

In my next life, I want to be a dictator like Putin – perhaps more benevolent. Here is my investment strategy. Load up on gold and oil—short the stock market, especially my own (RTY down -90%).

Then invade my next-door neighbor and throw out a few nuke threats. Pump as much oil as possible. Sell the gold. Reverse the stock market short to long. Negotiate peace. Rinse repeat.

It promises to be an interesting night. It now takes a 7% move in Globex to lock limit the S&P 500 Index. Let’s hope we don’t face that any time soon.

I will update all Key Levels in the morning notes.

A.F. Thornton

Archives March 2022

Interim Alert – 3/10/2022

Morning Notes – Key Trading Levels for 3-10-2022

Morning Notes – 3/10/2022

Afternoon Notes – 3/9/2022

Morning Notes – 3/9/2022 – Key Levels Update

Morning Notes – 3/9/2022

Afternoon Notes – 3-8-2022

Founder’s Morning Notes – Granular Daytime Frame Trading Levels

Founder’s Morning Notes – 3/8/2022

Afternoon Notes – 3/7/2022

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