Archives 2022

Navigator Oracle™ Weekly Stock Market Update – 3/20/2022

The weekly Navigator Oracle™ is BluPrint Quantitative Strategies’ adjunct to its signature Navigator Oracle™ monthly market letter and stock market thesis. The weekly forecast is available complimentary to the public on Monday mornings, and can be sent directly to your email if you register here.

Subscribers receive the publication on Sunday afternoon to give them time to plan their week. Subscribers also receive instant updates and swing trading signals initiated by the BluPrint Founders Group throughout the week. Learn about our subscriptions here.

This chart shows the position of the Navigator Algorithm at Friday's Close using S&P 500 Futures Daily ETH Data
[Click to Enlarge] This chart shows the position of the Navigator Algorithm at Friday's Close using S&P 500 Futures Daily ETH Data

Summary in Kamala English

After everyone got too scared last week, the market turned around and headed up again after a tough couple of months. I know this doesn’t make sense on the surface, but what happens is that the market goes up because the scared people have already sold out. Once they are out of the way and stop squawking, mainly buyers are left, and the market starts rising again.

It gets better, though. Once the market starts going up again, the same sellers start fearing that they will miss out on the new gains, having already sold at the bottom. So they jump in with both feet, and the market continues a little higher before it dumps them again. Eventually, these people run out of money because we take it from them, but there is always a new crop waiting.

Much of the technical discussion below is about how we measure all this stuff. We try to figure out when to buy, sell, or hold our investments to take advantage of these ups and downs. But you get what is going on, and that is good enough.

For now, the stock market will zig and zag and try to digest the last few days of gains. But it will likely keep going up for a bit unless someone does something stupid in the Russia/Ukraine conflict or we get into a spat with China over their desire to take over Taiwan. Only time will tell – it is hard to predict these things.

The market has been especially difficult lately because people are concerned about inflation ruining our economic recovery from the Pandemic. No doubt, you are paying higher prices for everything. It irks all of us because inflation comes from our government printing money to pay its bills. After all, it spends more than it takes in.

Fewer people want to buy stocks when they fear inflation. Inflation eats into business profits just like it does with your family budget. Stocks are not worth as much when business profits fall. It doesn’t help when people like us have less money to buy stuff from businesses because things are more expensive. And to add insult to injury, the government wants to raise interest rates to try to stop the inflation they caused in the first place.

Inflation is a sneaky way of taxing you without running it through Congress. You pay higher prices for everything and the government (whether through sales or income taxes) gets its percentage of the higher dollar figures. Historically, most countries that do this end up collapsing. 

A lot of the problems we face right now are because countries around the world are losing respect for the United States. We are not responsible with our finances. Yet, every country in the world depends on our U.S. Dollar to be sound money. We agreed to that after World War II and to use our military to protect other democracies and their shipping.

We have not been a super reliable military partner lately either. We intervene when we shouldn’t and mislead partners when we should be helping them. For example, we promised to help Ukraine if they agreed to give up their nuclear weapons after the Soviet Union collapsed. Heck, we promised to help them even at the end of last year. But when Russia came calling, we welched on the deal.

Worse still, our leaders have used some of the conflicts like Afghanistan and Ukraine as graft and bribery operations to rob the treasury and funnel money to family, friends, and supporters. When the graft is exposed, formerly respected leaders, like CIA directors, military, and politicians, sign letters they put in prominent newspapers to lie about the graft and hide it.

Most likely, the letter signers are in on the graft and theft of funds from the American people. A lot of them are communists that have infiltrated our government. There was a whole list of them in the New York times when they lied about Hunter Biden’s laptop, Those people need to be the first to go. So many people are in on the graft these days; we can hardly believe anyone or anything, including the American press. It is disheartening.

Some countries are shopping for a better deal lately – maybe with China. About every 80 years or so, natural processes thankfully come together to purge the system. Unfortunately, these periods can give us an economic whipping. Things get bad enough that the charlatans are finally exposed, jailed, or thrown out on their ears.

We find ourselves at the beginning of that purge now, so things seem a bit weird. We will get through it; we always do. Nothing can beat the wisdom and will of the American people. But it will be rough sailing for a while.

It seems that when you think life should be easy, it isn’t easy. But when you accept that life can be difficult, it gets easier.

If you want to go deeper, my technical discussion follows. I am a total math and computer geek. But if you learned how to invest and trade, there is not much that you would want for in life. And you cannot beat the personal freedom. But like anything, it is hard work and takes a while to learn.

A.F. Thornton

Narrative

As a quantitative investor and market technician, I trade and invest based solely on market-generated information (MGI) rather than opinion. Most opinions about financial markets, including my own, are worthless or become so in time. Still, there is no harm to crafting a storyline to try and make sense of what the algorithms show us, as long as we see the tale in perspective for what it is.

We are in a bear market or trading range rally likely driven by the rumor/hope of resolution or cease-fire in the Russia-Ukraine conflict and coming from peak to trough price slaps in markets including China -50%, European Banks -40%, Emerging Markets -30%, Big Tech -20%, and High-Yield -8%.

Oil or wheat prices may be good proxies to monitor for advance notice of resolving the crisis and inflation. Peak oil should equal a cease-fire and peak inflation. Oil recently reached $130 per barrel and settled Friday at $108. So $130 is the threshold high.

At the moment, however, I don’t believe that the inflation, interest rate, or recession shocks are over or have peaked. We will continue to experience sharp short-covering rallies sometimes supported by institutional repositioning as now. But I do not believe that the ultimate lows in stocks or peaks in credit spreads have been seen.

Inflation always causes recessions, real wage growth is negative, retail inventories have been rebuilt, mortgage rates are rising, there is a big risk that the labor market recovery stalls this summer, and then there is always China invading Taiwan -perhaps the last shoe to drop in this dystopian topping process.

If that is not enough to keep the bear from hibernating, the yield curve is inverting, Consumer Confidence has collapsed, the Fed won’t backstop Wall Street, the amount of private and sovereign debt is staggering, and equity valuations are still expensive. 

Periodic short-covering may drive rallies, but financial markets will react quickly and negatively to bouts of monetary tightening, not to mention China invading Taiwan or any use of nuclear weapons.

But for the moment, spring rally drivers are China’s verbal stimulus commitments last week, putting a floor under their GDP and lowering risks of an immediate Taiwan intervention.

Also, nearly $250 billion should flow back into equities before 3/31 from quarter-end rebalancing required to bring classic 60/40 funds back into formulaic equilibrium. But counter that a bit with entering the stock buyback blackout period which removes about $1 billion per day in equity purchases.

Finally, the seasonal turn for stocks, and particularly the NASDAQ 100, is mid-March and the intermediate cycle low is now confirmed as we had suspected at the 2/24 low. The daily chart has moved back into an uptrend but now encounters weekly mean resistance. But the market appears to have tailwinds as further discussed in the health checkup below.

S&P 500 4400 is now the key pivot line. Above it, volatility contracts and positive gamma should lead to more conventional market behavior – buying dips and selling rallies. Below 4400, rallies and declines are exaggerated by negative gamma, and the negative bear bias begins to reassert itself.

The Weekly Expected Move range, also our macro sandbox for day trading this week, remains elevated with the low at 4470 and the high at 4560.

S&P 500 Futures Weekly Expected Move
S&P 500 Futures Weekly Expected Move

A Reprieve to Get Your Act Together

In case you haven’t noticed, our corrupt political gangster class is pushing us into another war. The press is tossing around words like “nuclear war” as if it were a holiday party. 

A survey this past week showed 35% of the U.S. population in favor of a nuclear war with Russia. Why would anyone even want such a survey? Who in hell are the 35% that seem to support just about anything in any survey? Even China and Russia have volleyed nuclear threats this past week.

With Russia now showing off hypersonic missiles in Ukraine and telegraphing their capabilities to the world, let me be blunt. Get your act together if you haven’t already.

I have been telling you about the Fourth Turning and 80-year cycle for almost two years. I have been warning you for over a year that inflation was coming. I have been alerting you to buy small denomination gold and silver coins to potentially use as money in a collapse.

Even since the Biden Regime’s botched Afghanistan exit, I forewarned that Russia would invade Ukraine, and China would eventually invade Taiwan. Putin went to China before his invasion and he now has a new bromance with Xi. Xi now gets to watch a dry run in Ukraine to plan his invasion of Taiwan. Xi must think it is Christmas with the gift of both Biden and Putin in his sphere of influence.

Are you listening? Do you believe me yet?

New Woke Times
New Woke Times - Source Zero Hedge and WILLIAMBANZAI7

Nothing about the situation at hand is normal. It would help to prepare yourself and your family for an emergency. Keep your car gas tank full. You cannot charge your Tesla when the power grid is down. Extra food and water come in handy when the stores are empty and closed.

Intelligent people plan for the worst – then hope for the best. If you want some preparation coaching, I highly recommend watching the new documentary “End Game.”

We have been experiencing a somewhat stealth bear market that started in February 2021. Over the period, global stocks retraced 15-years of gains, pivoting just above their 2007 highs. 

The timeline is similar in the broad U.S. stock market, though U.S. stocks did not carve as deep a trough as their global cousins. Still, the Russell 2000 and Nasdaq 100 met the minimum -20% threshold.

One only needs to look at recent gogo stocks for the bear perspective

This is a table of the recent GoGo stocks and their losses into the 3/15 trough.

If you don’t know your symbols, here are a few highlights: Beyond Meat (BYND) -76%, Shopify (SHOP) -70%, PayPal (PYPL) -69%, Bed, Bath, & Beyond (BBBY) -55%, Pelaton (-84%), Facebook (FB) -52%, Netflix (NFLX) -52%, and Disney (-34%).

So my point is that one hopes we are coming out of the bear market and maybe it is so. If the market wants to repair itself and recover, it could move on to new highs. I just don’t see that happening quite yet. More importantly, I don’t need to be right about the forecast.

The best strategy is to follow our Navigator Swing Trade™ strategy and signals. The Navigator Algorithm™, 35-years in the making, uses dynamic learning, market intelligence, and MGI to respond to any environment with the requisite buy and sell signals to make money and avoid losses. You might even consider using the signals to profit from market declines in the weeks ahead. They may present nearly as often as market rallies. 

But to enjoy the wealth we create together, you need to survive our current political nightmare and anything our dubious ruling class might throw at us. Give yourself and your family a crisis checkup before it is too late. Can you survive for three to four weeks without power if there is a cyber attack on our electric grid?

Monthly Thesis Quick Review

Harkening back to our monthly publication and master thesis, I will continue to return to the 1965 to 1984 Dow chart below because it is the only period of stagflation I can recall. 

We came off 20% interest rates in 1982 into a deflationary tech and productivity boom that continues today. We ended the Cold War in 1985 with the peace dividend, positive supply shock, and deflation. But the new Cold War likely establishes 2020 as the secular low in interest rates and inflation. 

The 2020s are likely to be marked with quick and volatile boom and bust cycles like the 1970s due to the coming stagflation. I can only speculate, but the long-term mean lies well below us and the market will get there when the true bear unleashes. I prefer a lengthy sideways path, over a 1929 style crash. That crash overshot the mean in a 90% decline, which is even more unpleasant than moving sideways into the mean over a number of years.

Once stagflation reality set in in 1974, small-cap value, real estate, and commodities worked well through 1981. Commodities got overheated a week ago, so we need to be patient for pullbacks to get involved. And we should keep an eye on the Russell 2000 small company index for relative strength. 

I well remember how much people hated stocks in 1982 before the great 1982 – 2000 bull market began. Nobody believed in buy and hold. I was just a kid, but that is when I first started trading. When the Dow hit 1,000, you sold. At 500, you bought. A 60/40 balanced portfolio got hammered, just as it has in the first quarter of this year.

I will do more research on this, but I would peg our analogous location as about 1970 on the chart below. Recall that our next four-year cycle low arrives in 2024 – we are only halfway through this one. 

Stock Market (S&P 500 Index) Health Check

Let’s start the weekly health check with the price chart and just bottom-line it. The weekly chart tracks the intermediate trend, which continues to point down. We remain in a buy signal on the daily chart, but we are at the inflection point for a confirmed intermediate trend reversal. On Friday, the market came right up to the mean when it ran out of runway at the close (which is better than running out of steam).

A big weekly bull bar closing on its high increases the odds that this corrective phase or leg is probably over. However, the market may continue in its eight-month trading range indefinitely. The next target for the bulls is the February 2nd high at 4577 on the S&P 500 Futures and 458 on the SPY. Two closes above that high increase the odds of a retest of the all-time highs now adjusted to 4799.75 on the June Continuous Futures contract (roughly 480 on the SPY).

Bulls need to close this week above the mean with another bull bar to confirm the reversal higher. The stronger the bull bar and the higher the close, the better the odds are that this corrective phase is over.

The Weekly S&P 500 Cash Index ETF (SPY) Chart shows a strong pivot candle that swept four weeks of losses.

The weekly candle did sweep four weeks of losses, closed above the five and 50-week lines, and qualified as a pivot. The price reversal is an excellent start towards a trend reversal.

Still, the weekly mean points down and will act as strong resistance in a downtrend. Until price conquers the mean, any return to the mean still qualifies as a bear market rally.

Given that we know most of the gains were short-covering and the surprising lack of volume support on a quadruple witching expiration week, the market remains in an intermediate downtrend and  “prove it to me” mode.

Other Checklist Items

S&P 500 Continuous Futures Daily Chart showing 20 and 40-week cycles bottoming, primary downtrend line breaking, upside falling wedge breakout,, moving average resistance, and positive momentum divergence on the 3/15 low..
S&P 500 Continuous Futures Daily Chart showing 20 and 40-week cycles bottoming, primary downtrend line breaking, upside falling wedge breakout,, moving average resistance, and positive momentum divergence on the 3/15 low..

Each week, we also cover a checklist of items to help us assess underlying market health and trends. We examine cycles, seasonality, and sentiment for context. We look for reaction to trendlines, chart patterns, Elliott Wave, moving averages, volume, and breadth. A number of these technicals are marked in the chart above.

March 15th is the typical seasonal turn favoring higher stocks prices, and the market has bottomed the intermediate cycles as is evident in the cycle semi-circles above. The next intermediate cycle low is due later in May, but we should have tailwinds until then.

Negative sentiment reached levels we have not seen in a long time at the 3/15 low. which is bullish. And there is plenty of cash on the sidelines to fuel a rally. High cash positions should be positive for a sustained reversal, unless a balck swan event presents, perhaps associated with the Ukraine conflict.

The primary downtrend line on the daily chart has broken decisively. It would be nice to have a successful retest of the break from current overbought levels. But at least the daily chart has reversed into an uptrend. Weekly chart resistance also coincident with the 50 and 200-day lines on the daily chart will be short-term obstacles in shooting for the Februuary 2nd highs.

We broke out of a falling wedge pattern which projects a move back to its base, also the February 2nd highs discussed above. We came into the lows with some positive breadth divergences as far as New 52-Week Highs and Lows, and the percentage of stocks above their 50 and 200-day moving averages, though the NYSE A/D line is still following price and presenting no positive divergences.

Finally, as mentioned above I would have preferred more of a volume spike for the week, but perhaps the diminishing volume on each prominant spike low on the daily chart this past month is a positive sign in an of itself – as seller enthusiasm diminished.

Courtesy of Danerick Elliott Waves, the chart shows the current Elliott Wave Count which remains bearish.
Courtesy of Danerick Elliott Waves, this chart shows the current Elliott Wave Count on the broad Wilshire 5000 stock market index, which remains bearish.

Conclusion

We have reviewed fundamental narratives that may support prolonging the bear after this rally completes, and we continue to allow for a trading range as experienced in the stagflation of the 1970s. But narratives rarely coincide with reality, and price action always overrules them.

Financial markets will react quickly and negatively to bouts of monetary tightening, not to mention China invading Taiwan or using nuclear weapons. But short-covering rallies will rescue them from time to time. Even in the most optimistic view, beaten-up stocks need time to form bases before we try to catch them on their way back up.

But for the moment, spring rally drivers are carrying the market higher, and they can be powerful. With most technicals providing market tailwinds and our daily algorithms green again, the next challenge should present at the February 2nd highs.

Still, price does have to conquer the weekly mean, and I don’t mean to minimize the task. This week’s price action will telegraph success or failure on that front.

Key Option Support and Resistance per Strikes and Gamma.
Key Option Support and Resistant per strikes and gamma.

S&P 500 4400 is now the critical pivot line. Above it, volatility contracts and positive gamma should lead to more conventional market behavior – buying dips and selling rallies. Below 4400, dealer hedging and negative gamma exacerbate rallies and declines, and the negative bias begins to reassert itself.

The Weekly Expected Move range, our macro sandbox for day trading this week, remains elevated, with the low at 4470 and the high at 4560. While I expect some consolidation at Friday’s high, I plan to buy pullbacks until the trend reversal stalls or fails.

A.F. Thornton

Word of mouth is crucial for growing our trading community and providing education and support for your trading decisions. Please feel free to share this with your friends and family if you find the information beneficial.

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Afternoon Notes – 3/18/2022

This is a chart of Taiwan Semiconductor, a good proxy for the risk of China taking Taiwan.
This is a chart of Taiwan Semiconductor, a good proxy for the risk of China taking Taiwan.

Good Afternoon:

  • Caveat: I am not anti-Biden and want him to succeed and unite the country as he promised. My “politics” strictly relate to financial market stability, no matter which politician or political party threatens it.
  • Roughly 90% of high-end computer chips come from Taiwan. Any disruption in those chip flows threatens our financial and economic stability. These thoughts have pre-occupied me all week.
  • Biden’s unbelievably pathetic Afghanistan withdrawal, along with George Soros, U.S. Diplomat Victoria Nuland, and their Deep State Color Revolution to oust the democratically elected Ukrainian government in the early 2000s to seat Klaus Schwab protege President Zalensky, has many of us on edge.
  • Biden’s hands have been all over Ukraine for at least 10-years and he laid the groundwork for the Russian invasion, not to mention China taking Taiwan.
  • If Putin is bold enough to take Ukraine, why wouldn’t President Xi and China complete their long-held plans to forcibly reunite Taiwan with the mainland?
  • And assuming we have a fair mid-term election or one at all this November (if the left can manufacture another good crisis to cancel it), why would Xi wait for a potential Republican sweep of Congress to take the independent island nation?
  • Well, fear no more. A groveling President Biden just handed Taiwan over to Xi today on a silver platter if the call transcript is even close to accurate.
  • “Biden further assured Xi that the U.S. does not seek to “change China’s system,” does not support “Taiwan independence,” and “has no intention to seek a conflict with China.”
  • According to the Chinese readout, Biden repeated these pledges to Xi twice during the call. Just imagine Biden groveling and selling these concepts to Xi. “I take these remarks very seriously,” Xi responded.
  • Xi then proceeded to lecture Biden about the “predicament created by the previous U.S. administration,” especially the problem that “some people in the U.S. have sent a wrong signal to ‘Taiwan independence forces'” that is “very dangerous.”
  • In the most poignant statement relating to the true purpose of the call, soliciting China to stand down on their support for Russia, Xi told Biden he could not expect any help from Beijing in cleaning up the mess he [referring to Biden personally] made in Ukraine.
  • Recall that Biden was in charge of Ukraine as Vice President under Obama. Hunter Biden was paid $1 million per year to serve on the Board of Ukraine gas company Burisma. And then there is this:
You just cannot make this stuff up - whereever substantial U.S. money is directed, U.S. politicians follow with their money-laundering operations. The corruption in our government will eventually be our undoing.
You just cannot make this stuff up - whereever substantial U.S. money is directed, U.S. politicians follow with their money-laundering operations. The corruption in our government will eventually be our undoing.
  • The political thread runs deep, no pun intended. Recall that the Deep State conspired to impeach President Trump for the second time over a phone call with Ukraine President Zalensky when Trump asked him to look into Biden family corruption in Ukraine.
  • Apparently, Ukraine was another Deep State graft and money-laundering operation similar to Afghanistan. Ukraine involves a very familiar cast of characters – Biden, impeachment witness Nuland, George Soros, Klaus Schwab, the World Economic Forum, and even Fauci (with the 36 Biolabs in Ukraine). All of this is surreal, and it feels like we are in multipart television series.
  • When you observe our $30 trillion deficit, realize that a large portion of it is attributable to kickbacks and payoffs to American politicians, their supporters, and their children and extended family to keep the transactions opaqe. That is how it works in Washington D.C. these days and how these politicians become uber-wealthy. 
  • Graft and corruption are also why a billionaire President, who could not be bought off, was such an existential threat to the Deep State gravy train.
  • And that brings us full circle to Hunter Biden and the Biden family’s Ukraine connections and corruption.
  • Hunter Biden is apparently on the verge of being indicted for tax fraud.
  • Trying to get ahead of the story, the New York Times now admits that the Hunter Biden laptop documenting the Biden family corruption in Ukraine, with “10% for the Big Guy,” and millions in payments from China is authentic.
  • Of course, Big Tech and the Deep State Media interfered with the 2020 election by suppressing and banning the story to swing the election to Biden. By the way, that was illegal before we became a banana republic.
  • Would things be different in Ukraine today if the Deep State had failed in its efforts to throw the election to Biden and unseat Trump? Common sense and every poll on the subject says so. 
  • Think of the thousands of people now dying due to all of the nefarious corruption, subversion, treason and incompentant decisions. Sure, Putin is a tyrant but he simply does what tyrants do. Biden and his minions purport to be better than Putin, but in reality they are not.
  • And who would know better than Xi, who has the Biden family on his payroll – according to information sourced from Hunter Biden’s laptop?
  • The narrative that Biden warned Xi about interfering with Russian sanctions today belies the transcript and Biden’s subservient posture. 
  • Biden was the beta with Xi as the alpha in this humiliating turn in world affairs. Our country is practically lost at this point, as will be Taiwan and much needed premium computer chips with these charlatans in charge.
  • Biden and his minions appear to be hopelessly corrupt, not just incompetent.
  • Thanks to the Deep State and their media allies, we may have elected one of the most corrupt Presidents in modern history.
  • I am asking myself this too, why is nobody from the Unitied States in there trying to negotiate peace? Why is all we here about escalating tensions and sanctions? Why woundn’t Biden ask Xi to help broker peace? For heaven’s sake, Henry Kissinger has been a personal advisor to Putin over the years, why isn’t he asked to help? 
  • None of this is normal. It is as if the Biden regime wants a war with Russia. Respecting Biden’s China deference, his attitude underscores the success of the China “Elite Capture” program.
  • Strap in – we are in for a rough ride ahead.
  • On a more comical note, Congresswoman Sandy Cortez (“AOC”) takes the cake this week. 
  • Today, she warned us that “Fossil Fuel extraction” is correlated with “abduction and murders of indigenous women across the United States.
  • I think she was on one of my favorite websites, “Spurious Correlations.” It reminds me of the correlation between “cheese consumption and the number of people who died by becoming tangled in their bedsheets.”
This is a chart showing the spurious correlation of cheese consumption and people dying by getting twisted up in their bedsheets.
This is a chart showing the spurious correlation of cheese consumption and people dying by getting twisted up in their bedsheets.
This chart shows the S&P 500 Index Continuous Futures Daily Chart with today's price breaking the primary downtrend.
This chart shows the S&P 500 Index Continuous Futures Daily Chart with today's price breaking the primary downtrend.
  • The S&P 500 decisively broke the primary downtrend today, but I am trying to understand the pathetic volume considering this was quadruple witching expiration. Usually, the volume bar spikes above all others. I will get to the bottom of this over the weekend.
This chart shows the S&P 500 Index Continuous Futures at the more granular 15-minute chart level breaking the downtrend and respecting today's expected move.
This chart shows the S&P 500 Index Continuous Futures at the more granular 15-minute chart level breaking the downtrend and respecting today's expected move.
  • That is what Vanna looks like. It is the dealer’s unwinding a plethora of short positions over the last few days. It has been painful to be a dealer lately.
  • Notably, this is also one of those rare occasions where the S&P 500 left the Weekly Expected Move at 4318 in the dust. Of course, that made the Vanna worse as dealers raced to buy futures to try to minimize the damage from closing outside the WEM range.
S&P 500 Index Continuous Futures One_minute Granular Chart with Key Options Levels - Key Levels and Trading Ranges
S&P 500 Index Continuous Futures One_minute Granular Chart with Key Options Levels
  • In addition to breaking the downtrend, the price finished above the Volatility Trigger, Hedge Wall, Call Wall, and both Delta and Gamma neutral. That means that the market could now reverse into more of a mean reversion pattern, where dealers sell rallies and buy dips. Under the Volatility Trigger, they sell into dips and buy into rallies, exaggerating the moves.
  • Volatility will now contract, but we should be buying dips as long as the market maintains 4400.
  • From an options perspective, should participants add to their exposure at higher strikes, further out in time, option activity will confirm the rally.
  • On the other hand, below 4,400.00, there is the potential for a “slipstream” lower according to options guru Brent Kochuba. Removing a large swath of put hedges may put the market back into an underhedged position. 
  • If selling surfaces, the lower-bound for the S&P should move down back down from 4100 to 4,000.00. In such a case, increased customer demand for negative delta and positive gamma options exposure will coincide with added dealer pressure that “flattens” out near 4,000.00.

I will expand on all this in the weekly outlook on Sunday.

A.F. Thornton

Word of mouth is crucial for growing our trading community and providing education and support for your trading decisions. Please feel free to share this with your friends and family if you find the information beneficial.

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Morning Notes – 3/18/2022

Good Morning:

  • Today is Quadruple Witching Day, an expiry that happens only four times a year. As such, quarterly, monthly, and weekly options expire, as do March futures contracts.
  • It is not a good session for day trading with all the cross-currents, and I will use the opportunity to take a much-needed day off.
  • I have been burning the candle at all ends this week, putting the finishing touches on many improvements to the Website and our services. That is the explanation if you are getting a few random emails here and there. Sometimes we forget to turn the publication switch off when we are testing.
  • You will receive new user names and passwords soon.
  • One new feature is our BluPrint Research Library, which will have all the latest inside research from Wall Street’s boutique investment firms and top hedge funds.
S&P 500 Index Continuous Futures Daily Charts - Trend Analysis
S&P 500 Index Continuous Futures Daily Charts - Trend Analysis
  • As I had expected, this particular expiration supported the market because the sheer number of puts expiring forced short-covering over the past few sessions, giving the market Vanna tailwinds and a solid rally. 
  • Another way to look at it is that the Fed meeting drew the usual options expiration dip forward a few days.
  • But as I often say, short-covering is not the same as long-term buying and investing. Nor does the market typically experience “triple” bottoms.
  • Thus far, there is no evidence of call buying, which would give me more confidence that we have a true correction end. If anything, this correction leg may have ended, but there could be more downside ahead of us.
  • Next week, I will better understand the landscape as we monitor the follow-through from this latest swing low.
  • I mentioned Wednesday evening that I wanted to take the Navigator Swing Trade™ accounts back to cash. I was concerned (and still am) about a trip back down to the WEM High at 4318 at expiration today. As well, I want to enjoy a peaceful weekend.
  • So we sold the cash SPY position in the Navigator Swing Trade™ accounts at 440.75 at the close yesterday. We purchased the position only a few days earlier at 425.50.
  • Recall that we had already deleveraged the leveraged accounts at Wednesday’s close, switching from futures to cash. The exchange gave the leveraged funds exceptional gains.
  • Preliminarily, my analysis is that we are at the next inflection point to prove a sustainable rally.
  • At the 3/15 swing low, the price bounced off the monthly mean (21-month line) but is still below the critical 5-month line. It is bumping up against the 21-week line and mean on the weekly chart. On the daily chart, price is challenging the primary downtrend line.
  • In other words, we are close to confirming a turn and new intermediate uptrend, but not quite there yet. The NASDAQ 100 has broken its steeper downtrend, which is encouraging.
  • Nevertheless, the S&P 500’s impressive performance since the 2/24 invasion low is undeniable. Indeed, this is one of the most fearful and negative sentiment lows of my career – certainly in the top five.
  • Out tail risk remains inflation and Ukraine. Those are the knowns, but the unknowns always catch us off guard.
  • I will keep an open mind and cover more detail in Sunday’s Navigator Oracle™ Weekly Update. It is difficult to draw too many conclusions while still in the the trenches.

Have a great weekend,

A.F. Thornton

Word of mouth is crucial for growing our trading community and providing education and support for your trading decisions. Please feel free to share this with your friends and family if you find the information beneficial.

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Morning Notes – 3/17/2022

Good Morning:

  • As expected, someone was on the other side of those trades on the spikes in oil, wheat, nickel, etc.
  • As I said before, it takes about a week for the bodies to start floating up.
  • Actual commodities producers use options and futures to hedge or lock in prices. They are not traders per se, which is why commodities futures and options markets formed in the first place.
  • Say you shorted your wheat crop to lock in prices, and prices double and triple overnight. But you have not harvested your crop yet. Guess what? You get a margin call.
  • Trafigura (which trades hundreds of billion in commodities every year) – is facing “margin calls in the billions of dollars,” which means that the commodity “margin call doom loop” idea floated by repo guru Zoltan Pozsar is finally coming true.
  • The European Federation of Energy Traders (EFET), a trade body that counts BP, Shell, and commodity traders Vitol and the margin-call stricken Trafigura as members, said the industry needed “time-limited emergency liquidity support to ensure that wholesale gas and power markets continued to function.”
  • The EFET calls on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.
  • This week reminds me that the next few years will be a true nightmare. Big money will come on the short side of the market.
  • Bull markets condition you to avoid shorts, but they will pay handsomely over the next few years,
  • Of course, this assumes the other side can honor the trade (see above).
  • The Fed’s massive credit and liquidity creation, not traditional fundamentals, is behind current inflation.
  • I am sick and tired of the Biden regime acting like the rest of us are as stupid as their fans. Pocahontas takes the cake.
  • Is there something in the shot to help soften our judgment? It makes you wonder…
  • The truth is that the Fed is responsible for any central bank’s most significant money and credit creation. Well-intentioned? Maybe. But they waited too long to rein it in.
  • Yesterday, the Fed caught up with the market by raising 25 bps but did not announce the start of reducing its balance sheet. They instead said they would leave it for the meeting next month.
  • The Fed is likely stalling as proper action will cause a recession that would jeopardize the mid-term election results for the cabal later this year.
  • I am also worried that this regime will try coercive policies to stop prices from rising. Everyone will be blamed, such as “greedy business people” and “Putin,” but our state media won’t mention the real culprits.
  • I have already heard about “rent controls.” Count on them. Then gasoline price controls, and then price controls on food. President Nixon tried price controls in 1971. It was a disaster.
S&P 500 Index Daily Chart with Today's Main Support and Resistance - 3-17-2022
S&P 500 Index Daily Chart with Today's Main Support and Resistance - 3-17-2022
  • I am pegging resistance 4348 and 4400. Support should show at 4330 and 4300. Today’s trading plan and key level charts are available for Navigator Active Trader™ subscribers, accessible on the right sidebar menu “From Our Blog.”
  • We will be cashing in our Navigator Swing Trader™ SPY trade from yesterday. Subscribers should stay alert.
  • Remember that the WEM High on the futures is 4318 and will likely act as a magnet until expiration tomorrow.
  • I still believe that expiration will continue to support stocks into Friday. But I thought the same thing last month, and the market dipped into expiry (and the following Monday and Tuesday) anyway.
  • We may open with a small orthodox gap back into range on balanced overnight inventory. The Globex range is relatively small with symmetrical distribution indicating some balancing from the rally yesterday and the absence of stronger sellers at the moment.
  • How deep the pullback we are currently experiencing from yesterday’s highs will tell us about the future trajectory.
  • 4300 is close to yesterday’s RTH session halfback, making it a bull/bear threshold today. Whatever pullback we get (if any) should hold above this midpoint to increase the odds that buyers remain in control.
  • There is no data yet that implies options-based support into next week.
  • If we see a pickup in call flows and push above 4400 in the S&P, my view will change.

Trade like a champion today,

A.F. Thornton

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Afternoon Notes – 3/16/2022

  • I have been reflecting on the death and funeral of Patriot Rich Higgins today. With a US Government resume nearly a mile long, this National Security Council staffer was the first to blow the lid off the deep state cabal working to unseat President Trump barely four months into office in 2017.
  • It is easy to see the thread running through all of these recent events – from the China Virus to the events in Ukraine. Reading the memo today makes a grown person want to cry over the purposeful destruction of our Country.
  • Having barely recovered from reading Rich’s memo, I ran across this March 10th report from Dr. Peter Pry, Executive Director of the Congressional EMP Task Force on National and Homeland Security. His assessment of our nuclear capabilities vis-a-vis Russia is sobering and blew a lot of my assumptions out of the water. Better to read this in the morning, not before you go to sleep.
  • As predicted, we had continued the impressive short-covering rally today, and the market closed above the 21-day and minor wedge downtrend line, breaking above the falling wedge pattern.
  • We closed above the WEM High at 4318, and there is a 70% chance that level will draw the market back down into Friday’s close.
  • The breadth was strong enough today that it nearly qualifies as a breadth thrust, so maybe this will be the outlier where the WEM High fails to hold this week, but I am not willing to bet against it.
  • I cannot recall a market holding up so well in the face of some of the worst sentiment I can remember since 9/11.
  • I am more impressed with the 2/24 low holding through this fear than with the short-covering rally. We discussed the importance of the 2/24 low back at the end of February and predicted the low would be secure, at least on an intermediate basis.
S&P 500 Futures Daily Chart with Algo Dashboard and Falling Wedge
S&P 500 Futures Daily Chart with Algo Dashboard and Falling Wedge
  • As you will observe above, the Navigator Algorithm rolled into a buy signal at 4256 for the Navigator Swing Traders™. The stops on the dashboard are set as the labels turn green.
  • The leveraged accounts bought an Emini and exited at the close. The cash accounts took a 75% SPY cash position.
  • The next stop is the Primary Downtrend line, and there will be complications as we roll into Quadruple Witching, an event we experience only four times a year.
  • The compression of volatility post the Fed’s quarter-point rate increase, coupled with expiration pressures, has manifested with a bullish outcome.
  • While the Federal Reserve gave a good report on an improving economy, they came off less supportive of equity markets today. As a result, the expiration and covering of a large swath of these put hedges may place the market back into an “underhedged” position after expiration.
  • If there was to be renewed demand for protection and a continued real-money selling post options expiration, we could experience a rapid flush lower, potentially. 
  • Let’s enjoy the ride, but markets are fragile, so stay cautious.
  • Click the button below if you want to learn more about the Navigator Swing Trader strategy and subscriotion.

A.F. Thornton

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Morning Notes – 3/16/2022

S&P 500 Futures Daily Chart with Algo Dashboard and Falling Wedge
S&P 500 Futures Daily Chart with Algo Dashboard and Falling Wedge

Good Morning:

  • I am updating these notes as the email link did not work correctly this morning, or at least I didn’t work it properly.
  • Last night, China announced some significant “all in” stimulus (like our Fed did during Covid), and it sparked a massive overnight Asian rally, with the Hang Seng Index up nearly 10% on a single session.
  • Then, a proposal for Ukraine to become a neutral country but retain its armed forces “could be viewed as a certain kind of compromise,” Kremlin spokesman Dmitry Peskov said Wednesday, hinting at possible progress in peace negotiations.
  • And with that Kremlin statement, Pop went the Weasel – as the S&P 500 staged a 50 point overnight rally into Fed day. The rally brought the market into our resistance band at the 4300ish zone.
  • The market is pegged in a 4315 to 4340 range, not atypical before the announcement on a Fed Day.
  • More importantly, the price is bumping into the WEM high around 4318 or so, also the top of the falling wedge minor downtrend line and the 21-day line.
  • That is a lot of resistance to conquer on a day where I am unsure what the Fed can do to please the markets.
  • We shall see, but there could be a lot of short-covering, or the market could await quadruple witching on Friday when nearly 1/3 of all outstanding options expire.
  • The expiring options also have a short-covering bias which could continue supporting the markets.
  • Trying to call out key levels on a day like today is likely pointless. But here it goes anyway.
  • The 4315-4340 area should continue acting as resistance until the Fed announcement.
  • Above 4315 is the call wall at 4400.
  • We peg downside support at 4220, with significant support at 4000 to 4050.
  • Be careful. I may miss the low, but I am not anxious to get involved at the WEM high, given the odds. No guts, no glory – but losses are never better than patience.
  • And if the market does turn higher here, we will all be amazed at the narrative shift, as usual. Is it the end of the world, or will everything come up roses?
  • The market opened with a sizeable True Gap putting Gap Rules into play.
  • There is potential for a trend change if the wedge trendline breaks, but the WEM high is a powerful draw into Friday’s close and expiration, even breached today.
  • The primary downtrend line is the next significant level to conquer if higher prices are in order from here.
  • I publish my key chart levels at 7 am for subscribers. They also get access to a twice-weekly Pro Trading Room, where I trade these levels live. Click the Navigator Active Trader™ button below to learn more.

A.F. Thornton

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Key Daytime Frame Charts – 3/15/2022

Introduction

Using today (Tuesday, 3/15/2022) as a reference point, I want to walk through my process for setting the key levels I communicate to the Navigator Active Traders™ members each morning. I also want you to know how they work.

To summarize, first, I look at the options market to determine what kind of volatility is at hand for the week ahead, so I have a reasonable expectation of trending versus reversionary behavior.

On Friday evenings after the market closes, I set the expected move (WEM) range to establish my trading “sandbox” for the week ahead. Setting the probable zone allows me to prioritize the various support, resistance, and turning points price will encounter in the sandbox.

I set the expected move for the day (DEM) as a daily sandbox inside the weekly sandbox each weekday morning. The projected daily range allows me to further refine the support, resistance, and turning points in my windshield for that day. 

I look for clusters of support and resistance where I might initiate trades or target profits. I divide the sandboxes into quartiles for the day and week to help me correctly position trades depending on the bull, bear, or balancing context.

I monitor internals and follow-through, using market and volume profiles (a separate discussion) to help determine if the market is likely to trend higher, lower, or sideways. 

In short, I consistently apply a well-defined process that facilitates my day and swing trading success. Many of the variables discussed are also weighted components of our proprietary Navigator Algorithms™.

I publish the key levels at 7 am for the Navigator Active Trader™ subscribers. Subscribers also get access to attend our twice-weekly Pro Trading Room, where you can watch me prioritize and trade these levels.

You can click the button at the end of this discussion to learn more about a Navigator Active Trader™ subscription.

Weekly Trading Sandbox

Calculating the Weekly Expected Move is the first step in your trading plan for the week ahead. The move defines the macro sandbox for daytime frame trading during the week. It is your Sunday project.

The Weekly Expected Move gives you invaluable information about the overbought or oversold nature of the index in initiating trades and taking profits throughout the week. The market will stay within the boundaries 70% of the time.

I like to divide the weekly range into quartiles and generally look to initiate my long day trades when the index is in the first WEM quartile (shaded green) and target profits in the last quartile (colored red). Shorts are just the reverse.

It is also acceptable to divide the range into thirds. Whatever works for you is OK, as long as you understand the concept.

Of course, whether to focus on longs or shorts depends on context. Taking trades between the shaded boxes depends on the circumstances as well. But the closer you get to the middle when initiating a trade, the more likely you might be starting transactions in no man’s land.

Naturally, you can manage a trade initiated in the red or green zone through the middle. It depends on your target, and you can always trail a stop.

Knowing the range also helps you identify other key levels you may encounter as they travel inside the sandbox during the week. You can focus on the most likely moving averages, support, resistance levels, etc., where your trade might stall or change direction.

For the most part, you can ignore potential happenings outside the top of the red shaded boundary and the bottom of the green shaded edge, which are the maximum endpoints of the expected move.

The Weekly Expected Move sets the edges where Dealers and Market Makers begin to lose money if the price moves outside the range and stays there when weekly options expire at Friday’s close. Dealers and Market Makers will vigorously defend the boundaries or lose billions of dollars on a breakout.

Sometimes the price will exceed the boundaries intra-week. Such breakouts are acceptable to a point. But it is best to nail your profits at the boundaries. You will often be surprised to see the price return inside the range by Friday’s close. The possibility may create a trade set-up in and of itself.

But be aware that if the price exceeds either boundary significantly, Dealers and Market Makers may aggressively hedge their portfolio deltas by selling futures into the same direction of the move, potentially making the advance or decline worse.

Next, we set the daily expected move ranges for the trading day ahead.

Daily Trading Sandbox

Calculating the Daily Expected Moves is the second step in your daily planning. The boundaries define the sandbox for daytime frame trading just like the Weekly Expected Move does for the week ahead.

Combining the Daily and Weekly Expected Moves gives you invaluable information in taking your trades throughout the week.

Just like the week, I like to divide the daily range into quartiles and take longs in the first quartile (shaded green) and target profits in the last quartile (shaded red). Shorts are just the reverse.

But these decisions are also influenced by the index’s location inside the Weekly Expected Move range. Depending on the context, overlapping weekly and daily green and red zones deserve your attention.

For the daily chart, there are three expected move data points. The first data point is the expected high and low calculated from the RTH session Open. This calculation is beneficial when there is a large opening gap. Our estimate also incorporates options gamma, a valuable filter.

The second and third expected moves are data points calculated from the previous day’s close. Historically, the first data points from the close contain roughly 70% of the daily price action. The second levels frame about 90%.

Since there are multiple-choice data points in the daytime frame, choosing your anchors for the quartiles is a bit of an art. Is the market balanced or trending? Are the internals solid or weak? Did the market gap open? Should you be focusing on longs or shorts, or both? Pick the broader or narrower expected move range accordingly.

It is also helpful to identify other vital levels you will encounter in the daily sandbox. Suppose there are moving averages, additional support and resistance levels, etc… In those cases, you will better understand where to initiate new trades, set targets, and identify where the market may stall or reverse.

Now, let’s identify and add any key trendlines to our sandbox.

Today's Key Trendlines

Overnight and morning traders ran stops under the Primary Uptrend Line from the March 2020 China Virus Crash low and under the 2/8 low. Then they brought the market back up into yesterday’s range. The market’s rejection of lower prices and return inside yesterday’s range was impressive.

The price action reminds me that the market is holding its ground despite the constant stream of bad news since the 2/22 Ukraine Invasion low. As discussed in the 3/6 Navigator Oracle, the low remains secure. The market also conquered and retested a minor downtrend line on today’s strong advance.

All in all, today’s market action was bullish – even if it mainly was short-covering. But the market is still sandwiched between its Primary Uptrend and Downtrend Lines.

The pattern looks more like a bear flag to go down on the NASDAQ 100 and a falling wedge to rally on the S&P 500. But even on the S&P 500, the wedge may need lower prices to complete.

The Fed meeting reaction tomorrow will help the market resolve its consolidation. Quadruple witching expiration Friday would appear to provide some supportive gamma, but I thought that last month as well, and the market dipped into expiration anyway.

With sentiment at record low levels and a lot of cash on the sidelines, it would not take much to trigger short-covering. But there is unlikely to be an all-clear signal until next week.

Seasonally, the stock market tends to turn higher in mid-March. If the 2/24 low is the 20-week cycle trough, a relief rally is the most likely outcome as we get through the Fed announcement and options/futures expiration.

Let’s move on to the simplicity of the two support and two resistance levels I communicated this morning when the charts and colors briefly turned me into a mad scientist.

Today's Pre-Announced Key Support and Resistance

Today’s story was the market heading north after two bear days in a row, The market stalled at the first pre-announced resistance (1) for an hour. The level coincided with the minor downtrend line on the trendline chart above. 

After clearing the trendline, the market returned to retest the break above (2). Then the market rallied up to our second pre-announced resistance level, where the market stalled again into the close.

As we move down the chart list, you will see additional support and resistance constructs in the same neighborhood. The levels work whether you use them as targets for trade initiation or profits.

Now let’s look at some calendar-based levels.

Today's Relevant Calendar Based Levels

It is important to track certain calendar levels as they often act as support and resistance as the trading day begins and when you encounter the weekly and monthly levels in your sandbox.

I always mark the current monthly and weekly open because that is where the respective candles turn green or red (“screens go green”), as it is often said. I will also have the high and low for the previous month and week on my screens, as those can be important inflection points.

Remember that every bar or candle sets up a trading and breakout range, whether the bar is one minute or one month. It is impractical to trade a one-minute bar as such, but weekly and monthly candles are typically large enough to be monitored as a range. A sustained break above the candle is bullish and vice versa.

I also want the previous day’s high and low and the Globex high and low marked. Each day, the opening drives will often start by testing the overnight high and low and the previous day’s high and low to find the path of least resistance.

Today, the market opened at the overnight high and kept going. It finally reached yesterday’s high at the close. Yesterday’s candle was somewhat large, so it took a long trip up to test the top. Ultimately, the price closed above yesterday’s RTH high, another bullish sign.

If the previous day is a trend day with a large candle and extensive range, it is also helpful to mark the 50% point on the candle, also called the “halfback.” In such cases, the halfback can provide support or resistance and can be a target for taking profits on your trade.

Now, let’s take a look at the options market’s influence on today’s price action. 

Today's Influential Option Levels

The influence of options on the stock market has never been more significant. We track the highest impact levels and observe the index when it encounters them.

Every option generally has a dealer/market maker on the other side of the trade. With data from the exchanges and a few inferences, we can predict how these professionals will hedge their positions and where. 

Sometimes I feel as if the options information we convey is as close as we can get to legal, insider trading. Simply put, the various levels, regardless of the nomenclature, act as support and resistance. When there are clusters of lines, the area will likely be strong support and resistance.

For example, see the group of levels on the chart above around 4200, with the next collection above at 4300. These option levels have been primarily responsible for the market’s current rangebound conditions. You can see the influence today.

We also track the price where gamma and delta shift from negative to positive and vice versa. And there is another important level we monitor called the “volatility trigger.”

The market and price ranges behave very differently above and below these points. This helps me calculate the implied moves for the day and week. I can also anticipate intraday range expansion or contraction.

Today, the fact that the price traveled back up and through the gamma cluster at 4200 let us know that dealers and market makers are still willing to vigorously defend that price, which is also the Weekly Expected Move low. Coincidence? Not likely.

The market first stalled when it encountered the 4th largest combined gamma level of the S&P 500 Cash Index (SPX) and the Index ETF (SPY) around 4250.

Now let’s see if we can put all these together to give us a relevant framework traded today.

This is a one-minute chart of A.F. Thornton's Key Trading Levels for the 3/15/2021 expected range we call the "Sandbox" bounded by the top of the red shaded area and the bottom of the green shaded area.
This is a one-minute chart of A.F. Thornton's Key Trading Levels for the 3/15/2021 expected range we call the "Sandbox" bounded by the top of the red shaded area and the bottom of the green shaded area.

Completed Sandbox for 3/15/2022

Now, we can put it all together using a one-minute candle chart to magnify the granularity and separate some of the clusters. I’m not too fond of a busy chart. So in my setup, I can lay on the levels one at a time.

Also, don’t be afraid to rough out a level representing a cluster or shade a wider rectangle to define the area on your chart. Keep your charts as uncluttered and straightforward as possible. I crafted my process to put everything in front of me long before the open precisely to prioritize.

The first issue that stands out today is that you could have used the two support and two resistance levels I communicated to you in the Morning Notes. That is often the case.

With Internals strong, you could have bought any dip on a pivot (confirmed when my candles flip from orange to blue. You would be wise to skip the typical Chicago and New York lunch consolidation periods and catch the afternoon drive.

You could have used the Algo Trigger for confirmation in the five or 15-minute time frames, and the Internals guided that price action favored longs over shorts. 

I did not trade today because I am busy creating templates to deliver these charts every morning timely. They take so long to hand draw that I automate the lines and levels.

There are more issues to cover in day trading, but the information covered here is what matters as far as key levels.

Today's Conclusions

To summarize then, you start with the weekly range and focus on the material support and resistance levels you might encounter. Step out and look at the big picture.

Then each morning, you hone that down to what is in your windshield for the day. You look for clusters of support and resistance both as levels to initiate trades and then target for profits.

You monitor internals and follow-through, using market and volume profiles (a separate discussion) to help determine if the market is likely to trend higher, lower, or sideways. 

You need a consistently applied process to be successful day trading or even swing trading. All of the variables discussed above outline my approach and are also components of the Navigator Algorithms™.

I publish my levels at 7 am for subscribers to the new Active Trader Subscription. Subscribers also get access to our Pro Trading Room, where you can watch me use and trade these levels and learn twice a week.

Click the button below to learn more.

A.F. Thornton

Word of mouth is crucial for growing our trading community and providing education and support for our trading decisions. Please feel free to share this with your friends and family if you find the information beneficial.

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Morning Notes – 3/15/2021

February Producer Prices +10%

This is a chart and breakdown of the Producer Price Index for February 2022
This is a chart and breakdown of the Producer Price Index for February 2022

Good Morning:

  • I harken back to law school finals, which is the last time I recall pulling all-nighters. I now remember that I felt worse the second day than the first. I must avoid these in the future; I am getting too old and feel like I am experiencing a college hangover.
  • As such, I will tackle charts later this morning, though nothing has changed much.
  • The headlines have been writing themselves again lately: “When we’re having this discussion, it’s important to dispel some of those who say, well, it’s the government spending. No, it isn’t. The government spending is doing the exact reverse, reducing the national debt. It is not inflationary.” Nancy Pelosi
  • Hey Nancy, Producer Prices rose 10% last month, you are not spending enough! Politicians and financial advisers are the only categories showing significant demand waning and lower prices.
  • The NASDAQ 100 took out its February low yesterday, but the S&P 500 holds just above. From a NASDAQ perspective, it looks like a bear flag to go lower, but the S&P 500 is hanging on to a falling wedge look. Even within the wedge, there could be lower prices.
  • There is no shift in the outlook. The sentiment is poised – maybe even screaming – for a rally. Fed announcements come tomorrow. Options and Futures expire Friday (Quadruple Witching), with almost one-third of outstanding options expiring.
  • And don’t forget about short-covering rallies. If it were not for those, this would be no fun at all.
  • Significant support today will be at 4151 and 4126. Resistance is at 4201 and 4250. For now, that is your chart for today.
  • Hedge Funds have been taking profits on commodity spikes, with oil poking back down below $100 last night. Buy the dip?
  • We would open with a small gap higher into yesterday’s range at this writing. It would not be a True Gap, so Gap Rules are not applicable.
  • The NASDAQ 100 continued to explore new lows in overnight trade before returning into yesterday’s range. The NASDAQ behavior is classic h pattern price action, which allows for a bullish outcome.

  • The overnight rejection of lower prices and other technicals show potential for short covering in today’s session.

  • The S&P 500 continued to hold above the 2/24 low, but it looks like traders ran the stops under the 3/8 low before bringing the index back into yesterday’s range.

  • Markets added some more macro concerns yesterday, with Coronavirus headlines re-appearing and China imploding economically.

  • 4000 continues to be the monster strike level, guarding the gates of market hell.

A.F. Thornton

Navigator Oracle™ – Interim Update

S&P 500 Futures 15-Min RTH Chart with Key Support and Resistance Levels
S&P 500 Futures 15-Min RTH Chart with Key Support and Resistance Levels

And so it begins...

Barclays has announced the suspension, until further notice, of any additional sales from inventory and any additional issuances of iPath Pure Beta Crude Oil ETN (ticker OIL) and iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX)

According to a press release, the suspension is because “Barclays does not currently have sufficient issuance capacity to support further sales from inventory and any further issuances of the ETNs”

ETNs are exchange-traded senior debt notes usually linked to a benchmark index. They are similar to ETFs, except they hold debt rather than equities.

S&P 500 Futures 15-Min RTH Chart with Expected Move Levels
S&P 500 Futures 15-Min RTH Chart with Expected Move Levels

The major indices, including the S&P 500 index, were already in freefall but accelerated lower after the headlines hit.

The market is breaking the Covid Crash trendline at the moment, but it could be a stop run. We are at the Expected Move Low for the day and below our second major support level.

There might be a long trade on a pivot higher, but it feels like we would be fighting the algos. Market internals are 3:1 negative on both the NYSE and NASDAQ.

The day started on a positive note but failed on a test of the 5-day line. So let’s watch the wedge formation and go from there.

A.F. Thornton

Navigator Oracle ™ – 3/13/2022

This is a weekly chart of the S&P 500 futures June continuous contract with the Navigator Algorithm Dashboard showing the three sell alerts going into the January 4th peak. No sign of a bottom or buy signal yet in the weekly timeframe.
This is a weekly chart of the S&P 500 futures June continuous contract with the Navigator Algorithm Dashboard showing the three sell alerts going into the January 4th peak. No sign of a bottom or buy signal yet in the weekly timeframe.

Interim Issue Number 0975 - 03/13/2022

The Navigator Oracle™ is BluPrint Quantitative Strategies’ signature publication. The weekly forecast is available Monday mornings free and can be sent directly to your email if you register. Subscribers receive the Oracle on Sunday morning, along with essential updates during the week and live access to swing trading signals initiated by the BluPrint Founders Group.

Do You Embrace Change?

We had some technical issues tonight, and I have been awake until 2:30 am trying to fix the problems. I usually get up at 3:00 am – so the forecast will come out this afternoon and I won’t be publishing key levels this morning.

The key to the week ahead is to get through the Fed meeting and rate increase announcement on Wednesday, then monthly options expiration on Friday. I do not anticipate taking any significant positions before these events unless the price action dictates otherwise.

As we wade through these events with seriously negative investor sentiment, we are looking for a swing low to grip near the recent 2/24 and 3/8 lows, if not a temporary spike low below them to run all the stops.

Note the falling wedge pattern outlined in the chart above. The pattern can also help guide us through the next few sessions.

Even with a relief rally, this baby bear has the potential to grow into a mama bear before this unfortunate era is behind us.

At the moment, there is strong support at 4200 and strong resistance between 4300 and 4400, at least until monthly options expire around those strikes on Friday.

Please make no mistake; we are in a severe and unfolding crisis as the world divides between the fiat currency (worthless money) powers and commodity-rich countries such as Russia and China.

I believe that the U.S. dollar is finished as the reserve currency, as is our global leadership position. We are being challenged in every corridor because we have a fat, weak, and feckless government, and plenty of blame precedes Sleepy Joe.

Our “cancel culture’ politicians made a severe error in weaponizing the dollar and our Federal Reserve against Russia. No legitimate government will trust us any longer with their reserves, and they will flee our sphere of influence just as fast as conservatives are fleeing Twitter.

Nothing the Fed can do will stop the inflation unleashed in this crisis. We are shifting from a Western-dominated or financialized monetary world to an eastern-dominated or commoditized one.

When you see those unbelievable price spikes on oil, wheat, nickel, etc., don’t forget that some firm is on the wrong side of every one of those trades. Hedge funds and banks are losing billions and are sinking. It takes about a week for bodies to float to the surface.

Inflation is written all over this for us. This crisis is not like anything we have seen since President Nixon took the U.S. dollar off gold in 1971, ending the last era of commodity-based money.

Fiat currencies and the global powers that embrace them always end on the trash heap of history. We are now witnessing our potential demise in real-time.

Washington takes this so seriously they purposefully passed another $3.5 trillion in deficit spending in the middle of the night. It gets the government through another six months. Recall that we were all either asleep or distracted by the war when they passed the bill.

The majority of our political leadership class is corrupt, skimming off the top for themselves and their families. They will be our undoing,

Oh, did I forget to say Good Morning?

A.F. Thornton

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