2022 | Archimedes Methodologies

Founder's Trading Journal

Founder’s Morning Notes – 03/04/2022

Mar 4, 2022 AF Thornton 0 Comment

I still lie awake at night, wondering how we get through this. Our Country is in debt up to its ears. The average person faces accelerating inflation, which likely worsens before it gets better. The typical family is one paycheck away from disaster. Our Country is in debt up to its ears and lacks leadership. Our national dialogue has deteriorated to nonsense.
In a sense, I believe that a “Fourth Turning” is like a purge, where the natural cycle corrects in the fourth generation.
As I came from a considerable wealth, my mother used to remind me about a similar phenomenon with families “Shirtsleeves to Shirtsleeves in Three Generations.” In Ireland (she is Irish), they call it “Clogs to Clogs in Three Generations.” My father was the third generation, and he personified the principle.
In this time, society will return to its root values and principles. There will be no other choice, or we will all be speaking Russian and Mandarin.
Hard times will expose the corruption of our elites – which is out of control.
And my mainstay – why do we tolerate Mexican Drug Cartels on our now “open” borders? There are so many outrageous things Americans accept as normal. It is a form of conditioning.
Yesterday’s look above and fail is now complete as the S&P 500 futures tagged the bottom of the balance range overnight as Russia attempted to capture the largest nuclear power plant in Ukraine, one of the ten largest in the world.
The Russians successfully captured the plant, which controls 25% of Ukraine’s electric power.
When Consumer Confidence had turned this low in the past, a recession soon followed without exception. The yield curve has flattened but is not inverted yet. An inverted yield curve (where short-term rates exceed long-term rates) would confirm the scenario.
All in all, Chairman Powell’s two days of testimony before Congress reassured the markets. Though he favors raising rates one-quarter of a point at the mid-March meeting, he says the Fed will be flexible and respond to the data. That is about all anyone could ask for in the circumstances.
Of course, that is what the Fed has been doing for the last few years. How is that working for us?
The January Employment figures exceeded expectations this morning, but I have not delved into the numbers to see how much they are fudged. The market is seeing a bounce on the number at this writing. Average earnings were up 5% over the past year. That sounds great until you realize that the stated inflation rate was 8% and the real rate like was higher.

Yesterday’s look above and fail completed in Globex, as the price almost tagged the lower balance boundary. We are back below the 5-day line and the Volatility Trigger which is bearish.
Price remains inside the balance area, so keep Balance Rules handy if we approach the lower edge around 4275. I expect 4275 to 4300 to be strong support today.
Resistance should be encountered at 4350 and then at 4400. 4400 is formidable – any sustained break of 4400 should be considered bullish.
The WEM Low sits at 4275. Since weekly expiration occurs at today’s close, expect dealers to defend the WEM Low vigorously.

The VIX (Volatility Index) term structure remains in contango suggesting short-dated puts remain in high demand. Traders may step up to sell puts that expire this afternoon as I doubt traders will want to enter the weekend short volatility.
Selling puts this afternoon could bring us a short-covering rally at the end of the day, but it is likely to be reversed Monday.
The bottom line is I anticipate 4400-4500 to remain as stiff resistance into the mid-month Fed meeting.
Because of the significant negative gamma and high implied volatility, the downside remains vulnerable to sharp “steps” lower, with 4275 & 4180 showing as key stops. 4000-4100 should be the ultimate lower bound into that March 16-18th time frame.
Overnight inventory is net short, and we are slated to Gap down, so there could be a bounce at the open from overnight profit-taking. Since the Gap is a True Gap, apply Gap Rules this morning. The extent of the Gap-fill is your first sentiment indicator.
Gauge the strength or weakness of the market by the tone and amount of any gap-fill. If the market has zero corrective activity early, that is the most bearish outcome.
If the market does fall to the WEM low, around 4275, it won’t be easy to trade. Due to options expiring and related distortions, I don’t usually trade on Fridays.

A.F. Thornton

Founder's Trading Journal

Founder’s Afternoon Notes – 3-3-2022

Mar 3, 2022 AF Thornton 0 Comment

Global tensions continue to ratchet higher. The situation is almost beyond comprehension.
Chaos and instability are what we get when an administration selects the people in charge for their wokeness or tribe rather than their abilities.
I call the Russia/Ukraine conflict the Green New Deal war – because the Green New Deal facilitated it and may ultimately lead to our demise.
I call this the “Affirmative Action” administration. I don’t like my surgeon or airline pilot selected for anything other than their abilities, nor do I like the people in charge of my country selected or assigned for their wokeness.
If it is difficult to believe that we have unqualified people in charge, look at where we find ourselves after barely one year. Case closed.

The market is every bit as concerned as the rest of us. We got the look above and fail per Balance Rules this morning. The resistance line at 4400, also the balance area high and the 21-day line and mean, was the immovable object.
The S&P 500’s turn at $4,400.00 also resulted from a rise in call open interest above current prices which we pointed out this morning likely represented short positions.

The market rolled over to the 5-day line on the failed breakout, which saved the market from a complete trip to the other end of the balance range at 4275.
Globex’s action is unpleasant thus far, given that the Russians are attacking one of the ten largest nuclear power plants in the world located in Ukraine.
At best, there might be a rising wedge on the hourly chart with another leg up to go.

It is nothing short of astounding that the S&P 500 Index remains in about a 10% correction given the lofty valuation levels and the entire scenario unfolding.
I am still on the fence about whether the market is consolidating to work a bit higher or whether we are waiting for a waterfall, panic-puke.
As the days wear on, the puke scenario is looking more tenable.
There is increased potential for instability so long as participants maintain S&P 500 Index prices below the Volatility Trigger – forming the middle of the price action at 4380 today.
Given the negative gamma, heightened volatility remains, as does the potential for larger ranges; the negative gamma component can amplify the negative (or positive effects) of news. We need to exercise caution.
So what do we do? It doesn’t pay to bet on the end of the world because even if we are right, how do we collect!
Maybe the risk of a rally is greater than the risk of a puke?
- AAII Sentiment Survey: Retail Bullish Percent down to 23.40 last week – historically found near lows.
- CNN Fear & Greed Index: 17 = Fear Approaching 2020 Covid Lows.
- National Association of Active Investment Managers: Equity exposure at just 44.41% found near bounces and bottoms.
- 10 Day Moving Average Equity Put/Call Ratio at .625 (the highest level since 2020).
- The time to buy insurance (puts) is BEFORE the fire!
Let’s continue to take it one day at a time. We are back to 100% cash after our last profitable trade hit stops this morning. It helps me sleep better.

A.F. Thornton

Navigator™ Signals for Swing Traders

Sell Stops Hit

Mar 3, 2022 AF Thornton 0 Comment

Our sell stops triggered a nice profit at 436.50 on what looks like a look above and fail per Balance Rules. Trick and company tried a fake-out at the open, but the markets have been in a non-stop Gamma sell spiral since.

I am out for a few hours but will keep checking in for more opportunities. If we have to return to the bottom of the range, it is 4275. More negatively, the failure of this rally to follow through above the daily mean is a bad omen.

As always, I will keep an open mind. Even with fear indicators at correction highs, they are not at panic levels, which may be what is required to take us any higher.

A.F. Thornton

Founder's Trading Journal

Founder’s Morning Notes – 3/03/2022

Mar 3, 2022 AF Thornton 0 Comment

In the middle of the night, it occurred to me that if Putin had been planning to invade Ukraine since 2014, he knew there would be sanctions by the West.
That is why he has worked hard to keep Russia independent of the U.S. Dollar. He has been stockpiling gold for years. He holds no U.S. Government notes or bonds.
The latest figures show Russia’s debt is only 17% of GDP.
If the invasion was well-planned and Putin anticipated sanctions, wouldn’t he also want to have people stationed in the U.S. who could help retaliate?
I start thinking about the estimated 2 million unchecked illegals who have crossed our open borders in the last year and never got caught. That means illegals equating to the size of a city like Phoenix are circulating all over our country. The ones caught so far represent more than 150 countries, including Russia. What about the ones who didn’t get caught? We think that the illegals are all from Mexico. Not True.
By the way, could someone explain to me why we tolerate the Mexican Drug Cartels? These elites think we can take on Russia, but not the Drug Cartels? Things that make you go hmmm?
So add open borders to the existing national security risks related to energy and food.
Be keenly aware of your surroundings.
Why do the same names keep showing up? Putin and Justin Trudeau were both disciples of Klaus Schwab as young men (Schwab is the Davos Master of the Great Resent). Soros, Clintons, and Bidens in Ukraine. Russia collusion narrative. Bill Gates? More things that make you go hmmm.
Is it just me, or does Klaus Schwab look like Dr. Evil? Goldfinger?

My family, friends, partners, even all of you thought I was crazy talking about the “Great Reset” these past few years.
It is a good time to rewatch the World Economic Forum (the Davos Crowd) video from November 2020:

Truly you cannot make this stuff up!

Futures were quiet overnight. It was a tight, balanced range giving us little guidance for the open. Let the market settle in a bit before you pounce.
4400 and 4420 are resistant, with 4380 (the Volatility Trigger) as the key pivot area and support at 4330.
Fed Chairman Powell testifies in front of the Senate committee at 10 AM EST – should be a non-event and a repeat of his House testimony yesterday.
Monetary policy remains an important driver of uncertainty in markets.
Powell gave traders more clarity yesterday on March rate adjustments, which lifted equity markets.
Yesterday, the market pushed higher into the large, 4400 strike, where the bulk of call volume traded. There was a slight increase in call interest in the 4400-4500 range.
A lot of this call volume likely was sold short. Material long call positions don’t make much sense given the high carrying costs (decay until FOMC due to high implied volatility and time).
From an options perspective, the 4400-4500 area is resistant. The VIX at 30 suggests traders are looking for 1.8% daily S&P 500 moves.
As we anticipate “not much” coming from today’s Fed testimony, implied volatility may shift lower in the short term. The volatility compression gives some edge to markets holding up (due to Vanna flows) in this general price range (4350-4420).
On a larger time frame, we continue to believe that the possible price distribution remains skewed lower into the critical March 16-18 (FOMC, OPEX) time frame. Models suggest significant upside resistance near 4500 (+2.5% from current levels).
Due to the negative gamma framework, something as simple as a negative headline could spark a quick slide down under 4100 (-6% from current levels).
Balance Rules are in play this morning. If the market looks above 4400 and then fails to find acceptance, chances are we will go back to the bottom of the range down at 4275 near the WEM Low.
If there is acceptance, you double the range for the target high.
The range is 125 points, so the target is 4525, but…
The price has to get through the daily mean (21-day line), 200-day line, weekly mean (21-week line), the primary downtrend line, and the Weekly Expected Move high. If the price conquers all of that, it takes the market to 4486.
How the market handles this resistance ladder will tell us a lot in the short term.
Of course, the market may chicken out and return to the other end of the balance area. Who could blame it?
Let’s move our stop to 436.50 for both Navigator Swing Strategies. That locks in a profit but gives trick and company some room to try to fool us on a breakout.
The market just made a big move on the weekly jobs report, so there could be a slight Gap, and you may need to apply Gap rules.
The overnight low is a 45-degree angle low at 4367.50, which generally results in the low being secure.
Yesterday, the Value Area cleared the previous day’s Value Area with no overlap, supporting acceptance of the higher prices.

Stay nimble!

A.F. Thornton

Founder's Trading Journal

Founder’s Afternoon Notes – 3/2/2022

Mar 2, 2022 AF Thornton 0 Comment

My dominant thought tonight is where is this war headed? Who wants it? Who wins and loses? How will it affect the markets? Is my bunker stocked and ready?
My head has to be in the sand not to realize that Russia invading Ukraine challenges the current global order. Nothing will be the same – the Fourth Turning. First, a Pandemic. Now, war? How soon will the grid go down in a cyberattack? Will we be ready?
The sanctions will have unintended consequences. The U.S. Dollar could be over as the Global Reserve Currency when it is used as a weapon.
China and Mexico nixed any Russian sanctions. I get China, they will go after Taiwan. But Mexico? What gives?
Up until a few days ago, we were fighting over Covid mandates. Actually, we were ready to kill each other over them. Parents were designated domestic terrorists by the Biden regime. Canada was implementing Marshall law, jailing protesters, and seizing assets. Pelosi ordered the Capital fenced again in D.C. as an American trucker convoy was on its way.
What do the Truckers think now? When they left a few days ago – mandates were a fight to the finish. The truckers haven’t even reached their destination and “poof” the mandates are gone. No masks, no mandatory shots, no vaccine passports, and no explanation. Things that make you go hmmm?
I hope all that took the vaccine survive. I pray for them. The vaccines are the worst crime against humanity of my lifetime.
No worries, look over here, not over there. Is World War III the new Covid? What new “emergency” powers await us. Will there even be an election in November?
Big tech is already censoring any views on the Russia – Ukraine conflict that counter the official Biden regime narrative. Was Covid the dress rehearsal for the new censorship and authoritarianism?
We are fighting for Democracy in Ukraine? How about here?
And then there was the State of the Union speech…
Joe stole a line from Trump – Buy American!
Why don’t we start with oil, Joe?

And wheat?

The hell with the stock market, I am running the algos on Wheat and Oil – may need a few adjustments.
By the way, does our dependence on foreign food and oil threaten our national security?
Did you take your medication today, Joe? I know I am going to need a lot of medication to get through this. Did you know that 20% of the U.S. Population takes anti-depressants? That is double the rate from 10-years ago. If you can’t beat them…
Speaker Pelosi’s happy dance when Biden mentioned the burn pits in Ukraine says it all. Truly, you cannot make this stuff up. Hopefully, her Geriatric Doctor saw the clip and adjusted her medication.

Maybe the fringe right is correct – are they all Satan worshippers? Happy dance on the mention of Ukraine burn pits? It is not inconceivable. After all, every other conspiracy theory of the last 20 years has come true.
Maybe I need to see my Geriatric Doctor…
It made me wonder how they choreographed the whole production from a nursing home anyway.
Once again, I have to ask where is all of this headed? Are these creepy people really in charge of our safety? Our future? I am terrified.

The S&P 500 is finishing its fourth day of a trading range, principally bounded by the Weekly Expected Move on the lower boundary, and the 21-day line on the upper boundary.
Whichever way it breaks, double the range for your targets. Breakouts are tough because there are so many fake-outs. Keep Balance Rules in mind.
Did you know that every candle or bar is a trading range? Once you learn that, it is a game-changer. The open, high, low, and close on each bar gives you an immediate sentiment picture of the market in any time frame.
That is why I plot last month, last week, yesterday, and the overnight high and low on my charts. I also plot the opening of each new time frame.
The open tells me when the monthly, weekly, daily, or overnight bar turns red or green (bull or bear).
These levels become inflection points; support or resistance as each price level is encountered or overtaken.
For example, traders will first take the market towards the overnight high or low and test it on any given day.
Let’s say the market tests and pierces up and through the overnight high. Then traders will test yesterday’s high. Other resistance levels may be relevant in between as we saw today. Traders will keep going until they get a reversal or the market stalls at one of the levels.
All of this works the same in reverse.
Pay attention to the levels I discuss in the notes each morning. They work.

Using the chart immediately above, here are the conquered levels today:

1. The 5-day line, also the Navigator Algo trigger,
2. The overnight high and secondary downtrend line,
3. The first resistance level from the morning outlook, also the monthly open that determines whether March will be a bull or bear bar,
4. Today’s implied high,
5. The second resistance level from the morning outlook, also the Volatility Trigger, and
6. The previous week and yesterday’s high, also an important gamma level where the market stalled.
Today saw a lot of short-covering, so we did not see the market stall too much until #6. That is where I had identified the rising wedge. But note the hesitation at each level.
So that is how it works, point to point until it stalls or reverses. Clusters of key levels provide more support or resistance.
Of course, a vital trading principle is that conquered resistance becomes support and vice versa.
So our toe is back in the water on both the Leveraged and Non-Leveraged swing strategies. We have good positioning and set the stops. The stops are slightly below today’s halfback, but I might move them up if we get a look above and fail per Balance Rules.
We will be applying Balance Rules in the morning – depending on the overnight action.
I don’t like to repeat myself, so read all the notes today for strategy and buy/sell details.
There is no material change from Sunday’s outlook. We have overtaken both the 5-day line and the Algo Trigger, net positives. The 2/24 low still looks secure.
But the reality is that we moved from the bottom to the top of the four-day range. My best judgment is that the range is a consolidation to go higher and challenge the primary downtrend line.
Still, the market is holding up impressively under a lot of bad news.

A.F. Thornton

Navigator™ Signals for Swing Traders

Adjustment – Leveraged Accounts

Mar 2, 2022 AF Thornton 0 Comment

The Founder’s Group just exited the Emini Futures for Leveraged Accounts at 4382.50 and will replace it with a 100% position in the SPY. The swap deleverages the strategy for the rest of the day, locks in short-term profits, and keeps the market strategy. We will keep stops just below the SPY halfback at 434.25.

We don’t like to hold futures overnight in these circumstances. When we have a quick 56 point gain having reached our second resistance target on the day, we take the profit but stay in the market (unleveraged) consistent with the larger picture unfolding.

The S&P 500 is right at this morning’s 2nd resistance level at 4380, the Volatility Trigger, and last week’s high. The climb has a slight wedge look to it, so we may get some selling before it can break through the resistance.

The easy gain is over. The market must now work through the resistance up to the 21-day line. But if the market manages to close above yesterday’s futures high at 4399, it would achieve both a daily pivot and a weekly pivot, closing above last week’s high at 4391.25.

Also, a break through the Volatility Trigger shifts dealer focus back to positive Gamma. Instead of making losses worse because the dealers have to sell futures, the Dealers will turn around to buying dips and selling rallies to neutralize portfolio deltas. The shift also will reduce volatility.

I would be even more encouraged if I see traders buying more call positions out on the spectrum and reducing the put positions congregating at 4000. Chairman Powell’s announcement that he will stick with a quarter-point raise at the next meeting should provide some certainty that will discourage short interest.

A.F. Thornton

Navigator™ Signals for Swing Traders

Move Stops Up

Mar 2, 2022 AF Thornton 0 Comment

SPY stops are now 434.50, Emini stops are now 4245.25.

Navigator™ Signals for Swing Traders

New Buy

Mar 2, 2022 AF Thornton 0 Comment

This morning, the Founders Group took a 50% long position at 433.25 on the SPY for Swing Trade Accounts. We used an S&P 500 Emini Futures at 4326.50 for leveraged accounts. Stops are set at 431.50 on the SPY and 4315 on the Futures.

We have Navigator Algorithm buy signals, the first of which came at 4267.50 on 2/25. As we would have been holding over the weekend in the middle of the Russia/Ukraine conflict, we waited for an entry on Monday. We took a position Monday, but we were stopped out just above break-even in yesterday’s volatility.

We now have a secondary buy signal this morning, and we will try once again. We will move our stops to break even as soon as possible.

The market is volatile and tricky and not for the faint of heart. From a psychological standpoint, the buys are among the most difficult of my career. That is why we affectionately call it the “puke point.” Stops are our saving grace.

A.F. Thornton

Founder's Trading Journal

Founder’s Morning Notes – 3/2/2022

Mar 2, 2022 AF Thornton 0 Comment

Good morning

We are now five trading days out from the 2/24 low at 4101.75. Five days is a typical retest pivot, and we are not near the low at this writing. Look for the next big move to begin soon.
Since the 2/24 low ostensibly and successfully retested the January low, a new, full retest is not necessary or probable. The price action likely is a consolidation to move higher.
With all the boxes checked for the 2/24 low to be secure, I am looking at recent price action as a normal retracement of the parabolic short-covering rally off the 2/24 low.
Fear indicators and short interest are so high that all we need is a match to light the shorts’ pants on fire.
Chairman Powell begins his congressional testimony at 10:00 am EST. Let’s see if he brought any matches.
Meanwhile, back in Ukraine, it is getting uglier, and so is the price of oil.

Just to show that our good Lord has a sense of humor, remember this from May 2020?

Some call it the Green New Deal war. The oil price dropped so low in May 2020 it distorts my chart scaling. It takes talent to go from -$10 to $111 in less than 18-months. Our enemies are getting rich while Americans get poor.
Stagflation anyone? 1st Quarter GDP Forecasts continue to be revised downward to and including zero, but rising oil prices ensure more inflation. Chairman Powell’s testimony today ought to be interesting.
Futures are up slightly to 4311.75, but well up from overnight lows of 4280. Little changed in the options landscape overnight.
The volatility estimate remains in line with that of the last several days: 1.17% max open/close move. Don’t forget to mark your open and calculate from it.
Resistance appears at 4350, then 4380. Support shows at 4310 and 4276.

Note that there is a cluster of support around 4275, including the WEM low. The support should hold. If it doesn’t, look out below.
Resistance is similarly strong at 4350.

Overnight trade is balanced again, and all of the price action looks like a consolidation of the recent gains before we move higher.
There is nothing in the overnight action to guide us for the open. Given Chairman Powell’s testimony at 10:00 AM EST, better opportunities will emerge later in the session for day traders.
Watch where value develops closely today. It’s been relatively unchanged for three sessions now.
The market continues to handle a lot of bad news well. I am surprised it is not lower. While volatile, the overall read is bullish from the 2/24 swing low.
The war between Russia and Ukraine is and will remain an unpredictable wild card. If it bothers you, this is a good time for an extended vacation from the markets. It bothers me and I am considering one. There will always be another train leaving the station.
If you want to participate, this is where you apply and hone your money management skills.

A.F. Thornton

Founder's Trading Journal

Founder’s Afternoon Notes

Mar 1, 2022 AF Thornton 0 Comment

I highlighted the important levels we set up in the Morning Notes in yellow. The market sold off all day until it pivoted from the lower boundary line late in the day.
There was buying into the last 15 minutes like yesterday, that is a net positive.
Note that price almost tagged the WEM low, and the dealers defended it.
My inner thoughts are focused around whether I am looking for a normal swing low or a crash. If it is the former, all the boxes are checked. If it is the latter, there is more to go.
As I look at the CNN Fear/Greed index, fear achieved 19 today, a level associated with the usual correction troughs. Yet it went even lower – down to 5 – in the March 2020 Covid-19 crash.

The analysis is similar in the VIX volatility index, sometimes called the “fear” index.
It is high enough for normal correction lows, but is not close to the March 2020 Covid-19 crash levels.

There is no easy way to resolve what kind of low we need to squeeze the shorts again. Maybe we will scale in for some longer swing trades. The volatile price action today flat stopped us out of yesterday’s swing trade.
We hear from Fed Chairman Powell tomorrow. I guess that he will say that the Fed will hike at least a quarter-point, and the rest will be data-driven. We won’t find out until mid-March. But it hangs over the market.
1st quarter GDP estimates are being cut all over Wall Street, and the consensus is now close to zero. Consumers have clammed up in the circumstances.
Anything and everything can still go wrong with the Russia-Ukraine situation.
So do we take signals here? Do we wait for a crash? Fear indicators exceeding current levels almost require a crash to drive them higher.
We are dealing with an unprecedented, global red line that Putin crossed. Likely, it will be Putin or the rest of us – and it might take a long time to find out who prevails.
So my dilemma is simple. Do I wait for a crash? Do I start scaling in for another short squeeze? You see the problem. It helps to share it.

Did I forget to say that I am not fond of Fourth Turnings? Tomorrow’s levels will come out in the Morning Notes.

A.F. Thornton

Archives 2022

Founder’s Morning Notes – 03/04/2022

Founder’s Afternoon Notes – 3-3-2022

Sell Stops Hit

Founder’s Morning Notes – 3/03/2022

Founder’s Afternoon Notes – 3/2/2022

Adjustment – Leveraged Accounts

Move Stops Up

New Buy

Founder’s Morning Notes – 3/2/2022

Founder’s Afternoon Notes

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