January 2023 | Archimedes Methodologies

Founder's Trading Journal

A Fat, Happy Fed, and Sell Signal

Jan 31, 2023 AF Thornton 0 Comment

Destination - 3950

Good Morning:

This a quick reminder that I will be in the Trading Room today calling out plays to teach how the market algos are reacting to price and how we can follow them, or at least stay out of their way. I will join the room at 10:00 am EST after the Conference Board reports Consumer Confidence for December. I don’t want an open trade during the announcement.
I am not expecting a lot of activity in the room today as the market will likely quiet down into the Fed announcement tomorrow. It should be a good day for teaching and learning.
The Navigator Swing Strategy sell signal painted as anticipated yesterday. The sell signal formally triggered at 4056 on the S&P 500 futures index.
But it is not surprising to see some profit-taking before tomorrow’s Fed rate increase and statements. A selloff of a couple of days is always in the cards and tolerable. What triggered the sell signal is the recognition of various cycles in their topping zone, with the possibility of an intermediate decline ahead lasting several weeks. Also, fear indicators have moved into the bullish zone, which is bearish.
The pre-market (S&P 500) would have gapped down again this morning with another True Gap. I would have advised to tee up Gap Rules, but the market had a positive reaction thus far to employment costs reported slightly lower than expectations. So monitor for whether the gap manifests and apply the rules if necessary.
Support today is at 4010, then 3950. The 3950 level is extremely important as it marks the 200-day line and the highest volume node in the entire correction from the January 2022 peak. It is a high “energy” center and, therefore, a magnet. Resistance lies at 4110 and 4133.
If I were the Fed, I would be fat and happy. In case you haven’t noticed, the stock market has been rising since October, even though the Fed raised interest rates and continued to talk tough. So what has been the harm in normalizing rates?
The Fed also knows that the stock market could rocket to new highs if they transition to an accommodative or neutral stance. That likely is the last thing the Fed wants at this point. Accordingly, I expect the Fed to continue to “Curb our Enthusiasm” in tomorrow’s statement and press conference.
Still, the Fed Funds rate and their target rate are converging – in other words, “real” interest rates are finally shifting to positive. So a lot of the Fed’s work is done for now. They don’t need to move much beyond 5%, which can be accomplished in the next few meetings. In my view, the Fed and the Market are in sync.
The point is, no matter what you hear about the economic world coming to an end and absent a catalyst, don’t get overly bearish. What should happen now is a test of 3950 on the SPX cash index or about 395 on the SPY. How the market reacts at these levels will give us valuable information about our next move.

A successful test of the 3950 level also favors correlation to the 60-year master cycle rather than the 20-year or a cycle inversion. The pattern also reminds me of the turn from the 1973-74 lows in a similar inflationary environment (see chart immediately above).
Even if you are a bear, realize that the market can rise to 4200 and still be in a long-term bear market.

Other possibilities include a foldback to test the October low. Naturally, the market could also put in a new low. But these latter two possibilities belie the bullish behavior coming into this anticipated cycle turn.
We will take this anticipated turn day by day. Even this first sell-off was unusually hesitant, with many overlapping bars and a lot of institutional buying on the way down.
And while my correction forecast is more optimistic than I would have expected, negative catalysts loom, including global hostilities that could ignite at any moment.
As always, stay tuned.

A.F. Thornton

Founder's Trading Journal

To Be or Not To Be – A Bull or a Bear?

Jan 30, 2023 AF Thornton 0 Comment

Good Morning:

Our flagship market proxy, the S&P 500 Index, has performed impressively from the October low. More importantly, it correlates at 85% to the 60-year master cycle. The bullish behavior is a character change carried deep into most sectors, and the bears have their work cut out for them at this writing.
What the bears have on their side are several cycles entering their topping zone this week. As this coincides with another Fed Meeting and interest rate decision, the fuel for a decline is on the table. I do not doubt that the rhetoric from the upcoming meeting will continue to be hawkish. I expect the Fed will try to swat the market down, as they have done at their last few meetings.
In terms of the cycles, the nominal 20-week Hurst cycle should be topping, and momentum indicators signal it is.

The Kichen Cycle (above), very reliable but somewhat obscured by history, should be topping now and moving down into March.

Even our guiding light, the 60-Year Master Cycle (above), shows some pressure into March, and the 20-year cycle (think 2003) would be even more ominous.
This morning, the overnight futures market breached Friday’s low, terminating the one-time-framing from 1/26. This is a preliminary sell signal, as would violations of the 5-day line and Algo Trigger sitting around 3950.
The market also encounters quite a bit of resistance at the 4100 level. 4100 is the challenge for the bulls to overcome and close to many of the upside targets we identified at the recent lows.
Given that the market is only a few ticks short of the 80-day cycle and line segment targets, this is a perfect place for an “M” foldback/mirroring the left side of the first chart above on the right.
While the Navigator Algorithm is still in a buy signal from 1/20 (likely to turn into a sell signal today), the red down arrow on the first chart above marks where the Founder’s Group went back to cash.
The bottom line? I would be in cash into the Fed announcement Wednesday and be prepared to short if the sell signal formally manifests today. Without price action confirmation of the sell, we need to be ready to jump back on the bull train.
As set forth above and bull or bear aside, we have a unity of cyclical tailwinds for a short position, should it manifest.
As always, I keep an open mind and let the more objective price action dictate our moves. Don’t anticipate it with a premature trade; just be prepared to react to the signals that manifest.
I will be in the Trading Room this week Tuesday, Wednesday, and Thursday.
Tomorrow, I will be on the mic teaching how the machines interpret the price action and how we can use that information to our advantage in day trading.
In the meantime, Rome wasn’t built in a day. So for today, look for support at 3970 and 3925; resistance lies at 4100 and 4125.
At this writing, the market will Gap down at the open with a True Gap, so Gap Rules are on the table.

A.F. Thornton

Founder's Trading Journal

The Bulls Have the Ball, Where is Yogi Bear?

Jan 27, 2023 AF Thornton 0 Comment

Good Morning:

I harken back to our call that the market had bottomed on October 13th, when the crowd called for a crash. Now the crowd calls for a Recession.
And we discussed the Nominal Hurst 20-week cycle (red Xs on the chart above) – slated to trough again around February 10th. We also raised the possibility that this 20-week cycle could share a trough with the 18-month Hurst cycle. But perhaps the 18-month cycle shared the October 13th low instead?
The problem with long-term Hurst cycles like the 18-month is that the cycle can average between 16 and 20 months. This renders the cycle useless, so I prefer the 20-day and 20-week for swing and day trading purposes.
But here we sit, with stronger-than-expected growth as reported yesterday, though the headline GDP numbers were somewhat distorted/overstated by some non-defense airline orders.
We get the Personal Consumption Expenditures (PCE) report this morning, which the Fed considers a more accurate representation of inflation. It is still expected to be 5% – far from tame.
Then we head straight into the Fed meeting and rate announcement next week. Will they pivot? Only in Wall Street’s dreams!
And if it were a perfect world, we would see the next 20-week trough on February 10th, as indicated by the last red “X” in the chart above. These cycle troughs are rarely so perfectly timed – but the trough will appear again soon.
And If the 18-month Hurst cycle bottomed in October, the first 20-week dip will be a blip on the radar screen. That may be exactly what is unfolding.
Why should the Fed “pivot” into easy monetary policy now? They have been emphatic that they won’t. At best, they will slow the rate of increases as they get closer to 5%. And we cannot assume Wall Street is completely stupid (crooked, yes).
Yet, the character of the market has changed. And I see true, bullish behavior across the board – much more so than we have seen at previous peaks in the sequence over this past year. So what is up with all this bullish behavior?
The bears have to hope for a double top with the December peak – or they lose the game. At the same time, the bulls look to reach out to the green Xs and measured moves on the chart above – also a distinct possibility. And right now, the bulls have the ball.
But I believe the bull case goes beyond Fed interest rate hikes, which only a blind fool thinks will abate soon. Assuming it is solid, this market turnaround is more about earnings expectations than anything else. Fear of Missing Out (FOMO) is also a factor – as many hedge and other funds are sitting on a pile of cash.
Picture this theoretical conversation: “yes, Mr. Client, I lost a lot of your money last year, but I will make up for it this year by missing the recovery and rally.” Never underestimate FOMO – Wall Street is a business.
Of course, pundits have been expecting the worst Recession ever – a Depression by any other name. Earnings are expected to freefall in sympathy. The bears have a sound argument – with one of history’s biggest yield curve inversions. Still, the bears could be right, but early?
But analogous to what I said in October about the crash, my bottom line is, where is the Recession? What if the crowd has it wrong? And what if we have returned to “normal” rate levels – and earnings (especially in “real economy” stocks) will be ok?
Based on the price behavior alone, this 20-week cycle has been bullish compared to the others on the road down from the January 2022 peak. The wave will have a bullish, right translation even if we dive into the 20-week trough on October 10th.
And even the last 20-week cycle peaked in the middle, rejecting the left-translation, bearish wave structure.
We have been in the bear for more than a year – certainly in tune with an average bear timespan. And then there is the deficit spending, inflation, and war spending.
To be sure, we have a volatile week ahead. But my best judgment is that the bulls have the ball if they don’t fumble it. They will win the game if they can sustain prices above the 12/1/2022 high just above 4100.
We still have a dip on the table soon, and nobody can say how deep it will carve, but it would take a hell of a catalyst to take out the October 13th low.
As I have been counseling, the positive 60-year cycle has been correlating at 85% plus, and therein lies the wisdom of using multiple disciplines to predict the future. The market continues to follow it, and it points higher, with its own dip on the table, anticipated to come in higher than last October.
Though the Navigator Swing Strategy is still in a buy signal, the Founders Group is in cash as we navigate the next few sessions; we have substantial year-to-date gains, so we can afford to sit out and miss a rally if it ensues.
We want to deploy into the next 20-week cycle dip on the daily charts, as is anticipated to occur soon.

So my bottom line is this, (i) the stock market is still in the nosebleed seats by traditional measures, but the process to correct valuations finally started with this first bear decline from January 2022, (ii) as outlined in our 2022 forecast, the market may move sideways into its long-term, 100-year channel with a series of bear and bull legs forming a trading range similar to the market’s behavior in the 1966-1982 inflationary period, (iii) for now, the market may be finishing out the first bear leg, unless a catalyst arises to force the market to challenge the October 2022 low, and (iv) the market can tolerate a rally up to 4350 and still be in a bear market.

A.F. Thornton

Founder's Trading Journal

Drop and Pop, So What’s Next?

Jan 26, 2023 AF Thornton 0 Comment

Good Morning:

It has been a busy couple of days, as the market rolls into the next major data drops (GDP this morning and the PCE inflation report tomorrow). We also get some employment and durable goods data this morning.
I did not get a report out Tuesday morning in the midst of mysterious data issues on key NYSE stocks. In a rare instance, a lot of morning trades were busted on the exchange.
Like the grounding of all of our airplanes for a few hours last week (as has also now occurred in the Philippines and Canada), these incidents smack of cyber attacks and ransom, but the causes have been hidden from the public thus far.
Of course, the sudden rise in BitCoin might be the best indicator of what is actually going on, as ransom is often paid in cryptocurrency. Those using BitCoin as a “risk-on” indicator may find the coin’s rise problematic if ransom does turn out to be a temporary driver.
We get our first look at the 4th Quarter GDP pre-market today. The consensus number is +2.6%. I suppose if the number is lower, that would be perceived as good inflation news. If it is higher, perhaps that is good news that the economy is staving off the most anticipated Recession in history.
So the report is somewhat of a yawner to me. Nevertheless, we took the Navigator Swing Strategy back to cash at yesterday’s close, out of an abundance of caution and with early warning signs (divergences on the highs) of the market topping before the cycles turn into the February/March lows.
The most important report will be the PCE inflation report tomorrow morning. The Fed places a lot of weight on the report and they meet to set rates next week.
The market has fully recovered from two gaps in the last two sessions. In particular, yesterday’s gap down was nearly 2%, and the market recovered all of it by the end of the day. The recovery was impressive.
In my view, the market is trying to put in one more leg up before the cycles catch up. We don’t have a formal Navigator Swing sell signal yet.
Nevertheless, I am not willing to bet the farm on another leg. It was very unpleasant to hold yesterday as the price temporarily pierced our stop lines and triggers yesterday. So I was done with our latest position by the close.
We had established the latest swing position at 3939 by the end of the day. We were out at 4035 for a nice gain. And we can reenter if required after the next few reports.
Look for resistance today at 4075, then 4140. The leg target is now 4150, if it completes.
Support lies at 4020, then 3970.
I am always trying to forecast where the pain trade is at any moment. It would still seem that the pain trade is higher. And the contrarian view is that we don’t have a deep Recession, if we have a Recession at all.
I have already spoken about the fact that there are demographic issues that favor low unemployment, even in a slowdown.
And don’t discount how much the deficit and war spending can cushion the normal, cyclical forces at work. War is a lucrative business.

“The first panacea for a mismanaged nation is inflation of the currency, the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” Ernest Hemingway, Notes on the Next War”, Esquire, September 1935.

So if the market continues higher, and the anticipated cyclical dip comes in higher than the October low, you will know why. There is nothing new under the sun, right?
But there will be a day of reckoning, and the more we put it off the worse will be the reckoning.
I will be in the Trading Room for the first few hours this morning.
With all the mishmash of reports, it will be best to wait for the first hour to complete before taking positions.
At this writing (8:19 am EST), there will be a Gap Higher and Gap Rules are on the table.

A.F. Thornton

Founder's Trading Journal

Microsoft Giveth – Then Taketh Away…

Jan 25, 2023 AF Thornton 0 Comment

Good Morning:

It was all about Microsoft yesterday, trading higher because they beat expectations but lower after negative forward guidance.
This will be quick – as I am headed to the Trading Room this morning.
We will Gap down for the second morning in a row. Gap Rules are on the table. It won’t be lovely at the NYSE Open.
Closes below the 5-day line should trigger stops, as does taking out yesterday’s low.
Of course, this is a low-risk-to-stop entry point for the braver among us.
Major support lies at 3965, then 3930. Resistance is at 4040, then 4055.
I will update you after the close.

A.F. Thornton

Founder's Trading Journal

Should You Rent or Buy?

Jan 23, 2023 AF Thornton 0 Comment

Good Morning:

Happy Lunar New Year! We managed to get through monthly options expiration on Friday, and the market now has a chance to reset its direction for the Fed meeting in early February.
The market got a positive lift from short-covering by the DTE crowd going into the expiration. And it triggered another swing buy signal for the Navigator Swing Strategy at 3939.25.
Lately, we have been renting the index for a while, comfortably exiting when the swing indicators tell us to hit the bench. But is it time to “own” the index because a major low has been achieved? Unfortunately, caution is still warranted. We have talked about the pattern before. It starts with the next Fed meeting (and rate announcement) in early February.
Over the past three meetings, the Fed teased the investment community a few weeks ahead with mixed rhetoric about a pivot. A rally ensued, and the Fed took advantage of the upswing to aggressively raise rates again. The market heads lower on the disappointment. Will they do it again?
And therein lies the rub. The market wants to go up, and of that, I have little doubt. The 60-year master cycle (green dotted line) could give us a few more days, as suggested above – though it should be close to peaking. The Foldback (blue line) also means higher prices for a few days. A Foldback is where prices emulate the progression of the recent decline in a mirror image advance on the right side of the chart.
After the Blue and Green dotted lines peak, we get the markdown into February/March, where a cluster of cycles – Hurst and Gann – are slated to the bottom.
The question would be, how low can it go in the anticipated decline? Absent a catalyst, I don’t see it going past the October low. In fact, from recent behavior, I don’t see it even going that far. Current behavior across multiple asset classes has been bullish.
Note the bullish behavior of Dr. Copper.

Support lies at 3965-3970, which envelops the 200-day line (magenta). This is the fourth attempt to take the line. Note the reversal (higher) pattern projecting 4200 if the line is successfully conquered.

Resistance lies at 4088, then 4135 on the way to the target.
Remember, if 4000 is taken out, then 4050 and 4100 are the next major hurdles.
I will be in the Trading Room Tuesday-Friday this week.
Red Letter Reports this week are Durable Goods and 4th Quarter GDP on Thursday, then PCE Inflation, Personal Income, and Personal Spending on Friday.

A.F. Thornton

Founder's Trading Journal

Traveling Across a Great Country

Jan 20, 2023 AF Thornton 0 Comment

Good Morning:

We finally arrived in Upstate New York after driving from California this past week.
I accompanied my wife, who is here to help care for her ailing and widowed mother. We want to prepare for my mother-in-law to return home to Greece in a month or so. Depending on the conditions, we may head over there for a few months.
We worry about our home there and my mother-in-law, with all the craziness in Europe. With America’s leadership vacuum, every old conflict in the world is boiling up to the surface, including the longstanding conflict between Turkey and Greece. Turkey looks to be aligning with Russia and the BRICS nations – even though they are also a member of NATO.
As many of you know, my wife lost her father to the vaccine, just as I lost my mother to it last May. Their generation trusted the government – no matter how much we protested them getting the jab.
So you can imagine how we reacted to this clip from the CEO of Pfizer recorded from a closed-door meeting at the World Economic Forum yesterday. The CEO, Albert Bourla (also Greek), openly discussed the WEF goal from 2019 to cut the world population in half by 2023.
What would be a good analogy? The CEO of one of the largest pharmaceutical companies in the world is working on the WEF’s project to cut the world population in half. Maybe it is like putting the manufacturer of RoundUp (Glyphosate) in charge of organic vegetables and perhaps finding out that they own all the cancer centers and hospitals. If it weren’t true – nobody would believe it!
Pfizer and the WEF fell short of the 2023 goal. That is, unless the Vax kills slowly over time, which many experts argue. These are disgusting excuses for humans.
But it also reminds me of the opposite archetype – the good people of America who are slowly waking up to the coup.
We were driving through Painesville, Ohio (no pun intended). All of a sudden, the right rear tire started going flat.
We searched for a tire store and pulled off to Conrad’s Tire, about 3 miles off the Interstate. We encountered kind of a gruff, no-nonsense salesperson. Picture the type of guy who looks perpetually angry. Likely something negative had happened to him at one time, but he had probably worked at Conrad’s forever. I am sure he dutifully came to work every morning – come hell or high water. He was bottom-line busy but said he would work us in – likely an hour.
I had already seen the nail right in the flex zone of the passenger rear side radial tire. I had grown up in the tire business (among the many companies my father had ventured into), so I knew the prospects for the tire were dim.
And not to disappoint me, the initial prognosis was dire. And you don’t just replace one tire but two when radials are involved.
Whenever something goes wrong in our life, our inside joke is – there goes another $1,000. This would be no exception; when you have two different tires from different manufacturers on the front or back, one tire can stop faster than the other when you apply the brakes. So they come in pairs.
But there was an old-timer in the back who pulled the tire apart. He said he could fix it, and I believed him. He knew his tires.
And so, the old-timer repaired the tire, tested it thoroughly for a few hours, and brought the car around to send us on our way.
Mind you; we are driving an expensive Mercedes SUV with Wyoming license plates. It cost about the same as my parents’ house. Anything could happen now, right?
So the gruff salesman brought out the bill. Four hours had transpired after they pulled the tire, repaired it, and tested it to ensure it would hold.
The salesman then showed us the bill with the charges crossed out. There was no charge. I offered to tip the guys who worked on the car, but they wouldn’t have it. It was their gift to a couple of weary travelers.
That, my friends, is the United States of America. Never lose hope. Everyone we have encountered across this great country over the last week has woken up. They understand the coup; they are just unsure how to fight it – especially given the rampant cheating in elections.
And that brings us back to the markets. Cycles have “M” shapes. As such, we should see a bump higher on the nominal 40-day cycle before we dive into the nominal 20-week, 18-month cycle low.
Because of the longer length of the 18-month cycle – the low has a wide birth between early February and early March. We will hone in on the low as it develops.
David Hickson, one of the foremost experts on Hurst Cycles, lays out the arguments in the Video below:

Support today lies at 3860, then 3810. Look for resistance at 3930 and 3965.
As to the Gann Master Cycles, both the 60 and 20-year cycles call for a dip into February/March too. The 60-year cycle, considered more important than the 20-year, calls for a higher low than October. But the 20-year (think 2003), calls for a new low.
None of these cycles give us the exact low. We have other ways to determine that. But they do give us the zone and some structure to work with. We don’t run around blind to the prospects, nor do we have to react to the crap and manipulation from Wall Street.
To be sure, the market is still overvalued from traditional fundamentals (measures that have not worked since the 1970s). And we are still in the nosebleed seats.

But the deficit and defense spending, and War in general, may prop the market up awhile longer. Still, the next 18-month cycle low coincides with the deep and dastardly 54-month cycle, perhaps delaying the fireworks until 2024.
This reminds me that today is the two-year anniversary of the Orwell Regime stealing office.
I could never have believed that our country’s government could deteriorate so much so fast – when there was no good reason for it other than the cycles of time – the Fourth Turning.
Here is a recent update on the Fourth Turning from the surviving co-author – Neil Howe.

When I am in Greece and look at the ruins of one of history’s first democracies, I am reminded that governments come and go, but the people remain. But there is no excuse for the innocents who suffer along the way. More than 150,000 Ukrainian and 60,000 Russian troops have been lost, not to count the many civilians.
At least we knew what we were fighting for and against in World War II. My prayers are with all who suffer in this inexplicable war.

A.F. Thornton

Founder's Trading Journal

The Dream Strategy

Jan 19, 2023 AF Thornton 0 Comment

Good Morning:

They say that there is an “ether” or “net” that connects everything – hence the origin of the terms “Inter” and “Ether” net when Al Gore named his new invention.
He was on a roll then as they had just made the movie “Love Story” about his marriage to Tipper. I have been waiting for the sequel all these years, but apparently, Tipper is no longer on board with the project.
I thought of this yesterday, as Al Gore lost it over the Climate Scam at Davos’s World Economic Forum (“WEF”) meeting. Rumor has it that he was so upset that his Lear Jet spewed exhaust as it screeched tires up the runway on his way out.
The WEF convention of mostly communists continued unabated in Davos this week. There is a lot of focus on right speech and disinformation – as they are having a lot of trouble controlling the narrative. Think how much easier it must have been when there were only three television networks/channels, and the government owned the fourth (PBS).
The War in Ukraine is on their minds too. There were a lot of commission checks from the Defense Industry waiting for everyone as their FTX accounts had been closed. Russia has to be defeated – even though their subs are sitting off the U.S. East and West coast with supersonic Nukes that could take out New York and L.A. in three minutes. Maybe we should message Putin – a well-placed nuke in Davos might solve many problems. Perhaps that is why 5000 Swiss troops are guarding the conference.
But there are other panels in the WEF meeting too. You know – setting rules like you can only wash your jeans twice a week. There is a need for washing machines that can tattle on you if you break the rules. And there is a lot of talk about “indoor” air pollution this year. This way, they can get control of your thermostat too, and put in some “monitoring” devices inside your home to “help” you maintain clean air.
Did you know that a few day’s ago, the WEF tweeted out a little ad with a happy woman who said, and I quote, “I own nothing and have no privacy, but I have never been happier?” Truly, you cannot make this stuff up!
But my favorite proposal these days is their latest to eliminate gas stoves and furnaces. I can only postulate that the WEF wants to make everyone dependent on an electric grid that is already wholly inadequate for its current load. That should make us even less secure in an EMP or cyber attack that takes out the grid, right?
But the grid does have the convenience of a switch to shut you off if you are a bad boy or girl. It is not unlike the new digital money they are proposing, which can also be turned on and off if you speak out against the regime. It is all about control – and controlling every aspect of your life.
And worldwide, we see people taking to the streets to protest the WEF and more. Millions of people are protesting everywhere but here in the good ole USA. Truly our citizens are the proverbial frogs in boiling water. Rome burns while we all fiddle, and Nuclear War gets even closer as the West existentially threatens Russia’s existence. What would you do if you were Putin? It is a reasonable question.
Who would have thought that Russia would be defending faith, family, and freedom against the communist vision of the Davos-dominated West? But that is exactly what is happening.
And I lay all this crazy groundwork as the financial community had trouble explaining yesterday’s seemingly inexplicable reversal. Fed comments? Really?
And it should not be any stranger that I dreamed about yesterday’s reversal exactly how it unfolded the night before – down to the moment in front of the chart and selling the small runner we had left at the stop. Maybe I am finally getting ahead of this market in my morning meditations. That gives me access to the real ether no offense to Al and his invention).
As if this weren’t strange enough, Doc, when I had to be put in a coma during the summer of 2020 due to an allergic reaction, I found myself falling into colorful three-dimensional market charts where I could see behind them and around them. I could make out shapes like tetrahedrons, spheres, and cylindrical tunnels. It was as if there were other dimensions to the charts that we could not see on paper.
Time for a vacation…
The catalyst for yesterday’s decline is actually more subtle. Saudi Arabia announced the end of the Petrodollar.
Oil will no longer be priced and settled solely and exclusively in U.S. Dollars. Folks, this is a watershed event and directly threatens the supremacy of the U.S. Dollar in the global markets. That is your catalyst – and we had already anticipated a decline to start soon anyway.
This loss of Dollar hegemony will be catastrophic for the U.S. and its endless pursuit of debt and deficits. We the people will be the ones to suffer, as always. You think you have seen inflation? As the saying goes – “you ain’t seen nothing yet.”
And why wouldn’t the Saudis break the U.S. Dollar pact that has reined since the end of World War II? All this woke bullshit about oil and natural gas threatens their oil sales and exports. The Orwell Regime has been spitting in Saudi Arabia’s face since Orwell himself stole his way into office.
And China? They have to import everything, mostly oil. Wouldn’t it be logical for China to hook up with the Saudis and the Russians? Does anyone in the Orwell Regime or WEF have a brain?
The West’s war with Russia IS about energy and natural resources. But this time it is antithetical. In this case, Russia won’t bow to the Davos crowd and join the woke cabal requiring them to stop using and exporting fossil fuels.
Why would Russia clamp down on the use and export of oil and other natural resources? Natural resources and food are Russia’s main exports. So they have to be taken out – just like Trump supporters. Dissent is not permitted in the new, woke regime.
I suppose the difference is that Russia already had its bout with communism, and they want nothing of the kind for their future. The failed ideology did not work and will never work because it is antithetical to human nature and natural law.
Did you know that Russian schools are required by law to teach the horrors and failures of communism? It reminds me of what I was taught growing up before the teacher’s unions began imposing their communist teachings on the recent generations.
And so, here we are, apparently starting the decline into the February low we have been forecasting for months. No surprises for us. We know what to expect and when to expect it, so we tune in at the right time.
Not that we are perfect. Checking the math, I was a little off on the turn window. The original window started on the 12-13th. I did miscalculate – as it should have been the 15-16th. But the MLK holiday threw the date off a bit, and the 17th is close enough.
We look for the zone, then tune the Navigator Algorithms into the reversal window. And we dialed the strategy down to a small runner each time we approached the top of the bull channel.
Finally arriving at my destination after a couple of glitches, I will not be fully set up until tomorrow, so there is no Trading Room today. We will make up for it by running the room every day next week.
Let’s see where this sell-off takes us. I have no prediction yet, but the Elliott Wave traders argue that this is the draconian “3” wave down that we all like to avoid unless we are short.
Keep your head on in this insanity, and make sure your Plan “B” is out and ready. Gold is finally moving, so I hope you have taken my advice to keep acquiring small denomination coins over these past few years. You will be glad you did.
Watch the 50-handle levels for temporary support if the market gets into a waterfall decline. The October 13th low is a good first target if the downturn accelerates.
Sometimes it takes a few swipes in each direction before the market settles on a solid turn, so watch out for the whipsaws.

As always, stay tuned.

A.F. Thornton

Founder's Trading Journal

OVER UNDER FOR NOW

Jan 18, 2023 AF Thornton 0 Comment

Good Morning:

. Nothing has changed from yesterday’s discussion and key levels. But the market looks a bit tired and vulnerable.

. We came into this morning long a small runner – with our absolute stop a few ticks below the five-day line. We will see how it goes.

. Increasingly, the market will begin to focus on the early February Fed Meeting. The Fed is not excited about a higher stock market.

A.F. THORNTON

Founder's Trading Journal

Riding the Five to Stay Alive

Jan 17, 2023 AF Thornton 0 Comment

Good Morning:

S&P 500 EMini futures resistance today is at 4055 and then 4080. Support shows at the 200-day/5-day conjunction(3985), then 3970.
Our flagship S&P 500 Index closed out last week above the key 200-day line. The question is whether this is a head fake or sustainable move.
As the chart above shows, the Dow index (interchangeable with the S&P 500) is tracking the 60-year cycle roadmap thus far, but with a dip still scheduled for early February.
What has been working since the last buy signal has been to load up on the five-day stop line and lighten up at the top of the small pullback bull channel.
The behavior reflects algos accumulating on that line.
Another way to look at it is the market climbing the wall of worry.
Retail sales and wholesale inflation report this week, and we will continue to see Fed commentary going into the early February meeting.
I see a stock market that wants to move higher but a Fed that wants to keep a lid on it. Only time will tell who wins or loses – the market or the Fed.
The Navigator Swing Strategy remains in a Buy signal with an absolute stop a few ticks below the five-day line, though I doubt we would hold a full position to that level. We are more likely to continue what has been working as described above.
On an interesting side note, Bitcoin surged higher last week. Rumor has it that our airline system was attacked last week and held for ransom, which was the true cause for all planes to be grounded for the first time since 9/11. The U.S. had to pay ransom in Bitcoin to regain control of their systems – thus the buying surge.
Similar attacks recently occurred in the Philippines and Canada.
But don’t worry; we are all in safe hands with the Orwell Regime in charge!
I am still traveling to my nuclear-proof bunker in Antartica (just kidding) for the next few days, so the Trading Room will be open Thursday and Friday this week.

A.F. Thornton

Archives January 2023

A Fat, Happy Fed, and Sell Signal

Destination - 3950

To Be or Not To Be – A Bull or a Bear?

The Bulls Have the Ball, Where is Yogi Bear?

Drop and Pop, So What’s Next?

Microsoft Giveth – Then Taketh Away…

Should You Rent or Buy?

Traveling Across a Great Country

The Dream Strategy

OVER UNDER FOR NOW

Riding the Five to Stay Alive

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