All posts by AF Thornton

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

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

We are out on the S&P 500 Swing Trade at 4320 for a small profit. This morning, the market is increasingly hostile as oil hits $108 per barrel. As we approached the European close a few minutes ago, the market started breaking down – obviously due to the Europeans bailing. Risks are increasing across the board.

Watch the developing wedge pattern on the hourly chart. Wedges point to reversals.

• I remain nervous about the wildcard events in Europe. I am suspicious of the events, and I don’t trust our corrupt government and state department.
• Throughout history, war has always been the solution to troubled governments and their failed fiat currencies.
• Read the book “Generations” and the follow-up “Fourth Turning” to understand current events. These events are part of the 80-year cycle of history.
• By the way, unless I specifically say otherwise, when I reference “the market,” I am always talking about the S&P 500 Index.
• The numbers I specifically reference apply to the front-month continuous futures contract because I trade it. You can convert the levels to the cash index (SPX) or the ETF (SPY) with a bit of effort.
• Unless I specifically say otherwise, when I reference the word “stupid,” I am talking about the government – just kidding but wanted to see if you were still awake.

• I cannot believe that it is already March. When I look at the February candle, we finished in the upper third of the range. It is a red candle because the candle closed lower than the open. It could have been worse – I view it as neutral for now.
• There are not too many sequences of red candles on the monthly chart. Two is usual, three is rare.
• The concern here is context – we are moving off the multi-timeframe channel top at the 100-year highway intersection. It is what it is – but you don’t have to be creative to expect more downside.
• Be sure to carry the February high and low on your charts, as every monthly bar is a breakout range. Mark the March regular session open today and carry it forward as well. The open will define whether the March candle is red or green. The open will be an inflection point throughout the month.
• The middle of the bull market channel is 3500. It seems inconceivable that the March candle would carry us down that far, but there were candles capable of doing so in 2020 and 2018. We are moving into a Fed tightening cycle like 2018, and World War III might be a Covid moment like 2020.
• Always consider a trading range moving sideways into the mid (or heaven forbid) lower channel support.
• On that note, I marked what appears to be a 7-month trading range on the monthly chart that started back in August. Keep your eye on this. We briefly tagged the monthly mean last Thursday – sitting at about 4100. The best fit range is about 550 points – between 4250 and 4800. In a breakdown, the measured move is double the range – about 3700. This 3500 to 3700 range continues to emerge as important. But the market would have to get through all the option strikes congregating at 4000.
• Let’s use a breakeven stop on our swing trade entry at 4315 yesterday. We already tagged 4400 overnight, which was my original target, but we have backed down from the level. Hopefully, we get back there in the regular session today.
• Futures rejected from 4400 overnight and dropped down sharply to 4342. I expect moderate volatility again today, with an estimated 1.19% open/close move. Overhead resistance remains at 4380 and 4400. Support lies at 4300, then 4279.

• Early trade is hard to call with overnight inventory balanced. Better opportunities will emerge later in the session for day traders.   
• Traders should always “do what works until it doesn’t”. 
• I will continue to assume that sellers are weak and be looking for pullback buys given confirming context. 
• That being said, yesterday’s poor low at 4310 is a carry forward. We’ve already satisfied the first move away from it, so it is now a short trigger on a retest. 
• Remember that this doesn’t have to happen today; traders should carry the level forward for as long as it remains untested. 

Good luck today. Fund flows favor the first few days of the month. Stay alert for a sell signal on yesterday’s swing trade.

A.F. Thornton