All posts by AF Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook – 7/12/2021

AF Thornton 0 Comment

The NASDAQ 100 is well ahead of the S&P 500 futures at this writing. For the S&P 500 futures, our main broad-market proxy, there was a new all-time high in the overnight session, just slightly above Friday’s regular session high.

Friday’s regular session left a large wake of single prints from the market’s opening drive which were tested briefly overnight. Continue to carry them forward into today’s narrative. The 4350 area is my bull/bear line in the sand today where a lot of recent, important levels congregate.

Assume that Friday’s reversal of the Thursday weakness is a short term long signal unless the Thursday low (4279.25) is taken out. Note that the selling on that day was not able to even test the rising 21-EMA on the daily. Buyers remain in firm control of the market and traders should continue to do what works until it doesn’t.

The balance of the overnight session range almost matches the Friday value area. This tells us little about how the open will play out. The better trades should develop later rather than earlier in the session. Favor the buy side as long as the prices are above the top of the single prints (4347) from Friday. Watch the NASDAQ 100 closely as it it the obvious leader in relative strength.

The S&P 500 11-bar bull micro channel ended this past week when Tuesday traded below Monday’s low. Bulls typically buy the first pullback in a bull micro-channel, which they did this past week.

There is a 5-day expanding triangle (broadening/megaphone pattern), but no downside reversal as yet. Traders continue to expect higher prices, but there is often a 5 to10-bar trading range after a buy climax, such as manifested  in the overthrow of the recent bull micro-channel.

Look at the April bull micro-channel and aftermath as an example. The bulls will continue to buy every one to three-day reversal down, betting that each reversal will fail and lead to a new high. That is, until it stops working.

A.F. Thornton

Navigator™ Signals for Swing Traders

View from the Top Down – 7/12/2021

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In this Weekly Series, We Examine the Market From a Big Picture, Swing Trading Perspective. We Use the S&P 500 Index as our Broad Market Proxy, and All References to the Market Refer to the S&P 500 Index Unless Otherwise Noted. The Market Remains the Most Significant Variable in Higher or Lower Stock Prices, Influencing 60% to 70% of Individual Stock Price Movement. The Decision to Be Long or Short Based on the General Market’s Direction is One of the Most Important Decisions Investors Will Undertake.

In a word, the biggest problem with the market here, and perhaps the only problem, is breadth. This latest rally is narrow, with the breadth (and even some strength measures) still not confirming the new highs.

This could result in the market rolling over into an overdue intermediate correction. Or, perhaps another rotation from tech into economically sensitive names can help the market broaden out. Your guess is as good as mine, but we know what to look for. Our entry last week into the broad financials group (XLF) is a bet that the market will broaden out, and rates will begin to rise a bit again.

July currently has delivered a small bull bar trading at all-time highs. As previously discussed in these pages, this is the 3rd push higher in a tight bull channel since the pandemic lows. The rally is now rising into a parabolic wedge buy climax, which often attracts profit takers.

July is the 6th consecutive monthly bull bar, which is extreme. The last time we had six consecutive bull bars was in 2011. This increases the chance that July will close below the open of the month. If there is a big bear bar closing near its low, it will increase the chance of two to three months of a sideways to down move.

However, because the rally has been in a tight bull channel, bulls will buy the eventual pullback, even if it is 20%. In this case, I am expecting about a 10% pullback to the 200-day moving average.

While there continue to be weaknesses under the hood of this market, the price action does not yet evidence that the market is ready to correct in a big way.

Last week’s bar was a small bull bar at a new high with a big tail below. The tail below indicates bulls bought the test of last week’s low, but the small body indicates a slight loss of momentum.

Besides the 4404 trading range measured move we have been discussing, the top of the trend channel around 4500 continues to be a magnet above.

Good luck this week. I will be traveling Wednesday, Thursday, and Friday, so there will be no updates after tomorrow until Monday, July 19, 2021.

A.F. Thornton

Navigator™ Signals for Day Traders Navigator™ Signals for Swing Traders

Mid-Day Outlook – Buy XLF Calls

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XLF (Financials ETF) Daily Candles

The action so far today is quite bullish, though the tempo is plodding along. We had a gap-and-go scenario per the gap rules. We have nearly 9 to 1 and 4 to 1 advancers versus decliners on the NYSE and NASDAQ, respectively. On the S&P 500, we have pegged at a net 350 advancers all morning. 

In addition to the strong internals mentioned above, tick distribution has been positive, along with cumulative ticks, and we see new, all-time highs at this writing.

The Founders Group just took a 10% position in the August 20th XLF 36 Calls. The chart is very constructive. Our initial stop will be a close below today’s low at 36.09. This is a swing trade, and we plan to hold the position for more than a day trade. For how long? We cannot say for sure, but we should ride the position to a new all-time high above 38.60.

Don’t go for broke. You can scale in. A close above the 21 EMA would justify adding to the position.

The next update will come over the weekend. Enjoy yours!

A.F. Thornton

Founder's Trading Journal

Pre-Market Outlook – 7/9/2021

AF Thornton 0 Comment

Flip the script! We are slated to gap open with overnight inventory that is net long, so gap rules are in play, but this time heading north. Opening at these levels is still within yesterday’s gap down. Could this possibly leave a bullish island reversal on the 5-minute RTH chart? That would be a positive for the bulls.

Moving north again, you have the overnight high at 4237, the top of the gap at 4748, and then the old resistance around 4350 or so with the all-time high at 4252.25. I am looking for a trading range as a potential outcome of this week’s break of the bull microchannel, so I am reticent to be long above the recent highs. But there is an equal chance that the bull channel is still up, just wider now. Again, all of that applies if the market continues on the northerly route.

However, with long overnight inventories, look for the gap to potentially fade back to yesterday’s RTH high at 4323.50 on any inventory adjustments after the open. Don’t forget the WWSHD trade if there is no fade. You can buy one tick above the first one-minute bar on the way back up if the fade is faint. 

If the market continues south, on the other hand, then you can look to yesterday’s VPOC around 4309 on down to the halfback at 4301 for support. In a very negative pinch, yesterday’s low at 4280.25 should also provide support. Reference to our collection of other key levels should help if the market ventures even further south – which is doubtful today. Though the market has been horribly inefficient lately, the WEM low at 4300 should hold the downside in place before weekly options expiration on the close.

As always, watch internals for cues. There has been a lot of good trading this week with the wide swings, but that is atypical. A sideways market is overdue on the intraday charts.

Good luck today. I don’t typically trade Fridays unless something jumps off the screen to tempt me.

A.F. Thornton 

Navigator™ Signals for Day Traders

Epilogue – 6/8/2021

AF Thornton 0 Comment

I did not trade the RTH session yesterday, as I was doing some sightseeing. In such cases, I hate to put points on the board looking in 20/20 hindsight. When I quote trades and points, it is because that is what I actually achieved trading that day. Looking left after a trading session and then saying “I would have done this or that.” Nothing is the same as being there and doing it when there is nothing to the right of your screen. So view the comments today with that in mind.

Yesterday saw a more serious liquidation break than recently experienced, and it helped repair some of the structures below us. The GAP was serious, but having opened so oversold and outside the Keltner Bands, more than likely I would have been looking to get long, at least for a scalp. What followed from the bottom was a weak bull trend with a soft rollover in the afternoon. The afternoon pattern was a broadening formation – which typically means that traders don’t know quite where to go next.

As I cautioned in the morning, it was not wise to get too bearish quite yet. We were transitioning from a bull microchannel, which normally morphs into a trading range or wider channel. So far, that seems to be the current case. Today (Friday) will tell us more. Also, the WEM low did do its job yesterday and contained the damage, so the worst may be over for the week.

There is another pattern you should watch for at turns, often presenting as mirror images of each other in the day session – but can appear in any time frame. Scrunching the last two RTH sessions, I have highlighted the pattern in gray on the chart below: 

I have seen this pattern a lot lately, so watch for it. The pattern often occurs at turns and can trip up traders who think the trend will continue in one direction before it reverses.

A.F. Thornton

Founder's Trading Journal

Pre-Epilogue – 6/8/2021

AF Thornton 0 Comment

Something is Amiss...

These are just some preliminary thoughts about today’s session. I will make the detailed trade illustrations later tonight. The only trade I did today was a short in the S&P 500 futures in Globex, as I was not in front of the screens during regular hours. Nevertheless, I can illustrate some trades I would have taken. Both Tuesday and Wednesday were good roadmaps for today.

We held at the Weekly Expected Move low after dipping below it. But we closed under the 5-day line and right on the Algo trigger, so not quite the full recovery we have experienced the last few sessions. But nothing terrible happened either.

My concern, however, is the rip-your-face-off rally in U.S. Treasuries – e.g., the TLT (ETF Treasury Sector Fund). The TLT has blown through its WEM high for four weeks in a row. The converse of the treasury rally is lower interest rates. Contrast the TLT gains with the breakdown in Homebuilders (XHB) and Transports (IYT) – both economically sensitive and down nearly 3% today. How does that make sense? Why are treasuries rallying so hard and economically sensitive sectors breaking down? Is this just rotation? I am not so sure. All of this points to economic weakness ahead, but why? I need to get to the bottom of this. 

Generally, treasuries and stocks don’t rally together for very long as they have these past few weeks. This is exactly what happened in January 2020 – right before Covid hit. Granted, the NASDAQ 100 and growth stocks have benefitted from the lower interest rates, which makes sense more than economically sensitive stocks breaking down. 

But why are the FAANGMAN+T stocks carrying the market again? Is this simply a reflection of lower interest rates, or Is this a reflection of the new China Virus variant concerns? Why is *President Biden sending people door to door to check on and encourage vaccinations?

I have never seen such an obsession with vaccinating people in my lifetime – especially when the U.S. survival rate for those that get the China Virus is 99.7%. Is this just a control thing? Is it political, some kind of power grab? Is there really a nanochip in the vaccine? Or, more likely, does the government know something about this manufactured bioweapon that they are not telling us – such as it will morph into something far worse than we expect? Did you see Warren Buffett’s warning about worse pandemics to come over the weekend?

The dislocation in the Reverse Repo market is equally concerning. There are too many unused (un-loaned) “bank deposits” in the system, choking the overnight Repo market. This is very complicated stuff – but concerning nonetheless.

I know these are random thoughts, but when things don’t make sense and two markets cannot be simultaneously correct, something is amiss. At these valuation levels, there is not much room for error in the stock market. 

If you have any thoughts, drop me an email at info@bluprinttrading.com.

Anyway, second-quarter earnings are just around the corner.

More later…

A.F. Thornton

Founder's Trading Journal

Mid-Day Outlook – 6/8/2021

AF Thornton 0 Comment
24-Hr S&P 500 Index Futures - Daily Candles

So far this looks like the same playbook as the last two sessions, just from a lower level. This time, however, we got the real liquidation break and we are cleaning up a lot of the mess underneath us. 

This could qualify as a test of the 3-month break-out, depending on how you draw it (see chart above). From all appearances, the WEM low and Algo trigger line are pulling us back up out of the hole, and there was support just above the 21-day line and last week’s low at 4277.

RTH S&P 500 Futures - 5-Min Candles

As has been the case mid-day lately, we are pushing the fib retracements to see how high we can get. The 5-day line, now significantly violated, could now be resistance which would also be the 50% retracement of the decline this morning. In my opinion, the easy money off the double-bottom has been made. But we will see what they can do with the afternoon drive.

The short-term bottom looks even more solid with the Globex data in place, so you had a great long this morning. I am not quite ready to go for a swing long as yet, but I will see how we close.

A.F. Thornton

Founder's Trading Journal

Pre-Market Outlook -6/8/2021

AF Thornton 0 Comment

Murphy’s law, I decided to venture out a bit today, so here I sit harborside at a Cafe in Sami, Kefolonia, Greece sipping a frosty Mythos. I am doing the outlook from my phone – so there are a few limitations.

Naturally, here comes the liquidation break I have been harping about for days. So there will be a true gap down at the open, and gap rules apply (bluprintquantitative.tempurl.host/glossary/gap). Inventory is net short so an initial gap fade is possible.

A potential cycle top looms, and this could finally be it. Absent that, a trading range or wider bull channel is the most likely outcome of the daily chart micro bull channel morphing on us – so don’t get too bearish too quick. It will not be unlike yesterday’s 5-min chart that morphed into a trading range, but now the same will happen on the daily time frame.

You know all your levels below here. Keep the daily 21 and 50 in mind as pivot points.

You will find the gap rules here. Remember that large gaps tend to stall and move sideways the rest of the day. Ideally, we will retest the breakout from the three-month trading range around 4250 or so. I will be tempted to do a swing trade there.

I am not trading today, but will still post the possible trades in the Epilogue later tonight. 

Be careful today, it has the potential to get wild. 

A.F. Thornton 

Navigator™ Signals for Day Traders

Epilogue – 7/7/2021

AF Thornton 0 Comment

Yesterday’s script tracked much like Tuesday. We reversed down from a new high at the open but then reversed back up from a parabolic wedge sell climax and waterfall decline that ended at the conjunction of Tuesday’s value area high, the longer-term bull trendline, 5-day EMA, and hourly mean (21 EMA).

We rallied back to the high but entered a trading range for the rest of the day. The trading range was predictable both as a break of the bull micro-channel from the morning and because the price was trying to jump the ’50 handle at 4350, which normally is a bit of a task. Because the day closed near its high and the reversal up was strong yesterday and today, traders will continue to expect at least slightly higher prices going forward.

But after yesterday’s pullback in an 11-day bar bull microchannel on the daily chart, the bulls are probably unwilling to buy aggressively without a week or two of sideways trading. In other words, traders expect higher prices, but not much higher over the next couple weeks.

Targets above continue to be the top of the bull channel on the daily chart, which is around 4,500, and a measured move up to 4,404 based on the 3-month trading range. The bears can get a reversal at any time, but bulls will continue to buy every 1- to 3-day pullback.

A.F. Thornton

Founder's Trading Journal

Mid-Day Update – 6/7/2021

AF Thornton 0 Comment

So far, all you had to do this morning is follow the Epilogue from yesterday. We had a textbook Breach and Retreat trade, weak internals, a test of the LT uptrend line, a test of yesterday’s VPOC, and a sell climax (almost tagging the ETH 5-day EMA and tagging the RTH 5-day line). 

The only question now is whether the market will get through and maintain the 50%, 62%, and 78% retracements, or roll over again. Draw your Fib retracements. We are testing the 21-period mean at the moment on the 5-minute. 

We may now have a trading range, which is the typical transition from a bull microchannel. Excellent trades again so far – 30 points per contract. 

My next update will come after the close, as I am wrapped up for the day and headed to a dinner. I will mark the trades I took, and the rest of the trades that I would have taken had I been here, after the close.

A.F. Thornton

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