Category Navigator™ Signals for Day Traders

Navigator™ Signals for Day Traders

Mid-Day Update – 7/19/2021

AF Thornton 0 Comment

The S&P 500 is unquestionably short-term oversold, with the CBOE put/call ratio spiking to levels associated with a short-term low. The CNN Fear/Greed Index dropped down as low as 18 this morning, again showing extreme fear. The S&P 500 futures found initial support at the 50-day line, with the NASDAQ 100 finding support at its 21-day line. The low is untested at this point, and does not look like a “V” bottom.

I am following the lines of demarcation (FLDs) on the cycles using the daily chart.  We have now broken the nominal 20 and 40-day FLD lines, in sort of a cascading effect indicating the distinct possibility that we finally have our 18-month cycle peak. The bounce so far this morning looks sloppy and choppy, so a retest might very well happen before we can be assured that a short-term low is in place. 

Below the 50-day line, we have a trendline connecting the May, June, and July lows. That sits just above 4200 and could provide some support on further weakness. Don’t forget that we have the 200-day line just below 4000, as another target for a 10% correction. Typically, it takes some zigs and zags to get that far, if it happens at all.

All of this is normal and I am not prepared to get too negative, beyond what we would expect for an 18-month cycle low. Instead, I will let the price unfold and tell me what to do next. I am going to sit out the rest of the day. I have not found a good trade in the day session yet, though I will continue to check in to look for a potential double bottom or similar turn.

Likely, the next move would be a rally in the S&P 500 index futures back up to test the 21-day line, which may now become resistance in an intermediate down trend. That would be a fabulous short, should it present.

Stay tuned,

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook – 7/19/2021

AF Thornton 0 Comment

Due to time constraints, this will be an abbreviated version which I will supplement later this morning. Make sure you have the CBOE put/call ratio up somewhere on your screens – as the shorts will run for cover at some point in a squeeze. The ratio is at the high end of the pandemic range. Also, review “View from the Top” published this morning.

This large gap will cause an increase in volatility which opens the door to higher volatility options trades. This same volatility also makes day trading more lucrative than usual as the setups are the same, but stocks travel further and faster.

Gap rules are in play, to put it mildly. Overnight inventory is close enough to 100% net short. We have lots of market profile levels around where we will open and just below. Focus on the prominent VPOC’s at 4256.25 and 4239 and the GAP top and bottom at 4251.25 and 4246.25. The overnight halfback could also be a key pivot point at 4292. Take all of the levels in order – looking for pivots, as well as acceptance above or below. Always remember that the market likes the ’50 point increments, so all the points congregating around 4250 could likely provide the initial support in this decline.

Focus also on bigger picture dynamics today. This overnight move has futures trading well below the 21-day line on the S&P 500 (4200) and to a lesser degree on the Nasdaq 100 (14545) as well. This is noteworthy for both futures. In the S&P 500, there is potential to trade to the 50 (about 4230), while in the NASDAQ 100, it’s quite a bit further away (currently at 14017). When volatility gets elevated, your focus should shift away from more nuanced/granular levels and more towards the larger signposts that everyone trades on the daily charts.

As with any large, true gap, the potential for an early fade is there. Early failure to take out the ONL can be a signal. Aggressive traders can also buy the high of the first one-minute bar or repurchase the cross through the open should the opening drive be lower. Monitor for continuation and target overnight halfback first. Be very familiar with gap rules #2 and #4.

Any continuation lower (trending day) obviously needs acceptance below the ONL first. Internals will be important to note. Downside follow-through is often accompanied by a lack of positive ticks for the better part of the first hour.

If I haven’t stressed it enough, don’t assume you need to catch anything early on these days. Large gaps are the hardest type of day to trade early, as all moves are against the backdrop of how much the market has already moved overnight. It’s hard to trend early on top of that.

Good luck today.

A.F. Thornton

Navigator™ Signals for Day Traders

Brief Comments – 7/16/2021

AF Thornton 0 Comment

There is nothing more fun than flight cancellations in Frankfurt, not to mention spending the night in an airport “hotel by the hour.” I used to think that hotels by the hour were sketchy, but that is a story for another day. One good thing, my wife loves the “Tiny Houses” show on HGTV. “Wouldn’t that little house simplify our life.” she says. “So cute.” After spending the night in a stuffy cubicle of a room, I think she is cured now.

Did I forget to mention that we now need new PCR tests while stuck in this airport? They are only good for 36 hours – and that expired yesterday. It takes 24-48 hours to get the results – unless you pay about 750 Euro (about $950) for a six-hour result. That is more than the plane tickets home.

They are turning away people with vaccines which is even more fun, as many do not have the proper paperwork or did not wait long enough after the vaccine to travel. Apparently, there is a waiting period after getting the vaccine before you are safe to travel and not pass the virus to others. Like what? I know; you get the vaccine, and now you are contagious? This is the craziest vaccine I have ever encountered.

But at least now I know how to say an “F” bomb in about seven different languages. I think I learned some other swear words too, but I will wait to look them up on Google translate before i accidentally share them. 

And, incidentally, I would never fly Lufthansa again. They do not know how to handle the problems they cause for their customers. It is the worst airline I have ever encountered, and I have flown a lot over the years.

Since the vaccine caused my father-in-law’s death, I am not jumping up and down to get mine if I ever get it. And with all of the above, to say I am looking forward to my nine trading screens and home is an understatement.

More importantly, nothing has changed in the markets, at least as far as our S&P 500 index market proxy goes. We have seen a small pullback to the trendline over the past few days. The put/call ratio spiked – meaning that the fear spiked as it does at lows, and I would have bought yesterday’s low had I been in front of my screens. The volume spiked similarly as it does at lows. As I have said, the bulls will keep buying these small pullbacks until it stops working.

Yesterday morning, we had a gap down per gap rules and then the expected short-covering rally on inventory adjustments from Globex. After traders established the 30-minute opening range, we went on to a breach and retreat trade, (also a downside breach of the recent multi-day balance range). So this was a short rather than a long trade to the measured move at double the range. As to the multi-day balance range, the move down qualified as a look below and fail per our balance rules, likely meaning we will head back up to the highs again.

The 30-min opening range trade is a good, reliable trade on most days. Even though this was a downside (as opposed to upside) breach, the analysis was the same. The market sold off and then reversed at the measured move (double the range), with a “V” reversal back up and into the close. All of this fluctuation still held the 5-day line on the Daily Chart, more or less, which is all we ask at this point.

I still expect the market to go up to the 4404 magnet we have been discussing, and perhaps eventually higher to 4500. Not that the market really cares what I expect. But that is about as far as I can stretch it. Of course, we are smack in the middle of the month, where we typically see pullbacks and weakness.

The XLF (Financial Sector ETF) has held its own as well. It delivered a positive return in an overall negative environment yesterday. The August calls remain a bet on slightly higher interest rates, driven by higher than expected inflation. So we will continue to hold this position. 

The concern would be the XLF getting caught up in a macro, intermediate correction long overdue. So just like the S&P 500 index itself, an XLF close below the 5-day line (with a little wiggle room) continues to be my stop threshold.

Also, if money gravitates to a risk-off preference, the accompanying treasury buys could keep a lid on rates and bank spreads. Banks need higher rates and spread to drive their earnings.

A.F. Thornton

Navigator™ Signals for Day Traders

Epilogue – 7/13/2021

AF Thornton 0 Comment

This will be my last update and commentary until Sunday, as I will be traveling for the next few days. 

Using a 5-minute RTH chart and just like Monday, our S&P 500 index market proxy started with a weak bull trend from the open on weak internals.  After some consecutive complex tops and four pushes, we saw a mid-day reversal down into the top of the single prints identified yesterday morning around 4362. The 21-day line shifted from support to resistance for the rest of the session.

We saw a long trade from a Navigator Algo trigger buy signal near the open and another on the breach and retreat from the 30-minute opening range. Like Monday, the target was double the range where the price then reversed. The reversal generated one good, clean short trade which ended in a final flag. The rest of the day was sloppy and choppy.

Our XLF trade made a nice turn on support at the 5-day EMA but could not make much further progress after lunch. Nevertheless, it held its ground in the wake of solid results reported by Chase and Bank of America. There is always some profit-taking on the earnings reports. The XLF is poised to take advantage of some more pressure on interest rates in the wake of the third upside surprise in the monthly inflation data.

As I have been counseling, the probabilities are that July will close below the open of the month since we have six consecutive monthly bull market candles on the chart. It is highly unusual to have that many uninterrupted, positive months.

The market is likely to evolve into a trading range, and Tuesday’s action underscored that narrative. We will continue to use a close below the 5-day line on the XLF as our stop line. The XLF is poised to do well, but there is a risk it could get caught up in a market correction if the broad market decides to take a tumble later this month.

We will dig deeper into all of this on Sunday.

A.F. Thornton

Navigator™ Signals for Day Traders

Pre-Market Outlook 7/13/2021

AF Thornton 0 Comment

Inflation came in hotter than expected for the third month in a row this morning, sending futures down a bit deeper into yesterday’s regular session range but nowhere near the low. Yesterday’s distribution made the same “p” pattern as the prior day. This is a minor data point to carry forward that tells us that there are still some shorts covering from the one-day selloff of last week. We now have two of these single print patterns back to back.

Even with the CPI shakeup, overnight inventory is relatively balanced and only slightly net short. Futures are also trading close to overnight halfback at the moment, which tells us little about how the open will play out. NASDAQ 100 futures showed relative strength before the economic data but have now fallen more in line with the S&P 500.

The better trades should develop later rather than earlier in the session. I will favor the buy-side only if prices are above the top of the single prints at 4344.25 from yesterday.

Trading into the single prints has the potential for long liquidation. Carry forward that the overnight high could not make a new all-time high which increases the odds that there are some longs with poor location near yesterday’s regular session high. Think in terms of old business versus new business. Old business will always be transacted first.

A.F. Thornton

Navigator™ Signals for Day Traders

Epilogue 7/12/2021

AF Thornton 0 Comment

Yesterday, our S&P 500 index market proxy started with a weak bull trend from the open on weak internals. The initial, bull microchannel price action ended on a parabolic wedge that stalled at double the 30-min range, and eventually broke to a new, all-time high in the afternoon drive from an ascending triangle consolidation. 

There were a couple of buys near the open and a classic, initial 30-min opening range buy after the first half-hour that topped at double the opening balance range. From there, you could have taken a number of trades off the 21-EMA line, selling either at the triangle top or at the Keltner Bands or Bollinger Bands.

Often, when the market is trending on weak internals, a good target is double the initial 30-min range, as we saw on this day. The market remains strongly bullish on the daily, weekly, and monthly charts, and the downside likely is limited for at least the rest of the week.

The probabilities are that July will close below the open of the month since we have six consecutive monthly bull market candles on the chart. It is highly unusual to have that many uninterrupted, positive months. 

With July likely to close below the open of the month and after the 11-day microchannel (buy climax) ended last week, the probabilities are that there is  limited index upside for the remainder of the month – and the better focus is likely on stocks and sectors that are still rising. Since there is not a strong likelihood of significant gains or losses

In the near term, traders should expect the bull trend to evolve into a trading range. There were a number of good “scalping” trades throughout the day, as illustrated on the chart above.

A.F. Thornton

Navigator™ Signals for Day Traders

Mid-Day Update – 7/12/2021

AF Thornton 0 Comment
XLF (Financials ETF) Daily Candles

Another bullish market breakout to add to our collection. So we are status quo for now, but still wondering how the small megaphone pattern will resolve on the daily S&P 500 chart. Will it lead to another break? Or will it be a consolidation to go higher still? Be mindful of the magnets above at 4404 and 4500. 

Internals are mixed, as we broke out of the 30-min clearing range and then doubled it, a widespread occurrence. But with internals mixed to weak, I am not sure there will be much more index upside today.

Meanwhile, our XLF entry was well placed on Friday, as the XLF is the top-performing of all 11 S&P 500 sectors today. XLK (tech) is weaker, in fact barely positive, indicating at least some of the anticipated rotation discussed in this morning’s writings.

Our next discussion will be today’s epilogue after the close. Remember that I will be out Wednesday, Thursday, and Friday traveling back to the States, so there will be no outlooks on those days. If anything of significance occurs, I will send off a quick note from my phone. Continue to use a close for two hourly bars below the daily 5-EMA on the XLF for a stop. The XLF has managed to get through the 21-day line today, leaving only the 50-day line to conquer into clear sailing. The daily 5-EMA sits at 36.63 at this writing.

A.F. 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 Day Traders Navigator™ Signals for Swing Traders

Mid-Day Outlook – Buy XLF Calls

AF Thornton 0 Comment
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

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

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