Category Founder’s Trading Journal

Interim Update – 11/4/2022

Good Morning:

  • The strong October jobs report this morning confirms my theory that even in this recession, the declining population will keep employment growth stronger than we have experienced in the past.
  • And given the people dropping like flies from the jab, the labor shortage will only accelerate.
  • Futures are higher this morning to 3780, opening at the top of yesterday’s candle and suggesting a potential pivot at the 50% retracement for a second rally leg higher, just as I had suspected might occur and mentioned yesterday.
  • If the market follows through, note the power of the nominal 20-week cycle – even in a bear market.
  • Seeing the positives, the addition of put positions yesterday keeps us on our toes. The new, major overhead resistance now drops down to 3800, also the new Gamma flip point.
  • Above that level, we believe dealers switch back to a positive Gamma stance, giving prices a bullish edge. Above 3800 resistance, we mark 3835 and 3900 as resistance. Support shows at 3710-3700 and 3650.
  • Yesterday was a relatively quiet session after the S&P 500 gapped down to open at 3700.
  • Contemporaneously, the VIX dropped back to 25, but there appears to be no incremental demand for long put protection.
  • Our implied volatility metrics suggest traders are still content selling downside puts into market drawdowns. There is just no bear follow-through.
  • Despite the Put Wall support remaining at 3600, the new flow coming into 3700 has made it a sizeable Gamma strike and decent support.
  • Given the dynamics, you can see why we favor an upside recovery in the short term.
  • As new data comes in, we will reassess.

A.F. Thornton

Interim Update 11/3/2022

S&P 500 Continuous Futures - Cycles

Good Morning:

  • First and foremost, the Navigator Swing Strategy triggered a formal sell signal at 3878.75 yesterday. The alert formally closed out the 10/13 buy signal at 3595.
  • Keep in mind that save for holding a few calls from 10/13, the Founders Group never sat tight in the signal, preferring to work the hourly chart signals on the way up. As noted a few days ago, we exited the last trade just above 3900.
  • And there was no surprise yesterday; the Fed delivered bad news exactly as I thought they would. Given that the market expected the rate increase, it rallied initially, as expected.
  • All appeared to be well until the Fed Chairman pulled the pin out of the grenade in one sentence during the press conference – “rates may have to go higher than we originally forecast”.
  • No wonder President Orwell felt compelled to give another incoherent babble last night from a train station. His dystopian Nazi stage was unavailable.
  • He sought to bring unity to the Country, especially against Republicans. He succeeded in unifying most of the Country against him and his globalist comrades in the Uniparty.
  • Meanwhile, back at the ranch, futures are at overnight lows of 3727 at this writing and down from highs of 3780. Look for support in the 3710-3700 area, then 3650. Upside resistance shows at 3750, 3800, and 3834. We are looking for very high volatility today as post-FOMC macro adjustments are fueled by the onset of negative Gamma, increasing implied volatility, and large zero-day to expiration option flow.
  • SPY 360 / SPX 3600 forms the Put Wall and downside target, as outlined yesterday. The bears have the football again. Higher implied volatility and negative Gamma will pressure the markets lower from here.
  • I would flag the risk of a surprise, upside reversal. First, to get barely two weeks out of a nominal 20-week cycle turn is almost unprecedented. At this same juncture in past secular bear markets, the S&P 500 index usually rallied for eight to nine weeks, albeit not in a straight line. 
  • Objectively, this could or should be a pullback of about half the gains recently achieved from 10/13. The Fed Chairman’s right jab could have exaggerated the normal retracement. I want to leave that on the table.
  • The mirror image of that claim would be that this leg down is so ominous that the market could not sustain a two-week rally. I find that a hard pill to swallow. So I included a chart above with the larger and smaller components of the 20-week wave.
  • The Put/Call ratio screamed too much short-term bearishness yesterday, and the VIX did not confirm the sell-off yesterday.
  • We have unemployment claims this morning, the October employment report tomorrow, the CPI next week, and the mid-term elections next Tuesday. And especially regarding the elections, a Republican takeover of the house and Senate could trigger a temporary rally.
  • Stay tuned; I will be in the trading room at 10:00 am EST. Gap Rules are on the table at the open.

A.F. Thornton

Pre-Fed Update – 11/2/2022

Good Morning:

  • First, I will be in the Founders Trading Room at 10:30 am EST to prepare for the 11:00 am Fed rate announcement. The consensus continues to be 75 bps. A few speculate that a full point is possible, but I will stick with 75.
  • The focus is on the forward guidance if any. Most likely, the Fed will guide that everything will be data-driven. I do not expect them to be dovish.
  • The meeting comes on the heels of Europe reporting 10.1% inflation last month and a relatively dysfunctional U.S. Treasury market. 
  • In that regard, and given the Fed’s opposition to the free-spending Orwell Administration, the Treasury could counter the Fed by announcing its Operation Twist recycling program – to tap down rates at the long end of the curve and attempt to boost the stock market into the midterms.
  • But there are many other volatility events ahead of us near-term, including October unemployment on Friday, the mid-term elections, CPI next week, etc. But getting the Fed out of the way for a few months helps the bulls.
  • Yesterday the market dropped rapidly into our lower boundary at 3845. Futures were flat overnight, holding 3860.
  • I anticipate a quiet morning ahead of the Fed announcement. Resistance is at 3900, then 3950. Support shows at 3850, then 3800. But given all the recent volatility, the wider range is 4000 overhead and 3600 below.
  • The short-dated implied volatility for the S&P 500 is near 40% today, suggesting traders are looking for a 2% move. That would be plus or minus 75 points from yesterday’s close, around 3862.
  • My advice is to forget the Fed and the news. We are in the markup phase of the Nominal 20-week cycle, and it is still early. 
  • Looking at the dailty chart, more sellers await at 4000, rather than here. But even those are the lightweights. The big sellers presently congregate at 4150. 
  • My best GUESS is that after some initial selling following today’s meeting, the market drives up to 4150. After gains convince everyone that a new bull market is underway, the floor will give way to one of the worst, steady, and most destructive declines in stock market memory into March. 
  • I don’t know what the catalyst will be – just that there will be one.
  • I hope I am wrong; it wouldn’t be the first time. But let’s take it day by day, and we will get positioned for the next leg once the dust settles.
  • As we all know, we rank our decision process first on price action, second on the Navigator Algorithm, and last on A.F. Thornton’s opinion. I rank last for good reason! Always defer to rules number one and two,

A.F. Thornton

Interim Update – 11/1/2022

Good Morning:

  • Looking at the options market this morning, the Call Wall (highest open interest and Gamma) is now solidly placed at SPX 3950 and SPY 395.
  • Expect it to act as our ceiling into the Fed announcement and perhaps after. If we go to 3950 today, the price level will likely cause more chop and pinning like we saw yesterday around key strikes.
  • But more concerning, the street is not hedged as they have been ahead of previous Fed meetings. With the Put Wall (highest put open interest) down at 3600, even a parachute won’t help if the Fed disappoints the “pause” or “pivot” crowd Wednesday – and I am almost certain the Fed will disappoint them.
  • One investment bank yesterday said it well, pointing out that tomorrow could either be the best day of the year thus far or lead to an 8% intraday drop. Nice odds, right?
  • This 50/50 proposition is where gamblers make fortunes. I am not a gambler. I work with statistics and probabilities, and in the current situation prefer to wait it out.
  • Singles and doubles brought us 600%+ returns this year, not home runs. And we don’t need a home run loss, either.
  • The next important turn will be around the election. That turn is not the only turn ahead, just one of the four important turning dates we encounter in a calendar year.
  • In an unusual turn of events, we have the Dow leading and the NASDAQ 100 bringing up the rear guard off the October 13 low. The S&P 500 is in the middle.
  • The S&P 500 has good support at 3905, 3880, and 3845 today, with resistance at 3925, 3950, and 3980.
  • If we drop down to that level, expect some pinning around 3850 for most of the day. Price will likely mark time into tomorrow’s Fed announcement once it reaches today’s destination.
  • I will be in the trading room from the Open through lunch. Gap Rules apply today.
  • Today you can skip day trading as there may be scant opportunities as the market moves sideways into the Wednesday Fed announcement. And recall that the better the stock market has done, the more likely the Fed will stay the course of normalizing interest rates and selling off their balance sheet – assuming anyone wants what they are selling.
  • Realize that as rates increase, bonds will start competing with stocks for capital. It has been a long time since investors earned a decent interest rate on CDs or bonds, including municipals.
  • Tomorrow will be the day for action, and I will be in the room for the fireworks.

A.F. Thornton

Interim Update – 10/31/2022

S&P 500 Continuous Futures - Navigator Algorithm Status
S&P 500 Continuous Futures - Navigator Algorithm Status

Good Morning:

  • I will be brief this morning, saving most of my bloviating for the end-of-month discussion.
  • Futures have pulled back to 3885, consolidating Friday’s large gains.
  • Our Call Wall jumped higher to SPX 4000 and SPY 395. For a change, the options market is supporting higher prices.
  • Accordingly, I see 3900 providing some resistance into Wednesday’s FOMC, with 3950 as the more formidable obstacle. Support shows at 3850 and 3800.
  • The nominal 20-Week cycle (currently averaging about 16 weeks) and the 10/13 Navigator Swing Strategy buy signal have generally supported buying dips and selling rips on the hourly charts. 
  • However, price is in its third push higher from the 10/13 swing low, so we advise caution. A 1/3 to 1/2 retracement of the rally off Wednesday’s Fed announcement would not surprise me before the market is in a position to move higher, if at all.
  • After that, the next intermediate upside target is 4100 or so. If this rally fails altogether, the downside targets are unmentionables.
  • Either way, the next important market turn (from whatever direction precedes it) will be November 7th around noon EST.
  • The last entry for the Founder’s Group was Thursday during Globex at 3685, which we liquidated Friday at 3915 at the close. We did not communicate this trade publicly since it occurred in the overnight session.
  • As today is month-end and Wednesday is the next Fed announcement, we prefer to be in cash until Wednesday’s Fed announcement. 
  • From a day trading perspective, there is not much to do today with month-end cross-currents, though there should be some decent day trading tomorrow as the street positions for the Fed announcement.
  • We have a PMI report this morning, so be careful at 9:45 am EST if you choose to trade. Another Dallas Fed Business Manufacturing Index report is due at 10:30 am EST.
  • Bear markets don’t end until the generals fall, and they took a big spill last week. 
  • Look no further than the FAANG stocks, such as Google, Amazon, etc. No doubt that new leaders and acronyms will emerge in the recent bull market in the future.
  • Further evidence of the strength of the Nominal 20-week cycle appeared when the market shrugged off the earnings disappointments.
  • Fundamentals tend to take a back seat to cycles most of the time. When the cycle bottoms and unfolds, the press finds the news to explain it, not the reverse.
  • Much will be the same for the Fed meeting. I do not expect Powell to be dovish, especially in light of the strength of the current rally, which permits him to continue his tightening path. 
  • It would be different if the stock market was tanking as we approached the meeting – but it isn’t. That is the problem that seems to escape the crowd’s attention. The better the stock market, the easier it is for the Fed to normalize interest rates and sell off its balance sheet.
  • My important intermediate and short-term cycles bottomed on 10/13, but the 18-month and many longer cycles are unresolved. So enjoy the reprieve – it may be your last chance to cull your holdings before the final leg of the bear presents into the spring.
  • At this point in other secular bears, the market rallied for 6-9 weeks from the equivalent of our October 13th low. Then, the biggest leg of the bear unfolded.
  • If that is the case, we can observe that 90% of investor losses came in the last 10% of the bear. So we will keep that in mind as we move along.
  • Having said all that, it doesn’t pay to hold strong opinions, and I don’t; the price action will tell us what to do if we are willing to listen. If this turns out to be a “cyclical” instead of a “secular” bear – it is over.
  • We follow the evidence wherever it leads us, which is why our returns exceeded 600% this year.
  • Perhaps there is an advantage to my legal pedigree after all – I follow the evidence and build a case.
  • This week, I will be in the Trading Room Tuesday, Wednesday (for the Fed announcement), and Thursday. We will broadcast Tom in the room starting at 11:30 am EST today and Rose on Friday. Tom will be live trading order flow, an important aspect of day trading. Rose will teach price action trading – the primary foundation necessary to succeed in this endeavor.

A.F. Thornton

Interim Update – 10/27/2022

Good Morning:

  • Futures were flat to 3850 ahead of the 8:30 AM ET GDP report. It has been floating around 3850 since the report’s release, along with the release of weekly unemployment claims.
  • Key levels are unchanged from the past two days except for a higher Vol Trigger (3805).
  • This metric sliding higher suggests an increase in put Gamma positions.
  • I am looking for support today at 3834 and 3800. Below there, I see another support level at 3755. On the upside, we will likely continue encountering some major resistance at the 3900 (Call Wall).
  • The positioning dynamics outlined in yesterday’s AM note still stand for today. We historically wouldn’t even mention a GDP reading, but now those readings (like CPI’s) are potential volatility triggers in this illiquid environment.
  • The headline number is positive due to a flood of government spending in the last few months, typical of the Uniparty ahead of the midterms. Incincumbents want to keep their jobs.
  • And I already discussed Treasury Secretary Janet Yellen’s hail mary pass to put a floor under the stock and bond markets to help minimize the Democrats’ walloping in a few weeks.
  • Even typical Dem cheating cannot overcome their fate if the polls are accurate. And their cheating is limited by the local population counts – if they are losing in a landslide and they add too many phantom votes, the votes could exceed the local population as happened in a number of cases in 2020.
  • By the way, don’t think Republicans don’t cheat too. I didn’t see them clambering for audits after the 2020 election, either. That is why I call them the Uniparty.
  • Further, our critical support line (Vol Trigger) has been working its way higher along with the market. This migration is expected behavior and highlights that a break of 3800 leads to an air pocket underneath.
  • I would also note that once again (as with Tuesday), the S&P charged into 3900, but the Call Wall did not move higher. Traders do not appear to be looking for more upside over that level right now – but we are early in the 20-week cycle.
  • In addition to the usual interest rates and earnings concerns, the predominant theme has been the rise of DTE options trading and the extremely flat skew.
  • To this point, put values are low relative to calls – which comes from call buying and put selling.
  • The Founders Group exited their latest swing long position yesterday at 3895.75 on an hourly sell signal. We met our next intersecting price objective at 3900, derived from the 20-day cycle forecast on the daily chart. 
  • The 3900 level also happened to be the 50% retracement of the August to October decline, where this second leg up had equality with the first from October 13th to October 17th.
  • Also, we are rolling into month-end on Monday. Tomorrow is the weekly expiration, and the WEM high is 3936 – so be aware that the WEM high alone could stall gains today and tomorrow.
  • Even in the most bullish of scenarios, nothing goes straight up.
  • The pain trade is still higher, I am reticent to go to a swing short quite yet, and I would consider entering new long positions from the 5-day line at 3820.
  • Also, remember that the “strong” GDP number and an improved stock market give the Fed flexibility to raise rates further.
  • Here is my bottom line; we are in the eye of the hurricane as the 20-week cycle delivers what I expect to be a bear market rally that peaks between 4000 and 4100.
  • Then everything reasserts itself from inflation to Taiwan before year-end.
  • Don’t be confused by the GDP “head fake,” as the Uniparty throws out this brief “save” before mid-terms.
  • And if the market rolls over this cycle from 3900, which is possible, look out below. If the bear is alive and well, the 20-week cycle would peak in early December. If not, then the peak comes early next year.
  • On the bear sice, any slide accelerates below 3700 as we head into the air pocket.
  • Get your parachutes ready – just in case. But everything tells me we are going up for now.

A.F. Thornton

Interim Update – 10/25/2022

Good Morning:

  • Futures were quiet overnight, holding 3800. Key levels from yesterday are little changed. Price will encounter resistance at 3800, 3824, and 3851. Support shows at 3756, then 3700. Reread yesterday’s update for context.

  • Traders need to get on board with longer-dated calls to support this rally, especially as short-term sentiment indicators have moved back to neutral. 

  • Volatility is starting to subside, a bullish signal for markets as the contraction invokes a Vanna tailwind.

  • But there is little between 3800 and 3700 to support prices if they slide, and there is the potential of a right shoulder dip, as discussed yesterday. Then the rally could resume in earnest, and I would put 4100-4150 as an objective.

  • But a little FOMO fever is developing as the trend-following CTA community flips to buy signals between 3800 and 3900. Also, stock buybacks continue next week.

  • Global tensions could be the catalyst for any scary dip south. Otherwise, this rally leg should top in early December if the bear is to resume.

  • And don’t forget that the Fed meets and will announce interest rate policy on November 2nd, with the midterm elections a week later. That could be the turn after a right shoulder dip.

  • I will be in the Founder’s Room later this morning.

 A.F. Thornton

Interim Update – 10/23/2020

Originally Published Sunday Evening 10/22/2020

Revised Monday Morning, 10/24/2022

Projecting Last Dow Jones Index Stagflation Market from 1963-1984 Onto Our Current Developing Correction
Projecting Last Dow Jones Index Stagflation Market from 1963-1984 OntoThe Current Developing Correction
  • Good Evening:
  • Futures have recovered to 3790 after opening above 3800, then trading to 3740. For today we see resistance at 3800, then 3835—support shows at 3760, 3725, then 3700. The DEM Implied Move is quite high at 1.3%, which reflects the Gamma that expired on Friday.
  • My work told me to expect the bounce from 10/13 at 3507. And the price actually bounced at 3502 – only a few points off the target. But prices remained in the recently formed balance zone between 3600 and 3800 on Friday, with 3700 as the mid-point. 
  • Combine this with the street being lopsidedly short (with the highest cash positions in a long time), and I still think the “pain” trade is higher. The question is whether the price is ready to break out now and tag our first target at 3916. Or does it take one more spill into the lower end of the balance zone and then return to the top and break higher?
  • I am leaning towards the latter scenario, as the price appears to be finalizing three pushes from the low, forming a leading diagonal on the daily chart. Diagonals often lead to components of head and shoulders chart patterns; in this case, it would be a right shoulder to reverse higher. Concurrently, this would provide some accurate upside targets.
  • The possibility motivated the Founder’s Group to take a swing position at 3684.25 on Friday. And our trailing stop remains 3976.50 at this writing. 
  • We would have been stopped out last night at our original, lower stop price from Friday. Fortunately (and sometimes, unfortunately), you cannot place a formal stop on options, nor can you sell SPY options on weekends or during Globex hours, and we are better off for it this morning.
  • Many of the 24-hour price highs have come overnight before selling ensues in regular hours.
  • If prices break above the 3600 – 3800 zone, it is easier to contemplate a move to the first Fib target at 3916. The Balance Range projection (200 points) is even higher, near 4000. 
  • Similarly, if the price breaks below the bottom of the zone at 3600, we can project a move to new lows near 3400 or worse. Balance Rules are a good guide in that respect.
  • Another key to the rally case is maintaining prices above the 21-day mean at 3724, the 5-day line at 3737, and the Algo trigger at 3648. These are moving targets throughout the day, but if we could tolerate a dip into the Algo Trigger, the price would form a perfect right shoulder reversal pattern to go higher. 
  • The minimum projection from the pattern would shift to the 200-day line and the highest regional volume node between 4120-4140. I don’t want to get too far ahead of my skis, and there would be a few humps between our 3800ish range top and a trip to test the 200-day line.
  • And what would motivate this rally amid Nuclear War threats, record Inflation, and the fastest rise in yields in our history? 
  • First, there are hardly any potential sellers remaining; save the retail crowd. Then there will be the short-covering. And FOMO will kick in as year-end approaches. Stock buybacks resume next week. And post-November 8th, maybe we will have thrown the bastards out of office.
  • Note to self; it could take them months to count the vote in this modern republic.
  • A reversal would also be consistent with a launch of the 20-week cycle, expected to be weaker than usual with the bear market overlay.
  • Note that following moving average lines like the five and 21-day lines in a sideways range is admittedly treacherous – but let’s see how it goes. 
  • And If I am accurately interpreting the wave action, once this 20-week cycle rolls over, regardless of when or where it starts, a series of multifractal “3” waves will get underway as we travel to the nominal 18-month cycle low, currently scheduled to arrive around 2/25/2023. 
  • Third waves are the worst waves we encounter in bear markets, especially in a multi-generational cycle, such as the nominal 90-year cycle that defines this period.
  • I expect this 20-week cycle wave to resolve with a bearish left translation, though the pattern allows for more rallying. But we will be about one-third of the way through the wave by early December, the ideal time for a bearish wave to peak.
  • I wish I knew what to tell you to do now. At best, I can set the stage. But In times like these, I prefer to observe the price action in real time. A patient investor might wait until we call a bottom to the bear – likely next spring. 
  • Or, pay attention to the next Navigator Swing signal, likely to come off the right shoulder mentioned above around October 28th.
  • And don’t forget the Founder’s Room motto I first heard from Tom over at Bookmap. From time to time, we feature Tom in the Founder’s Room. The motto is, “If this, then that. If not, then what? That is the only plan that makes sense, especially in a bear market. Have a plan that considers both sides of the market. A plan helps you stay objective.
  • Much of the option open interest at 3700 expired Friday. After reviewing the CME statistics last night, here are my thoughts: 
  • The board has currently been “reset,” so to speak. We now kick off a November OPEX (Monthly Options Expiration) cycle; we look for new large options positions to form over the coming weeks. With that, the market should start to tighten around key options levels.
  • To that end, there were several shifts in key levels after Friday OPEX:
    • First – the largest gamma level shifts up to 4000 from 3700. This rise, like a higher DEM today, syncs with my view that markets will unpin from the 3700 area this week.
    • Second, the Call Wall shifted to 3900, which now starts as our overhead target into Nov OPEX.
    • Finally, the Vol Trigger is at 3725, and as stated on Friday – should the SPX trade above that level, our algos hold a bullish stance.
    • Since the Oct OPEX positions are gone, we see the range from 3835 down to 3700 as quite fluid due to light open interest. Accordingly, over the next session or two, I anticipate options positions building right below the 3900 Call Wall or right above the 3600 Put Wall, with implied volatility reinforcing market behavior – meaning higher prices lead to lower volatility and vice versa.
    • With traders net short here, declines tend to “grind down” with jumpy upside moves. This behavior is the mirror image of call-heavy, bullish markets (like last year).
    • The options feedback look is increasingly important as the “Meme Crowd” and hedge funds continue driving daily Gamma squeezes in the ES and NQ using DTE (one Day To Expiration) options.
    • Seasonally, the market usually picks up momentum on the way to midterm elections. The market could also rally into the Fed meeting in early November. 
  • The Fed flinched slightly in a New York Times leak on Friday morning when the market looked a bit scary. We know there was a big meeting of the powers that be. And we also know that OUR Fed bailed out Credit Swiss to the tune of $11 billion. 
  • When you consider all the money rolling out the U.S. doors these days, wouldn’t you rather be one of our customers than a taxpayer?
  • And thanks to inflation, the U.S. had the highest tax receipts ever this past year. AND THEY STILL RAN A $1.4 TRILLION DEFICIT! How will that $31 trillion debt payment look at 5% instead of 0% interest?
  • So we survived another day Friday without capitulation – but I am not sure the Fed leak was sufficient to drive anything other than a bear market rally.
  • What I am more certain of is that the Uniparty will TRY to drive a rally to support incumbents in the election ahead. I suspect the big Friday meeting had discussions to that effect.
  • Besides last Friday and Monday being among the lunar “Dark Days,” where past stock market panics have bottomed, Tuesday is a solar eclipse. That should be enough for the astrologers to bring us a low, right?
  • Is there anything to this astrology trading? I just learned about it, and we will find out if the market puts in an intermediate low here. Even then, the celestial relationships might still be a coincidence. 
  • By the way, there is a lunar eclipse on Election Day if you can believe it. If we will all be “lunatics” on Election Day, then we are no worse off than the people on the ballot. 
  • Nor does the Fed seem to have control of the treasury market at the moment, with Japan and China dumping our treasuries like they are kryptonite. That does not help the case for stabilizing the fastest and largest interest rate rise in American history. 
  • The interest rate on U.S. Treasuries closed well over 4% last week, and the chart looks like a hockey stick.
  • And then there was the big news today that “someone” will set off a dirty bomb in Ukraine this coming week. I have been waiting for the October surprise, and maybe this is it.
    If so, this should be followed here by mobilization of the U.S. military, a draft, martial law, and a suspension of the U.S. elections. Wouldn’t that be convenient?
  • A nuke in Ukraine would likely cause a flight to safety (I am referring to renewed demand for treasuries, not my plane flight to Antarctica).
  • There is precedence for stocks to rally even in the face of higher rates, but I wouldn’t say I like the probabilities that it would rally beyond what I discussed above. At the same time, you don’t have to lose much to test a low-risk-to-stop short position at the top of a range. So if you are bearish, keep a short around 3800 in mind.
  • So I am on the fence about another spill or whether the market rallies from here for another month or so before the final nose dive.
  • I would also note how similar the current spill looks to the first sell-off in the stock market that topped in 1963 and went sideways for 16 years. At the comparative juncture, the 1963 market rallied back up to the top of the range in 1966 before a 50% decline into 1974. I  posted a perspective chart with a few notes above.
  • On a separate note, many of you know I lost my father-in-law and mother to the Covid vaccines in the past year. The side effects killed them. Remember it was “The Disease of the Unvaccinated?” Everyone had to be vaccinated to protect others, not just themselves. 
  • This past week, we discovered that Big Pharma knew the vaccines did nothing to prevent transmission and likely enhanced transmission from the vaccinated. Pfizer’s testimony to the European Parliament this past week confirmed it. And my loved ones died from the exact side effects that Pfizer failed to disclose. They tried to seal all the vaccine trial documentation for 55 years! Fortunately, the judge who got the case wasn’t corrupt and refused Pfizer’s request.
  • Do you know why I never took the vaccines? Instinct! The Orwell Regime pushed them too hard – with the Davos Crowd supporting them. It wasn’t normal. No government has ever forced a vaccine down their citizens’ throats like this. What was their motive?
  • The vaccine has killed or injured many (otherwise healthy) people. There will be many more for years to come – likely in the multiple millions. You will be stunned as the evidence comes forward. The CDC and NIH have been hiding it. The vaccines are a complete fraud, and it is hard to believe it wasn’t intentional.
  • India used Ivermectin and Hydroxychloroquine prophylactically in a province of 200 million people and maintained a fractional incidence of the disease.
  • I immediately recovered when I finally used both inexpensive treatments after getting the virus.
  • The vaccine’s real story is slowly coming out – and it should terrify every patriotic American.
  • Please go to this Website  [https://freedomplatform.tv/the-real-anthony-fauci-the-movie/] and watch this disturbing documentary about Anthony Fauci and his crimes produced and narrated by Robert Kennedy Jr. The documentary tracks Mr. Kennedy’s recent book of the same name. The documentary is free for another few days. Be sure to pass the link to your friends and family.
  • Sadly, like every other institution in this Country, our medical system is badly corrupted and broken.
  • You will be shocked at what you will learn in this documentary. Every word in the movie and book is footnoted and double-footnoted to back it up.
  • We have to vote anyone associated with this nightmare out of office this November, regardless of whether their name has a “D” or an “R” behind it. They need to go, or our nation is doomed.
  • And the only way to change the captured and corrupt government agencies and their leaders is to send these actors to jail. Their actions are on par with the Nazis in Germany, and these actors deserve Nuremberg-like trials.

A.F. Thornton

Interim Update – 7/27/2022

Good Morning:

  • Futures are higher to start the morning, testing the 3700 level. Support shows at 3659, then 3600. Resistance lies at 3700 and 3750.
  • As mentioned yesterday, I am taking some much-needed time off today, as monthly options expiration can distort normal trading. I can already see the craziness on my screens pre-market.
  • And no, I did not get the date wrong – though I do get it wrong occasionally.
  • Instead, I decided to use the lunar calendar. Why, might you ask?
  • 7/27 and 7/28 on the lunar calendar are called the “Dark Days.’ And that is because most of the serious stock market panics in history bottomed on one of these two days.
  • There are too many panic lows that ended on these two lunar calendar days in the past two centuries to consider the timing a mere coincidence.
  • And let’s face it, the moon moves the tides, right?
  • And our stock market has been declining since November 2021 for the NASDAQ and January 2022 for the S&P 500.
  • But I don’t see a “panic” low in stocks coming today, though the day is far from over. Wouldn’t it be crazy, though, if this were THE low in the stock market today?
S&P 500 Cash Index - Diverging from Bonds and Leading Them Higher?
S&P 500 Cash Index - Diverging from Bonds and Leading Them Higher?
  • But what about the bond market? Now there, you might have a point!
  • The 10-year U.S. Treasury yield has been on a tear all week, rising above 4% for the first time since 2007.
  • Rates have only risen this fast a few times in history.
  • And that destroys the principal value of existing bonds.
U.S. Treasuries - The End of a Panic on the Dark Days?
U.S. Treasuries - The End of a Panic on the Dark Days?
  • Now that looks more like panic. Could the bond bear market possibly end today? We will find out.
  • With this morning’s expiration, roughly 20% of total SPX options positioning expires, then approximately 30% of total SPY/QQQ expires in the afternoon.
  • Markets are all about feedback loops. Momentum shifts in one direction, and options flow forms to reinforce that direction.
  • This feedback loop, we believe, helped to propel equity markets higher over the last week, and now expiration is a catalyst to spark a new feedback loop.
  • Our core takeaway from this expiration is an unpinning of the 370 SPY/3700 SPX and 270 QQQ area.
  • We assign a very slight edge to a downside test of the 3600 Put Wall to start next week based on the idea that the put decay, which has been an equity tailwind, is gone.
  • But, should the SPX trade above its Vol Trigger level (3750), our algorithms flip to a bullish stance.
  • The flip presents because above the Volatility Trigger, we estimate the dealer gamma shifts positive, which suggests that volatility should come down.
  • If volatility comes down, that reinstates the tailwind for equities (Vanna flow).
  • Even if implied volatility recedes sharply in the short term, we only have another two weeks until two strong volatility catalysts present: The Fed meeting (11/3) and elections (11/8).
  • Additionally, some foreign central bank events could trigger market movement (e.g., the European Central Bank (their Fed) has its next meeting on October 28th).
  • One additional item bears mentioning and may turn out to be very important. When we look at the futures market, the Commercials (Dealers) are positioned for the stock market to rally. They are rarely wrong. In fact, I cannot recall the last time that they were wrong.
  • And, even if the bear is persistent, the 20-week cycle should provide some tailwinds, at least for a time.

In closing, do you know where the term “lunatic” comes from? It refers to the Moon’s influence on human behavior. As I looked at myself in the mirror this morning and thought about what I would be sharing with you  – that voice in my head said, “If the shoe fits…”

Have a great weekend.

A.F. Thornton

Interim Update – 10/20/2022

Good Morning:

  • As I had suspected it would transpire, this rally is starting to look a bit like the sputtering launch last June. And this is still a bear market until proven otherwise – cycles tend to peak early.
  • With the Weekly Expected Move high at 3700 this week, combined with monthly options expiration tomorrow, it does not seem like there is much room for higher prices until Monday. The cycle at hand should have taken us up to 3820, and it may yet. Thus far, however, there has been no follow-through buying after the short-covering finished.
  • We took our stop yesterday at 3715 for the Navigator Swing Strategy, and we are now back to cash. We were heavily influenced by yesterday’s extraordinarily weak 20-year U.S. Treasury auction. It took a 4.35% yield to move the bonds – the highest for the series since its inception. 
  • Foreign buyers were scarce compared to previous auctions. One can only wonder what happens if the U.S. Treasury auctions begin to fail. These auctions feed a monstrous debt and deficit spending, not to mention the ever-increasing interest on the debt.
  • Let’s get through options expiration over the next few days, and we will do heavier-duty forecasting over the weekend.
  • For now, we are in the middle of the range/strikes at 3700. We show 3800 as the top of the range and 3600 as the floor.
  • Any time you try to position from the middle of a range, you had better be right. Your risk to a valid stop is 100 points in this case. 
  • I still see the potential for another leg up in this rally, but the easy part is behind us, with the short-covering seemingly over.
  • Now that we are back in cash and options expiration is influencing prices, I am taking a few much-needed days off today and Friday. The trading room will be closed absent an unexpected opportunity. Even on days off, I never take my eye off the ball.
  • And we won’t be day trading for the next few days, as that is the general rule around monthly options expiration. Expiration often distorts price movement and can decimate typical day-trading setups.

Have a great weekend ahead!

A.F. Thornton

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