Category Founder’s Trading Journal

• Well, the airplane stalled, and the nosedive was something to behold.
• The wholesale inflation numbers released this morning essentially tracked the CPI numbers. The topline number was lower than expected, but Core PPI was higher. The price may try to climb up as high as the 5-day line just above 4000 (also DEM high) on a short-covering rally before it rolls down again. But there is nothing in the PPI report to motivate buyers.
• Recall that 4000 is the highest option open interest level, either acting as a magnet or more likely repelling prices into Friday’s expiration.
• I don’t see evidence of a bottom forming in the new decline yet, so lower prices are the most likely path, with some bounces along the way.
• With the rollover, we can now project some lower targets starting with 3730, where the new down leg equals the 8/16 to 9/7 down leg. The 1.618% target is 3758, with the 2.618% target at 3000.
• A rip-your-face-off short-covering rally is coming soon, so be careful with the short positions. I would rather be in Puts than Futures. Lately, market participants have been using short-dated options, and the pros can run the Vanna into Friday’s expiration. We tend to ride this out in the Navigator Swing Strategy until a solid sell signal or price starts closing above the 5-day line.
• In addition to the lower targets, look for support at the June 7 low (3886) and then the June 17 low at 3639. Hopefully, the levels don’t turn out to be speed bumps in a crash. 
• With the DEM low set for 3895 and the WEM low even higher at 3975, there is a prayer to hold the market near today’s (Tuesday) low through expiration. If not a prayer, how about hopium? Makes sure you calculate 1.5 to 2 times the expected moves in current circumstances.
• Quadruple Witching and Expiration, starting early with the VIX tomorrow, is a complicated time to make reliable market calls. We are navigating blindly for a few days.
• Today was another day I appreciated navigating by algorithm instead of my own opinion. I got caught up in the narrative that inflation would be flat to lower this month. I did not expect much reaction to the inflation reports, other than a positive rally if the numbers were less than expected.
• I was wrong (media tainted) because I did not contemplate the numbers coming in higher than expected. Lately, the White House has issued prior warnings when expecting higher inflation numbers. They didn’t warn us this time, so I was slightly complacent.
• Perhaps the higher-than-expected inflation levels finally lit the fire we have been contemplating. And should we be surprised? Student Loan Forgiveness, the CHIPS Act, Build Inflation Better – all deficit spending. The stated national debt is about to pop over $31 trillion. But you also need to add $6 trillion from the Fed’s balance sheet, not to mention unfunded liabilities.
• But the numbers don’t matter to us anyway. They give us some fodder to debate, but ultimately the Navigator Algorithm took us to cash or short (for aggressive subscribers) yesterday (Monday) at 10:30 AM EST. We even let the public know our new position on these pages yesterday (Monday) evening.
• Whether back to cash or short, subscribers bagged a four-day profit of 186 points per futures contract and slightly more than $1,000.00 per call on the 9/7 long position. Paid subscribers who shorted the market yesterday on the sell signal woke up happy this morning too. Apparently, there is some Dom Perignon coming my way.
• While I did not expect a liquidation break of the magnitude the market experienced today, I am not surprised either. As previously mentioned, I expected a more orderly dip to retest the September 7 low around options expiration (9/16) or the Fed meeting (9/21).
• In any event, we ended a four-day short-covering rally, nothing more and nothing less. But we never know for sure until it is over. Even legitimate bottoms start with short-covering.
• But the inflation report did not miss the number by much, so what gives? Perhaps it is the fact that the rising inflation trend is more important than the actual numbers. But there are many other problems amiss, as mentioned Sunday.
• One of them may be one of the most stunning disclosures I have encountered in a long time – if true. You won’t read about it in the mainstream media. 
• A purported whistleblower at the CIA’s favorite think tank, the Rand Corporation, supposedly released a January 2022 memo copied to the White House and Democrat Party that laid out the plan to trigger a conflict between Ukraine and Russia to cause European energy prices to skyrocket.
• The idea was to weaken Germany and the EU to keep them under the U.S.’s thumb. The secondary benefit was to weaken Russia. I must say, the memo is believable with the corrupt politicians we have in charge these days.
• Objectively, however, I have doubts that the memo is legitimate. The trained eye will see obvious typos, missing words, and grammatical errors. The poor work is reminiscent of one of those Nigerian email scams, not something that would be representative of the Rand Corporation’s work. 
• If the directive is real, it is a truly disgusting and inhuman plan. If we did what Rand claimed in the report, why would Europe need to worry about Russia or China? We are their worst enemy.
• The memo is being suppressed in the Google search engine while readily available from numerous sources in less censored search engines such as Brave and StartPage. The primary story on the Google search engine labels the memo as fake. Naturally, the Rand Corporation denies its legitimacy.
• We return to the “Boy Who Cried Wolf” syndrome. Were it not for Google frequently censoring on behalf of the Deep State; Google might have some credibility. Their suppression (especially of counter-narratives to the Orwell Regime) is the only thing that keeps me wondering if the memo truly is real.
• The constant propaganda we have to filter these days is annoying.
• Whether the memo is true or not, voters must oust the people in charge of our Country in November before it is too late and our Country collapses.
• The stock market is beginning to connect the dots to the reality of our current situation. I don’t know what took it so long.
• We are truly experiencing a communist takeover, and everyone knows it. It is the proverbial 100-pound elephant in the room.
• Financial markets aren’t receptive to communist regimes, nor can they sustain many days like today, when stocks and bonds get hammered together.
• The key 10-year treasury interest rate closed only a few basis points short of a new high today. As I have said before, a new, sustained high in 10-year interest rates likely means the June low (3639) in the stock market is vulnerable, and a trip to 3000 is inevitable.
• Recall that our longstanding (minimum) forecast for this bear is to visit the middle of the 100-year channel near 3000 before it is over.
• Yesterday was reminiscent of the March 2020 China Virus crash. Last night (Monday), the market rallied slightly above the WEM high in Globex but headed straight south from the CPI Report. If it wasn’t for the WEM low around 3975, there was nothing but blue sky below until the September 7 low (3886).
• Closes and price acceptance below 3886 will confirm that wave (iii) of (1) of 3 is underway. Don’t worry, though; we are not even to the fun part yet when we are in the (iii) of (3) of 3. That is likely coming to a theater near you soon.
• Meanwhile, as Rome burned, Nero  President Orwell held a picnic outside the White House to celebrate his new “Build Inflation Better Production Reduction Act.” 
• As if the irony of the picnic wasn’t enough, Democrat stalwart James Taylor (damn, he looked old) played “Fire and Rain” for the crowd, a song he wrote about a friend who committed suicide. And crazy Nancy Pelosi directed the crowd, telling everyone when to clap. I guess she is practicing “Central Planning.”
• Look, I gave the market every benefit of the doubt and tried to come up with any lipstick I could put on it to explain further gains. I try to be fair.
• But alas, Price = Truth.

A.F. Thornton