Yesterday was a bloodbath of a retest, and the Founder’s Group took the opportunity to nibble on a 5% position in each of the QQQ and SPY. Both positions are in the green this morning thus far.
It is a bit tricky for an options strategy as the implied volatility is high for pure calls. If volatility abates, the implied volatility crush can subtract from otherwise positive returns. I will discuss that complication later today. This outlook is already a bit late this morning due to a technical glitch, so I would rather expand on the concepts later.
Although we are opening in balance, sentiment has shifted to bearish, and longs who are still stuck may see the small gap higher as a gift that decreases their losses.
I will use the ONH/Bottom of the Single Prints/Weekly Expected Move Low at 4372.50 and the ONL at 4344 as signposts for potential larger change. Should prices stay within these boundaries, then the market is balancing.
At the upper reference is potential for short-covering and below emboldens sellers and should attract new ones. If so, the swing low at 4293.75 is the ultimate target.
If we move decisively above 4372.50, a successful retest on the 80-day cycle could be finished, and we might begin a new move higher to challenge the old highs.
The sentiment is so negative at this point that I would bet on higher rather than lower prices. But with tomorrow being the end of the calendar quarter, window dressing by money managers may complicate matters over the next 24 hours.
The Navigator swing strategy remains 100% cash as we have yet to achieve an Algorithm buy signal.
A.F. Thornton