Pre-Market Outlook Update

Pre-Market Outlook Update

S&P 500 Futures - 5-Minute Candles

As expected, the market is balancing back into Friday’s range so far this morning. Maybe I have not lost my touch after all. The S&P 500 has twice tested the top of the old range at 4215. It needs to bounce on this second touch for me to stay positive. Tick distribution is favorable so far, and the cumulative tick has been building positive as well. So it is not as if the market is going down; it just isn’t going up.

There is nothing particularly negative at the moment. The (now apparent) news-driven gains from Friday have stalled. Perhaps we are still missing a catalyst after all. I do like the positive momentum divergence on the morning low on the 5-minute RTH chart.

The Founder’s Group has taken a position in the NASDAQ 100 at 13,733. The reversal down pattern now has a turnaround up pattern on the right side, if it takes. We are running a 15 point stop – using a little discretion to give the trade some room.

Growth stocks are strong this morning, as is the IWM (Russell 2000). The S&P 500 Advance/Decline line is about even. It is hard to get the breakout the bulls want without solid internals. Mixed internals rule the day thus far.

I would put odds at 60% that we still break to new highs in the next few days and about 40% that we don’t. Of course, that is more of an educated guess than anything else.

We shall see if the market will take a run at the highs mid-day or perhaps on this afternoon’s post-lunch drive. The put/call ratio is low, indicating complacency here, which is unhelpful.

It was important to determine early on that we would be balancing this morning. That way, you don’t become overly negative about your existing long positions.

As outlined in the morning’s commentary, I think the tone changes if we drop below 4209 and into Friday’s gap area. So carry that forward in your narrative.

Watch for the bull trap as well. The leprechauns may run us up and above the old highs this afternoon, only to take our gold while they run the stops and bring it back into range. Today is a quiet day so far, and that is when the leprechauns come out to play.

Stay tuned.

A.F. Thornton

AF Thornton

Website: https://tradingarchimedes.com

A.F. "Arthur" Thornton is an expert in logic, risk/reward quantification, market fractals, pattern recognition and asset class behavioral analysis with 34 years devoted to developing algorithmic and quantitative trading systems. In addition to trading his own capital, Mr. Thornton designs custom algorithmic and quantitative trading systems for a small and exclusive group of exceptionally qualified traders.

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