Founder's Trading Journal Another Calm Before the Storm? by AF Thornton Nov 30, 2022 0 Comment Good Morning:Futures are quiet, trading near 3970. A multi-day string of key data points begins today with pre-market GDP revisions, then Fed Chairman Powell speaking at 1:30 PM ET.Mark primary resistance at 4000, then 4048.Support starts at a band near 3960 (SPY 395) to 3950, then 3890 (SPY 390 and the Put Wall).Today likely sets up a strong directional move into the 12/14 Fed announcement, coinciding with the 12/16 monthly options expiration.On a breakout higher, we are looking for a target of 4200. A close above 4000 is bullish, as 4000 should invoke strong support.On a break of 3900, the major support line is the 3600 Put Wall.Gamma flips materially negative below 3900, likely to coincide with a large implied volatility spike.Lower equity prices and higher implied volatility would invoke a reflexive feedback loop wherein dealers exacerbate declines by selling futures into dips.Meanwhile, all Navigator Algorithm timeframes are either in cash or short. We formally closed out the 10/13 swing buy signal on Monday. However, swing accounts were already in cash or short from the hourly sell/short signal on 11/24.This morning’s takeaway is that the range of possible prices is sharply skewed to the downside.But – and it is a big but (no pun intended) – you will see a rising wedge pattern still visible on the chart above, predicting one last burst higher, possibly into that 4075-4200 target area set back in October.I would call that the “pain” trade for now because nobody expects the market to continue higher.As the market currently sits on the lower wedge boundary, there is not much tolerance for lower prices today other than a few stop runs.A rally had been underway Monday until Fed Governors hit the speaking circuit to talk the market down. The Fed does not appear to want the stock market to go up.So even if the rising wedge pattern gets a final leg higher, the rally will be short-lived before the market rolls over on the Nominal 80-day cycle.Don’t forget that today is the last trading day of November – so not always ideal for day trading. And the market is not likely to do much until Powell’s speech is published later in the session.We had an exceptionally good day in the trading room yesterday. I will be in the room again on Thursday.You have to see the enhanced day trading algorithm to believe it. It is an awesome new tool for our arsenal.I have also carried many of the improvements and concepts into the swing algorithms.The main improvements make the algorithms use artificial intelligence to predict future prices and turns.In other words, we know the time and price level where the buy or sell signals will likely paint in the future. Then we look for price action (HOLB or LOHB breaches) for final confirmation.The algo can predict patterns up to a year in advance.After seeing the new algorithms operate, my wife commented that she would be pleased to see my brain improve, as she currently views it as artificially intelligent too.A.F. Thornton
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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.