Bernie Madoff with his Clients’ Money / FTX’s Bankman-Fried his Clients’ of their Money Too – 11/17/2022

Good Morning:

• Tuesday’s sell signal on the hourly charts has morphed into a Navigator Swing sell signal overnight, triggering at 3942.
• Of course, today’s candle needs to close below 3942 to validate the signal. I will keep you posted on that front.
• A pullback from the meteoric short-covering candle on the daily charts a week ago today is to be expected.
• Nevertheless, we must be careful in the current environment, and the downturn is a rejection of the 200-day moving average on the daily charts.
• Also, we may be peaking the second of two nominal 40-day cycles in the first 80-day cycle slated to trough in mid-December.
• In short, it is too early to tell whether the 20-week cycle wave has peaked. We will know in due course. This may be a healthy pullback on the way to our original 4100-4150 target.
• But the reason we have been working the hourly chart signals rather than the daily ones is precisely what we are encountering this morning: waking up to a big sell-off.
• The FTX contagion grows, as do the global recession risks continuing to plague the markets.
• Futures are lower to 3945, down from overnight highs of 3990.
• Our key levels remain largely unchanged, with resistance above at 3960, then 4000. Support below is at 3904.
• For today, do not be surprised if the S&P 500  stages a rally today back into 4000, and with our volatility estimate of 1.03% we do not see a move down through 3900.
• That possibility is markedly higher for tomorrow and into next week.
• Yesterday there were very large volumes at the 4000 strike. The call activity, which is likely call selling, adds to resistance at that level.
• Conversely, there was clearly a lot of put activity below, which translated to an uptick in open interest at 3900 and 3950.
• We think these are likely short-term put sellers.
• With the algo in decidedly negative territory, we assign an edge to the downside after OPEX.
• We will watch the 4100 Call Wall area as resistance into month end.
• The Call Wall lines up closely with the widely watched SPX 200-day Moving Average mentioned above and hovering near 4080.

A.F. Thornton