Afternoon Notes – 3/7/2022

• Perhaps you can see now why it was such a brutal day on Wall Street.
• But Subscribers who followed this morning’s plan should be donning a big smile this afternoon.
• The Founder’s Group covered half of the short position at the ONL (4239) and the other half at 4200. There wasn’t enough runway left today to take another position. We considered a long position at the 4200 level, but the market looked too sick.
• The most significant event today was the S&P 500 index closing below 4211. The level goes back a long way, and the violation is a bad omen. We also closed below that Put Wall and WEM low. I cautioned about that in the late morning update. Too much further, and Dealers will have to sell even more index futures to hedge their Friday expiration risk.
• The largest concentration of options open interest is at 4000. The level should help catch the downward spiral.
• My first target at 3600-3700 is where I expected a bounce before traveling to the middle of the long-term channel at 2500.
• All of this could take a while – six months to a year.
• Options Guru Brent Kochuba is calling this “Controlled Demolition.”Due to the inflation spikes and the upcoming Fed policy change anticipated for mid-March, the street was already hedged at the invasion. So few were caught with their pants down, as they would typically be when Russia invaded Ukraine.
• Instead of a crash or spike lows, the overly hedged street experiences a controlled Gamma spiral down, with a few loops up.
• Today was slow and frustrating – like watching the grass grow when we are used to quick rewards in our short positions.
• Don’t discount spikes or crashes yet. Something tells me that everyone cannot hedge against losses. Something might break when everyone runs for the exits at once.
• All those charts with spikes up represent broken markets. There will be more to come.
• The next few monthly inflation charts promise something to behold, but what can the Fed do? Higher interest rates won’t help the problem and promise to trigger the next recession – which is coming anyway.

In my next life, I want to be a dictator like Putin – perhaps more benevolent. Here is my investment strategy. Load up on gold and oil—short the stock market, especially my own (RTY down -90%).

Then invade my next-door neighbor and throw out a few nuke threats. Pump as much oil as possible. Sell the gold. Reverse the stock market short to long. Negotiate peace. Rinse repeat.

It promises to be an interesting night. It now takes a 7% move in Globex to lock limit the S&P 500 Index. Let’s hope we don’t face that any time soon.

I will update all Key Levels in the morning notes.

A.F. Thornton