Founder's Morning Notes - 3/8/2022 | Archimedes Methodologies

Good Morning:

We find ourselves hunting for a swing low again today.
In law, we learned that even though you may have been negligent in the car accident, the judge would assign fault to the person who had the last clear chance to avoid it.
Later on, they started apportioning fault between the drivers – so-called comparative negligence.
This morning, I need to exculpate myself from any fault here – ahead of time. The Founder’s Group has not had a single loss all year and held cash during the declines. Every single transaction has dawned on these pages.
If you are still in the market and don’t want to take a trip down to 3600, this is the stock market’s last stand and your last clear chance to avoid the accident – at least for now. It could also be a buying opportunity. That is why we call it an “inflection” point.
It is time to fold if the market does not hold the overnight low at 4138.75 today. Maybe it will be a short-term entry point for a swing trade if it holds. We will let you know later today.
Last night, the market impressively flipped higher from the Covid-19 trendline at 4138.75, which is why holding the low is the most critical task of the day ahead.
Will the market hold the levels today? Any other time I would say yes. The CNN Fear and Greed Index is now down to 11. I suppose it could tag zero – but there is no argument that we are in the zone for a swing low.

Suffice it to say that sentiment is locked and loaded for an important low, and if the low does not appear soon, it is because there is no modern precedent for where we find ourselves.
I would add to the lack of precedent that we don’t get a lot of practice at bear markets. It is hard to remember if the same issues arose in the last bear from 2007-2009. For sure, options had significantly less influence on the markets then.
Don’t forget my dictator investment strategy from yesterday’s afternoon notes. The risk of a rally on any good news from the war front is beyond extraordinary and far exceeds the risk of further losses.
The rally thought hit me in the middle of the night as I contemplated how the market could screw the most people at once. While everyone on the street smiles over their hedges, the strategy could backfire – as it usually does when the crowd is in a lopsided position.
It is back to our reference of the “mother of all short-covering rallies” when $1 trillion in Put Options head for the exits at once.
That keeps it simple today for the big picture, hold the overnight low at 4138.75 or bust – that is today’s market task.
The 3600 level could be tagged intraday on a spike low to wash out a few dealers, but it is a low probability.
And just because the market pivots here does not mean the bear goes into hibernation. Think of it more as a rest stop along the way to next week’s Fed meeting.

It was a volatile overnight session, and there weren’t any concrete headlines triggering the ES move to 4138.75– it just seems the market found a base at the trendline and then ripped higher as EU markets (and SPX options) re-opened.
Key resistance today is at 4228 and 4300. Support is at 4149, and a break of 4149 invokes a move to 4050.
A break of 4100 renders the stock market “oversold” from an options perspective.
Until the S&P 500 recaptures 4300, there is no reason for volatility to subside.
If things don’t make sense, and there is no news driving markets lower, remember that there are exogenous and tangential effects from parabolic moves in commodities and credit. Some of these markets are broken, and it isn’t easy to gauge the impact contemporaneously.
I will put out my granular level screen a little later this morning, but holding 4138.75 is the critical information for now.
Coming off a trending day, coupled with futures being divergent overnight, has me looking for more two-sided trade today.
Lately, though, overnight markets have been irrelevant.
I would also watch the halfback level today at 4253.50 as an essential line in the sand for potential tone change back to bullish. Maintaining acceptance below this level keeps the status quo – sellers in firm control. If the price manages to get above the halfback, monitor for continuation.
Watch the previous swing low at 4101.75 as a reference point if things go south again today.
Don’t forget that the February inflation numbers come out Thursday morning. The numbers won’t reflect the recent commodity spikes.

Happy Turnaround Tuesday? One can only hope…

A.F. Thornton

Founder’s Morning Notes – 3/8/2022

Founder’s Morning Notes – 3/8/2022

AF Thornton

Subscribe!

Founder’s Morning Notes – 3/8/2022

Related Posts

Subscribe!