Interim Update – 11/10/2022

Good Morning:

• I am under the weather this morning, so I will cover the Trading Room tomorrow. Tom will cover the room beginning at 10:30 EST today.
• The CPI Report beat expectations this morning, so the short-covering has kicked in spectacularly, with the S&P 500 jumping 3% pre-market. Yesterday, I had estimated a 2.5% move in either direction based on option pricing – obviously a little light on the forecast.
• Gap Rules will be in order this morning, emphasizing #2 and #4.
• Today is not likely to be a great day-trading day, as distortions will abound in the indicators any time there is a move such as this in either direction.
• And the move may be nothing more than the DTE (one day to expiration) crowd running for the hills. Watching them suffer along with Bitcoin on the road to ruin is a pleasure.
• Every bull market cycle has its pretty lady, and she was Bitcoin for this one. There could be nothing more representative of pure Ponzi speculation save for U.S. Treasuries. And the 10-year treasury auction was awful yesterday. Nobody seems to want what the U.S. government is selling.
• But just like the election, onward we go for now.
• So, do we get our second leg up in the 20-week cycle or a complete reversal of these gains today? As I have repeatedly pointed out, the 20-week cycle usually runs for at least four weeks, even in a bear.
• When I look at the wacky way everything turns out these days, a complete reversal of the 3% gain would not surprise me in the least today. That is pure speculation on my part (and not science). It is just a feeling when we live in a world where up is down, and down is up.
• And fading this rally would be the brave thing to do – if one truly believes Armageddon awaits us in the third push down of the bear.
• And my embrace of an upside-down world is in no small part drawn from Tuesday’s election results where a very high percentage of voters seemingly approve of (i) skyrocketing energy prices, (ii) skyrocketing inflation, (iii) a rapidly deteriorating economy, (iv) suppression of free speech, (v) a disastrous withdrawal from Afghanistan, (vi) untested and mandatory shots that are killing people, (vii) open borders, (viii) a corrupt DOJ and FBI, (ix) a police state attacking parents, (x) grooming and sexualization of our children, (xi) World War III, and many more issues I have likely forgotten in these wee morning hours.
• I suspect Satan himself could be elected our next President, assuming he is not already in office.
• In past bears, the upward portion of the cycle at this point ran for eight weeks. This week counts four from the October 13th low.
• So let’s see how the day unfolds and whether traders and investors set a positive tone into weekly expiration next week (or not).
• Markets easily fool the unwary, just as elections do. But in the markets, everything starts with short-covering, though today is an extreme.
• Follow-through rules the day – and it may take a few days to confirm investor moods. For now, this is another day to cull your portfolio. Keep the winners and sell the losers.
• Imagine the money lost this morning by the meme crowd shorting the market for one-day. It is likely the same crowd eating their Bitcoin. That is why I prefer probabilities rather than gambling.
• We remain in cash. Even if the Algo issues a signal today, I will need more confirmation as the indicators will distort for a few days. If the picture is clear, we will let you know. 
• The Founders Group covered our shorts yesterday for a nice profit from our last sell signal. We always prefer to be neutral going into any high-volatility events.

A.F. Thornton