Good Morning:

• Yesterday’s publication of the March Fed Minutes was a lot to swallow. Over $90 billion a month in balance sheet reductions plus more interest rate increases.
• If the market holds, it is partially because over $1 trillion naturally comes off the balance sheet over the next 24 months through bonds and notes maturing. They do not have to sell into the market.
• The news, however, kept the market below the key 4500 threshold, which puts the market back into higher volatility and negative gamma. I am expecting a 50 point plus or minus range from the open today.
• The 4575 area is home to the 21-day line, the 200-day line, and the 21-week line. The WEM low sits at 4450, which we tagged yesterday, but the market bounced there. The S&P 500 Futures are at 4460 at this writing.
• There are many technical reasons, then, for the market to turn here and close back above 4575.

• That puts significant resistance now at 4500-4520, with WEM support at 4450. 4450 should hold as the WEM low, at least for the week.

• At this point, it is just as easy for markets to shift lower and tag 4400 as it is for them to rip back up into the 4550 area. 

• Markets have built up just enough implied volatility to add some Vanna fuel. If the market can retake 4500, that fuel likely leads to a pretty sharp snapback as volatility selling slips markets higher. 

• Risk remains high while the S&P is below 4500, and that same Vanna fuel can work to the downside.

• If the market can rally in the face of all the negatives, do not ignore it. Let the price action take us where it wants to go. MGI always takes precedence over opinion.

• Subscriber charts are posted.

A.F. Thornton