Morning Notes – 5/9/2022

Good Morning:

• We come into this inflation reporting week on decidedly negative terms.
• The tech wreck continues with the NASDAQ 100 and the S&P 500 both at new lows and opening down 2% and 1.5% respectively.
• The S&P 500 has strong support at 4000, which has been my lower boundary call for a while.
• The market could briefly overshoot the level, as the WEM takes us as low as 3985 this week. But I would be looking to work a bounce from there. Unless we are in an all-out crash, it does not make a lot of sense to short here.
• We will have a True Gap down at this writing, so Gap Rules are on the table this morning. Focus especially on rules 2 and 4. But even if we open back inside the range, the key is to find acceptance there. Otherwise, the market will expand the lower range.
• Overnight inventory is net short, so profit-taking should mark the open and boost prices. However, having come back up to the midpoint of the overnight range, the profit-taking may be well finished. If not, and as always, how the market handles the gap fill is your first sentiment indicator.
• Be sure to mark the open, as it is a key component of working the Gap Rules.
• Also be sure to review the BluQuant Oracle™  from yesterday for the weekly picture.
• Your job is to make money – so focus on that today and leave the news off.
• There is a significant chance for a tradable short-covering rally from here – so stay alert. It would more likely coincide with Wednesday’s consumer price data, but there are always insiders who already know the results.
• Overnight traders may simply have run the stops under recent lows – just to bring it back up into range. Also note my comments in the weekly review about the 4100 level and its importance.
• So I will peg support today at 4000, then 3985, with the overnight low at 4031 as the gateway to lower prices. Resistance is now at 4065, then 4100.
• Recall that we are in extreme negative Gamma. And while that tips the bias to the bear side, gains as well as losses are exaggerated. So once you pick a direction, let it run. Obviously, as short-covering rally has the greatest potential.
• A lot of folks are talking about a crash today. I don’t see it, and the market is too short to accommodate it without a significant catalyst.
• That doesn’t mean you have to be the first in. Wait for a true, confirmed pivot.

A.F. Thornton