It’s a Schism-Based Stock Market

It’s a Schism-Based Stock Market

S&P 500 Cash Index Big Picture - Monthly Candles - Click Chart to Enlarge
S&P 500 Cash Index Big Picture - Monthly Candles - Click Chart to Enlarge

Good Morning:

 — Our algorithms brought subscribers back into the stock market (S&P 500 Index) beginning at 4113 over a week ago. But the Archimedes’ Hourly strategy tripped a sell signal at 4132.50 overnight, and the Daily strategy also tripped a sell signal at 4121 in Globex as I am writing this. We have been rotating some of the position when it is overbought and picking it back up at the 5-period line. But the weight of the evidence calls for a short-term turn today, which appears to be coming earlier rather than later.

 — We accumulate on the 5-period line in both strategies until it stops working. Price discovery much below the 5-period line triggers our stops. While it may seem somewhat of a conundrum, subscribers understand the approach.

 — The big picture in the Monthly Chart above shows the schism between a rising market since last October and the black swans circling above prices. A wide range of inept policies by political and financial institutions brought us to this point in only two years. Note the 2000-2002 bear market out to the left side of the chart with our M-Square framing. It is a close analogy to the current market.

 — “C” waves are dreaded. But as we saw in the March 2020 China Virus crash, they don’t always present. But carry the risk forward in our narrative because price reached the top of the consolidation triangle at the April 4 high, around 4138.

 — And when today is a short-term turning point on the daily chart as can be seen below, caution is elevated.

S&P 500 Futures Daily Chart - M-Square and Archimedes Turn Point Today - Click to Enlarge
S&P 500 Futures Daily Chart - M-Square and Archimedes Turn Point Today - Click to Enlarge

 — So if the machines fail to buy on the five-period line on the daily chart, and price discovery drops below Thursday’s low at 4121as is happening in Globex, cash is king once again, and shorts become attractive.

 — Our hourly strategy already stopped out in Globex at 4132.50 and may lead the daily time frame lower.

S&P 500 Index Futures - Hourly Chart Sell Signal Tripped (Clicked to Enlarge).

 — Supporting lower prices, the measured move from the last turn major turn point in early March is complete. So there is no reason to ignore this turn in the other direction.

 — And today’s turn date also shows up on the Master Cycle, though it is not forecast to be a major turn as yet. Only time will tell.

A.F. Thornton

AF Thornton


A.F. "Arthur" Thornton is an expert in logic, risk/reward quantification, market fractals, pattern recognition and asset class behavioral analysis with 34 years devoted to developing algorithmic and quantitative trading systems. In addition to trading his own capital, Mr. Thornton designs custom algorithmic and quantitative trading systems for a small and exclusive group of exceptionally qualified traders.


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