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Prepared by and Scott
Writing under the nom de plume of J.L. LORD

Thursday | May 21, 2020

Hello Eizell.




I stated in yesterday's MORNING REPORT that “Yesterday's selling at the close was stupid and an over reaction”. I predicted a day higher because of anticipation leading up to the Fed meeting and a remedy to the previous day's stupid sell-off.


The news on Tuesday was nuts, and we only sold off 40 points from the high to the close because of nerves (or the lack of). We made that ALL back on the open, and then kept going.

The SPX opened +30 points higher and climbed to a high of +57, led by tech stocks such as AAPL which closed up $6.09. We did have two slight/minor pull backs. The first was news that the Chinese stock market was falling because the US Senate passed a bill to limit US-listed Chinese firms. Fear or reprisals had the algorithms selling slightly. We worked our way back to the highs and then the Fed announced, which caused another 10-point decline before bouncing again.

The day can be best described as “sitting around waiting for 3,000, but getting tripped twice along the journey.

Remember that SPX 3,000 is the 200-Day MA, and a HUGE support/resistance number.


TODAY: May 21

MEDIUM TERM – HIGHER, testing 3,000 (200-day MA = 2997)


The minis in the night session are lower by 16 points at the moment. The cause of the move lower in after-hours trading is likely a spat between Trump and China. China is thanking Trump for being comical and making China strong, while Trump is blaming China for lying about the virus.


BELOW 2950

All of this sent futures below 2950, BUT I AM NOT WORRIED. Most people seeing futures below this key number in the middle of the night would predict a lower open; however, these things have a very short half life. Eventually we realize that every time China complains, it is because they are hurting.

We will very likely see this ratcheting up with tensions and tempers flaring. Neither Xi nor Trump are the type to pay quarter or back down. Even with the most to lose long term, China still acts as if it controls the board game.

I am still standing by my prediction (made December 31, 2019) that we will be positive for the year and making new all-time highs by the end of the year. I maintained this stance even when the SPX was down -35% for the year.

S&P 500 Price Limits

From 8:30 a.m. to 2:25 p.m. CST, there are successive price limits corresponding to 7%, 13%, and 20% declines below the previous trading day’s reference price.

From 2:25 p.m. until the 3:00 p.m. CST close of the cash equity market, only the 20% price limit will be applicable.


Average year with lots of inter42mittent volatility
(-8.02% so far)

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I called an “audible” and changed the topic based on the deluge of questions coming in. The topic was the BOX SPREAD and DRAGON FLY. With the BOX, we discussed how to price spreads off of the BOX, who to hedge ITM spreads, the 3-Leg BOX, synthetics and arbitrage based on the BOX. This is a MUST class for any trader. Seriously, and NOT a sales pitch.



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