April 21, 2020

Volatility Reports 4.21.20 Risk Off / Hedge On

If they’re not making any money in the Twittersphere, they are sure having fun

Here is a prime example of a common attitude among investors: 

The fact is that over 140 years or better of market history it is either in a base-building trading range for 15 to 20 years or in a secular bull market for 15 to 20 years. The only difference is you have to learn to trade when you don’t have a bull market. Market timing is required.

Connecting the Spring Outlook Report expecting a deflationary spike, the stock market fits in with that scenario.

I like to compare the day session chart with the Globex hours only graph. I expect to see cross confirmation, like success or failure at the same time, the OB-OS model giving signals at the same time. The volatility modeling being in gear comparing the two sessions. In general, I assume the NY day session is local money and the other offshore funds.

Both sessions show a 62% retracement of the first leg down of a significant bear market. They both reveal a sell signal by the OB-OS method used by Contrary Thinker.  The charts show a failure on Monday the 20th of April, which is a failure to breakout. The reversal is a sell signal. Now any move below the S-T support zone that starts at 23,065-22,995 on the high side with a clear break below 22,450-22,690 should provide bears confidence.  The majority of bulls ruled out a test of the March low, CT expects the low to be broken.

The volatility model is not ideal for our hedging systems, which like the straight-line high rate of change trends.  The direction does not hurt the short only systems, its the false starts that hurt, the whip-saws. The S-T model shows an uptrend that is laboring, old, and in need of a change.  This condition can sustain; it called a low volatility trend like the market experienced in 2017.  However, as I accented in the last Market Map 2020, the market has now rallied into a change of trend window. This week the cycles flipping from an uptrend to downtrend.

When you add up the above and the bulls seeing the change coming yet asserting an inversion without a basis and the deflationary spike hitting the commodity markets, it remains “Risk Off” and “Hedges On.”

A man without a vision of the future always returns to his past experiences. Use outside historical and independent research.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

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