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May 15, 2020

Volatility Reports 05/15/20

If the 62% retracement is familiar to the majority, they are ignoring it.  The comparisons to 2000 and 2008 are just the most recent when looking at today’s market.  The history of the .618 retracement is well known back to 1929 and before. It also fits the market phases model seen below the first featured chart.
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The 62% bear market rally is the so-called “Return to Normal” phase of all market cycles, seen here overlayed with the speculative bull market in gold back in the late 1970s early 80s.

The “Greatest Bull Market” shows the same type of pattern as it cut through the behavioral phases that all markets go through.  Today we are in the denial phase, the “I can’t believe it” period.  That can be applied to the market, the economy, and the pandemic and other known unknows that will be impacting the market, like the geopolitical events and the election.

Our tidal model is providing sell signals in the current time window that are nearly identical to the configuration of the peak of February 12 (19th for the Nasdaq), with an inverted cycle and the same tidal forces. Next to October, May is the second most active month for panics. The time window running from May 22- May 30 should experience the same type of long bar days seen from March 9 through the 16th

If the secondary peak is in place as expected the decline will unfold like the chart on the left which is the primary top on 2/12/20. Hence, the price level at “2” should not be exceeded and another near term decline for <i> should make new near term lows before the meaningful period of the decline digs-in.

Contrary Thinker has already pointed out that Bitcoin is a risk asset, not a hedge.  We have pointed out that after near-zero pricing to 10s of thousands of dollars bubble and bust, it takes years of base building before anything bullish re-emerges. From the massive spikes we saw in the late ’70s in gold and crude, all of my clients wanted to buy them after the markets crashed and it took decades to recover.

The same will hold true for the Cryptocurrencies boom’s fairy dust will take a while to rub off. The featured chart here provides three short term sell signals, one based on our OB/OS model, one based on the tidal forces flipping to down – see the track record on the left-hand side and the red high-lighted area points to the markets failure to hold its new support area.

The Bitcoin has been leading the stock market lower.

Another market that should concern risk markets is junk bonds.  The narrow trading range has set the market up for a dynamic trend. Our Volatility model has been coiling up in a Technical Event #2 for a week plus. These #2 events are leading signals of a one-way trend.  A drop below 77.58 should set it on its way. A move above 80.40 would be a break for the bulls.

For reasons CT has pointed out previously, our bias is bearish and the break should be lower and should lead stocks lower.

 

Visitors at the “Volatility Reports” Group in LinkedIn, need to opt-in as a subscriber before their free look runs out. 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice.  My indicators and strategies can be withdrawn for private use without notice, at any time.

— Contrary Thinker does not refund policy; all sales are the finale.

Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

May 8, 2020

To be a hedge or a risk asset the Bitcoin

Until there are clearer signs of the commodity (food) based inflation, I will stay with deflation across the board.  Bitcoin is a risk asset and leads the stock market direction. It is not a hedge.

While the supply of the coin is controlled everyone is a crypto coin miner, creating the new digital assets. So Bitcoin is a brand like Coke or Kleenex and a leader, but there are many many many more on the market and many on the way.

The sentiment is over the moon on BTC. calling for $50,000.

Yes, it’s truly one of my heroes, someone I have met is publically saying he is buying the coin. To be honest with you, I have hear all his calls going back to the 1980s, like the passive short on a head and shoulders on the Swiss franc, which was a disaster.  Like I have said before, I never take his public ideas seriously, only his methods, which I have studied.

The BTC was s dream come true turning pennies into thousands, and sure if it happened recently it can happen again. If it was just that easy.

The public seems to be an enthusiastic buyer so the “pool” of liquidity is set up will buy dips and TPJ will be a seller and a short seller.

Here is a chart crime on the Bitcoin, that makes no sense. Its a triangle like a form this guy sees buy it’s based on no known formation and is not anchored to any volatility model that would support that breakout. In fact, the I-T backdrop provides an event that says the uptrend is old, feeble, persistent but due for a change. Plus the S-T peek here has been on panic buying, the kind of emotional buyers that are easy to take advantage of.

The long term bullish case is to but BTC maybe in two or three years and that may be optimistic. From an EWT point of view, the highest price would be the beginning of a very long term bull market, like the peak in Gold back in the late 70’s early 80s’. If the market is tracking out a triangle its a large [B] wave. With the late 2018 low wave (A), the recover rally into the mid-2019 wave “A ” the break to the March 2020 low wave “B” and this S-T recovery wave “C.”  so an S-T decline from here is wave “D” and one last little advance inside the triangle wave “E” to finish the wave [B] before a collapse about the width of the triangle.

p.s. If its a triangle  Today, CT’s chart shows the market nearing a peak.

Just like the world equity markets, the Bitcoin market is a leader and always in gear with its bullish and bearish moves. The chart I feature here shows an overbought market in S-T resistance. A sell signal today or Monday by our OB-OS method, a slip by the market below the low end of S-T support – aka failure to breakout – with the Tidal Wave system flipping today or early next week from up to down, should set in motion a meaning full decline.

TradeStation Members

I am working on the short only BTC system, a version of FastEd (FE), and as promised all workspaces and code will be uploaded to your Dropbox folders shortly.   FE really likes short breakouts and working it for the long side at this point, will let you know. If you are using Eclipsed or %BB-DBR and you are showing it to run hot in the long side, email me. When I dust it off it looks fine and robust but no hot streaks – 18 winners in a row – as we saw 4 years ago.

Great and Many Thanks,

Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
Copyright 1989-2020

Capital Managers and Professional Investment Advisors visit: www.ContraryThinker.com
Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-618-3820

or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice.  My indicators and strategies can be withdrawn for private use without notice, at any time.

Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Use only risk capital when trading futures or options

May 6, 2020

Stock Averages Back Story 5/6/20

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