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July 28, 2020

Volatility Reports 07/27/20 World Index net USA

The race to the bottom by the central banks will not end well. The shift from central bank puts as they are called that are “reactionary” to pre-emptive stricks on financial risk through unconventional monetary policy amplifies hidden short convexity. A market that is trained like Pavlov’s dogs.  A backdrop that leads
to tail risks that are near impossible to gauge.
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July 27, 2020

Volatility Report 7/27/20 mini Russell

 

The evidence stacks up that the risk equity markets are on the verge of the next leg of decline.  In the face of  “preemptive” volatility suppression, there is no way the local or the world economy is going to grow its way out of all the debt. The only question that remains is who gets thrown under the bus?
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July 21, 2020

Volatility Reports 7/21/20 Fang Index

Panic Buying is Gripping the Premier Fang Stocks

On July 7 “Volatility Reports” pointed out the occurrence of a TE#1, a backdrop of emotional buying. Furthermore, all of the below is in the context of the S-T tidal system flipping from long to short on the Nasdaq plus MarketMap’s annual fractal providing the big turn for the year this week.

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July 16, 2020

Volatility Reports 07/16/20 Nasdaq

Nasdaq Hyperbolic Peak, in place. What supports this idea is equivocation by so many advisors and analysts on what this market is doing, and their subject lines or intros being “questions.”
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I’m sure not many recall the peak in early 2000 by the Nasdaq composite. It ended a secular bull market from the low in 1974. A great bull move. I wanted to point out the pattern at this inverted V top. For one it broke the upper channel of the long term trend from the ’74 low. Such “throw overs” are equivalent to investors paying any price for these shares of stock. The type of emotional investing old money likes to see for profit-taking.

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July 16, 2020

Volatility Reports 07/16/20 Nasdaq Hyperbolic Peak

Volatility Reports 07/16/20 Nasdaq Nasdaq Hyperbolic Peak, in place. What supports this idea is equivocation by so many advisors and analysts on what this market is doing, and their subject lines or intros being “questions.”
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I’m sure not many recall the peak in early 2000 by the Nasdaq composite. It ended a secular bull market from the low in 1974. A great bull move. I wanted to point out the pattern at this inverted V top. For one it broke the upper channel of the long term trend from the ’74 low. Such “throw overs” are equivalent to investors paying any price for these shares of stock. The type of emotional investing old money likes to see for profit-taking.

Contrary Thinker’s volatility model on the monthly bar seen here signaled the uptrend was old, persistent and ready for a change. Please note that after the high in January and a month of decline the recovery – bounce – took a few months on backing and filling on the low side of L-T resistance – blue line – that was coincidental to 62% retracement before the other shoe drop.

Here is a snapshot of the composite from the wave [4] low in 2002, which reveals a similar set up at today’s highs. the throw-over the upper channel and the TEM reading of old, feeble, and ready for a change on the monthly bar. That is the Technical Event (TE) #3.  What else is nice is wave (5) is 2.618 times wave (1) and wave (5) is related to the length of the previous correction, wave (4) by the Fib-ration of 1.381.

On an S-T basis, the daily bar is saying that the tension behind the market is ready for a trend change as well, with a TE#3. The key price levels that would suggest a lower market are shown in the data window.

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July 15, 2020

MarketMap 2020 Issue #12

Change of trend time windows is popping up from early next week into mid-August. MarketMap-2020 discusses the methods and reveal the dates in this report

MarketMap-2020 issues early in the year provided ContraryThinkers with a hint that a peak was going to happen in the early part of the year.  One of the cycles was working back from 2020 with the Fibonacci series.

I said: “…working back from 2020, subtracting the beginning of the summation series from the current time window pinpoints the years of all meaningful – tradable – peaks back to 1929. I have highlighted them in the above charts.

The major or corrective tops posted in 1929, 1966, 1987, 1999, 2007, 2011, 2015, 2018, are all in the series counting back from late 2019 and the year 2020. Among other reasons, the market began to put in a major top precisely two years ago.”  In 2018 and 2020 fits as a major top year and 2020 fits with the Decennial cycle. Thus far it is proved very true.

By the way, reaching back 144 years – from 2019-20 – it pinpoints the panic of 1873. This financial crisis triggered a depression in Europe and North America that lasted from 1873 until 1879. In the United States, the Panic was known as the “Great Depression” until the events of the early 1930s set a new standard.

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July 14, 2020

Volatility Report 7/14/20

“Give me freedom or give me death against King George III, not Covid19”

A few weeks ago in Volatility Reports, I pointed out one alternative of the current rally’s change back to a bear trend. I pointed to the “1973-74 parallel. On that basis, “the current rally would take four to five months off the March 23, 2020 low before a dull and slow bear market took hold making new lows in 2021.” That timing for that peak takes the market into a July or August peak.

Volatility Report 7/14/20

The other alternative and the desire of many to get it over quickly puts the market early in the 1929 or 1987 crash, the first 62% retrace the first S-T leg down.

Given the fast recovery – the wishful thinking – of normal circumstances in the face of a pandemic and some in leadership pushing the libertarian ideal of “give me freedom or give me death.” So reopen fast and get back to work was their mantra. The problem is that we were fighting to be a nation, not fighting a pandemic.

The low cycle expected around the 4th to the 7th was a non-event, the cycle inverted, as previously noted. The cycles for long bar days have some potential this week. In other words, from the open to the close the day range can be greater than 4%. These are the types of days we lay in wait for, as low risk and better than 4 to 1 opportunity.

However, these dates jump out of the history books for long bar decline days, from July 20 through August 3, it should be hard down. These particular days are anniversary dates of previous long bar selloffs: July 19, 21, 26, and 30. As long as traders are on the front foot, it does not matter which day(s) hit, but the period from July 27 through August 3, should be the period of the highest rate of decline.

There are a number of things that need to start lining up to put Volatility into our bearish strategies, which is a futures short selling scalping system. Monday’s UpThrust – head-fake or failed breakout- was a beginning. Our featured chart here shows the typical set up for this distribution pattern.

Similar to the above model, the point on the mini S&P chart below wave (2) was the climactic high followed by the distribution range. The rallies to the peak of wave “a” is the phase “B” in the Wyckoff model; and the rally and intraday reversal is the phase “C.” That suggests the range lows should fall today, with possible testing pull back to the low end of the range. That puts the S&P mini futures below 3,000. The Dow has a similar chart pattern.

The important intermediate-term volatility model is set up to support a longer-term trend. Excluding the Nasdaq and its futures are ready for a trend, a dynamic forceful one-way move. Once it begins there should be little in pullbacks or whip-saws. The Nasdaq is a different story and not bullish, but I will take it up in a second VR today. Plus the newsletter via email that covers our proprietary volatility model

Here is the S-T chart on the ES, the price levels in red, in the data window, are the S-T breakdown levels that should accelerate the decline, once broken. If you have short or bear strategies, this would be your signal. Contrary Thinker members can use this break, but there are more details in the next two VR’s coming out today.

Contrary Thinking begins here. 

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.

July 14, 2020

Long Volatility Hedge Report

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July 7, 2020

Volatility Reports 7/7/20 Fanng meets Fang

While advisors and capital managers should not expect the FANNG stocks to roll over at the same time, the signs are becoming clear that the buying behind these stocks is emotionally based, investor’s greed going over the top chasing profit potential, thinking in a straight line. To the experienced, this looks like a steak dinner with cocktails.
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July 6, 2020

Volatility Reports 7/6/20 Short Term Indices

The background based on price is coiled up like a spring. A trend-following or breakout (down) signal will get carryover. Charts with breakout points will be posted with the opening of the day session.

Last week I pointed out that our volatility model – a leading indicator, never lagging – for both the intermediate and short term signaled a trending move was on the horizon. that the bulls have a chance for the 1929 or 1987 melt-up that they are looking for.

For s-t and day traders’ money is money, trade either direction, it does not matter if my outlook suggests deflation for the long term followed by hyperinflation in the recovery effort.  I saw a connection of mine post a brief headed ” the low is in for the year,” which tells me nothing. Granted I did not read the brief, but the headline should be captured in the writer’s content. In other words, the low could be in for the year and there could still gibe back 20 to 25% from here, and not make new lows until 2021. The sell-off does not need to be like the last three we have witnessed. It could be more like the 1973-74 slow Chinese water torture, low volatility, and dull bear market.

The big take away here and breaking old school thinking out of their box it’s how you get there that is key and to be clear about risk and opportunity.

Contrary thinker’s featured chart is the S&P futures going back 23 years with our Tidal Wave model. As a system, it can be refined into a day trader with the TEM as a filter. From a forecast point of view, it provides a basis for the outlook.  Since the near-perfect sell signal after the February island reversal, the buy signal was early setting the cycle system into inversion, that is buy mean to have a short bias and sell means to long bias.

 

A few things stand out in the above chart. for one is the island reversals at the February top and the June secondary or lower peak. Neither one has had their gap closed, a bearish tendency. Both reversals were failures to hold long term and intermediate-term support zones. As mentioned TEM is a new signal for trend-ability.

While the headlines since the 8% down day have been one-sided bullish and every random count I take in social media has the bears at 3 to 5%, the market has made little headway. Here is the Globex three hours before the open, and only the Nasdaq futures are in virgin territory.

The NQ is in the S-T resistance zone and a move below 10,451 would be a sign of weakness.  Support for July is at 10,334.00. The other majors have run into S-T resistance and fallen back thus far.  More on that after the open.

As intimated above, the mentality of small-time investors, measured by the put/call ratio provides an indication that the bottom of the pyramid is buying, providing liquidity for smart money to pad off into, to take profits. Smart money needs a broad base of small buyers to be well entrenched in their buy one day dips strategies so they do no collapse the market.

Given the speed of two of the last three declines since early 2018, bibs are being pulled and the market hits the panic stage quickly. However, from a market mapping point of view, there are only one of two places the bear market can be stationed, and this is a bear market rally in the big caps and an irregular top – Gartley’s butterfly formation – in the Nasdaq, with the new highs.

Referring to the above 1973-74 parallel, the current rally would take four to five months off the March 23, 2020 low before a dull and slow bear market took hold making new lows in 2021.  That time mapping brings the market into a July or August peak. The let’s get it over quickly scenario puts the market at the (2) point on the chart. Given the snap back to normal mania and the tension in the background measured by TEM, collapse is very possible here.

Here is the textbook example of an irregular top. Keynotes about the topping process are the nominal new high made by the (b) wave. This new high is not confirmed by market internals like the A/D line, which is the case.  The new highs are being led by a handful of marque stocks, not robust advance. The limit of the advance is typically 1.236 times the length of the (a) wave; and the subsequent decline takes prices back to the beginning of the major (5) wave advance.

Running those rations on the real chart should put a cap around 10,542. My I-T resistance zone has its outside resistance at 10,549 for July. The (C) wave sell-off would target 6,000, the low from 2019, and about equal to the overshot on the high side.

Lastly, referring to MarketMap 2020, there is a change of trend expected early this week. If it is an inversion the market should change from side-ways to down. If prices continue to move higher, the next orthodox time frame for a COT is the week of July 20.

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

 

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