September 12, 2021

Volatility Reports 9/13/21

The Rule of Alternation Tells Us to “Expect Something Different” That is one of the many first principles advisors, managers, and traders know but it does not tell us “when.”

But this ebb and flow, this process from motion to rest and back is demarcated. The when is after natural or human-made divisions in time, as the calendar week-month-quarter or the accounting period when the books close, or anniversary dates when cycles begin and end.

So, after the lowest year in volatility -according to the media – 2017 was it; and what proceeded was a change, with a 13% correction in nine trading days from January 26 to February 9, 2018. Followed by a near 20% correction in the fourth quarter of the same year. Something different indeed.

Today, nearly the last quarter of 2021 we have a similar background. Our social media friend Charlie Bilello posted the following stats:

This is also in agreement with the Google Alerts following keywords like “FOMO” and “Stock Market” among others that have spiked to extremes over the same period as seen in this chart from Global Market Perspectives.

Lastly, in recent issues, I have displayed charts of the Skew index reaching historical highs. This index is based on perceived tail risk by big money players. In other words, with their “ear to the ground” they hear a known – unknown coming at the markets and possibly a black swan event, an unknown – unknown.

Staying with the underlying context of the markets the next four window chart tells the story of the current readings of the historical volatility of perceived volatility for each market on a short term (S-T) basis. That jumps off all the charts is the Technical Event Model reaching an extreme rule #2. These signals – setups – as a rule, precede breakouts with carry-over or trends. And here I am talking about breakouts in volatility, in other words, “fear is about to go into a trending mode since that is what the CBOE data measures.

Based on the above, for traders and hedgers that have scalping Algos with Turtle Style contract sizing – esp if filtered by TEM – now is the time to be engaged.

The bottom line in the Volatility Report dated 8/23/21 stated: “The rally into today’s COT is expected to fail and the downtrend that began on the 16th will be capped off on the 23rd and 24th going to an “out of the blue” bear market. iCahn Hedge is engaged, more on that in the last two hours of trading.

The Dow is always our focus as it is a household name and most widely followed. Plus we have data going back to 1889.  What is important to see on the daily Dow chart is the peak came in on the 16th of August, the exact date in the COT table; and the secondary high hit on September 2, the day before a high tide event was expected and early in the week of high COTs. The chart shows this market just not failing to keep up with the S&P but being rejected but intermediate-term resistance followed by the breakdown of its wedge pattern and its lower channel line.

Another daily bar chart of the Dow shows a truncated fifth wave high. It’s more than another way of saying it failed to confirm ATHs with the S&P and Nasdaq, it broke an EWT rule, as such – if it is a failed fifth wave – the old school EWT boys will be jumping on this with massive selling this coming week.

The chart also uses Gann angles to point out target areas for this first phase of decline. Each zone is highlighted in blue and the price levels are cross-checked with CT’s Gann’s excel sheet that projects targets, where the focus is only on the 360-degree target nothing in between. Contrary Thinker likes to see the 360-degree projections nest with the angle crosses seen on the chart. 32,000 should be a walk in the park by Friday.

If you recall how bear markets are structured, if the market does has a long bar day of greater than 5% – a place where banks and funds have their trend following bands that kick in – shortly after the ATH, it is only a correction. If it is a bear (by definition greater than 20%) it will unfold with longer bars following a geomatical expansion.

Historically, the market does not go into any form of panic – aka long bar days greater than 5% until a month after the peak. The Dow is there now, so the pace of the decline is expected to pick up this week. The next meaningful COT is Monday the 20th, but that series of COTs works it way out to the end of the month, September 27. What is key – assuming the above scenario is correct – at the end of this week or over next weekend, CT needs to see where TEM is along with its Panic Index and on all time frames along with an EWT count, with the expectation of an S-T bounce

Trade-Ideas are the same.

Any of the positions that were stopped out does not mean the position is wrong it means the goal is to keep losses small. All of the positions will be reentered. Last week as noted I doubled up on long USD/JPY and short EUR/USD.  More on positions and new entries and re-entries to follow.

Don’t get caught looking the wrong way.  Don’t think all the social media contacts are friends providing solid advice for free. Wouldn’t you rather have four quarters than one hundred pennies? Value who you work with.

The new you is going to cost you. For starters giving up the old you. Join our group without question. 

Copyright 1989-2021

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 8006183820 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its client’s 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.

September 8, 2021

Volatility Reports 9/8/21

Going for the record books, again, but does that matter?

For the record books how many times have you heard this:

The economy “is caught in an ongoing ‘liquidity trap’ where maintaining ultra-low interest rates are the key to sustaining an economic pulse. The unintended consequence of such actions, as we are witnessing in the U.S. currently, is the battle with deflationary pressures. The lower interest rates go – the less economic return that can be generated. An ultra-low interest rate environment, contrary to mainstream thought, has a negative impact on making productive investments, and risk begins to outweigh the potential return.”

and how many times have you read this:

“The ironic truth of the current bubble is this: it’s not the effectiveness of Fed policy that rules out market losses. Rather, it’s the willingness of speculators to rule out market losses that makes Fed policy effective.”

or how many times has this content popped up on your phone’s data stream:

“Friday was the 52 and Monday all indications are that we will get the 53rd record high with 2021 set to have a record number of all-time highs”

and the catch 22 faced by the western civilized world:

“With inflation on both sides of the Atlantic now rising by more than anticipated, not tightening monetary policy risks letting the inflation genie out of the bottle in America and in Europe. However, for different reasons for Powell and for Lagarde, tightening monetary policy now risks triggering serious financial market crises both at home and abroad.”

Without the intent of lecturing,

all this is great stuff but when the bull’s time has come, its time has come. All the doctors of money have written this elderly patient off. A market that is riddled with every record to break in the history books, yet that pacemaker keeps on ticking. Still, we all know, when its time has come, its family will gather around to see it off peacefully, no?

But what is the market saying about itself?

For one it is unquestionably obedient and very compliant.

It is gratifying to see my competitors, especially the ones who get their dial on TV following me so closing in time and space with the same idea. One difference is that I do not hedge my statements. So when they say their indicator does not “intended” to call tops or bottoms” one understand how they can look at their own work and say in the fourth quarter 2018″…the data below the surface was turning bearish and the current %5 dip ‘could’ see further downside.” He goes on to include the 2020 peak, which he missed ” as his indicator did “not expect to produce larger moves (lower.)

Since 1987 there are few tops I missed that rendered the market helpless for 20% or more, from 2015 peak through 2020, Contrary Thinker is perfect. Here in 2021 we are early with the risk-off since May 2021, as in walk away May and come back in October (see more details below regarding impact on P&L).

In any event what my CMT pal is trying to say is that, since the fourth quarter 2020 low, the advance has been increasingly low volatility. After each steady advance reaching an extreme of complacency, the ensuing corrections have been milder and shorter in time. The S&P chart on the right is a prime example. The indicator on the left is CT’s %BB-VIX which is one of our measurements of market emotional preparedness. 

At the moment the market is ill-prepared for a decline that reaches 2 to 3% in a single day. But to repeat here an important rule is if one expects a bear market, do not expect a crash near the high pivot.

Use Bitcoin as an example. It made top tick on 4/13/21 – my birthday so you can mark that in your calendar and send referrals. Relative to its long bar history it did not have a panic day until 5/12/21 when it declines 23%. Such action is similar across other broad risk-taker markets.

That gives contrary Thinkers two conclusions here.  One regarding the BTC, it is in a bear market with that mini panic being part of the decline, not the end, because it did not exceed the previous long bar decline with its 21% range day sell-off.

Dito for the Dow & Co, while the sell-off that is expected from here into October should be brisk, there should not be a long bar decline that exceeds 5%. If one does, the bear will be like the 2020 crash, which is too soon to be likely else it is only an S-T to an I-T correction of 10% inside of a longer-term bull market.

Change of Trend Table

So you know astrology was a $2.2 billion industry last year, and most of them are generalists writing for blogs, magazines, and the Sunday paper regarding a person’s sun sign. A product that leaves them and the science open to the critic of being so general it could fit anyone. Fair enough, but I have a long-time friend who called the peak of the 1987 market to the minute based on Geo-cosmic events. Today he is more retiring but the point is it works, does so consistently especially used in conjunction with other tools.

Since I added tidal waves to my studies and expanded the research from 2016, my calls for market turns have been on the money. Out of the last four major off-risk signals, only the current one has had my advisory over my skies, which is on the right-hand side of the ATH.

However, the way I strategize around the pivots is a low-risk high reward ratio of 1 to 10, leaving my portfolios down since May 8.6% in the S-T product and 9.8 in the I-T product.  I encourage any visitor to the LinkedIn Group to sign up for one of our discounts deals because come mid to late October we will be set up to provide the trades ideas on a transactional basis with a percent of profits kicker. In other words, this is your chance to get in while it is still inexpensive.

As always the discount offers only apply to current visitors in the group or returning customers.- Thanks to the many that have been inside the group since early July and hope to work with you in the near future. 

Calendar counts, cycles, tidal and geo-cosmic events are clustering this first week of September. Anniversary dates are big in the first week ten days of September. For example, on September 6, 1901, President McKinley was shot, he did not fully recover with his relapse on September 13th setting the market into a mini panic.

The Bull market is at the point of either melt-up or shut-up.

Don’t be a lone wolf, be a pack animal, collaborate with Contrary Thinker membership.

Copyright 1989-2021

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 8006183820 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its client’s 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.