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May 30, 2022

MarketMap #13

Ignore at your own risk, I could not be more serious in the conclusions of my research

Pulling money out of risk and putting it into short-term savings for the next few months to see how it goes is worth a “little embarrassment” if the Contrary Thinker’s advice is wrong.
P.S the risk of a missed opportunity is a false equivalent for proper risk management.
Eight Weeks Down According to History the Market is Bearish

Aniversary Dates

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May 21, 2022

Volatility Reports 5/23/22

Black swan events are a metaphor for an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact.

 

Back in 2013 when the Fukushima earthquake hit Japan there was a market incident where implied volatility on the Nikkei Dow jumped as high as 45 intraday in April of 2013. During that event the Nikkei Dow sold off with the Japanese government bonds selling off as well, hitting a 1% yield to maturity.

These jumps or spikes in volatility are short-covering rallies in the majority because the industry and public do not venture into trading for a bear market or a black swan event.

Rather the institutional types find a way to achieve a higher than average return by selling risk, they sell short the VX futures or the call options on the futures or some combination.

Add to that the dealer community being extremely short in volatility exposure and they have to buy it all back at once causing the spike.

The “bulletproof” mob that promotes the 60/40 split portfolio, they are faced with an interesting and inconvenient truth regarding modern portfolio theory (MPT). That is bond prices do not always move in the opposite direction as a stock market MPT has been built on the basis of an anti-correlation between bonds and stocks, which historically has proven untrue.

It is possible, if not likely, to enter an environment where stocks and bonds

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May 9, 2022

Volatility Reports 5/9/22 Risk Assessment

Fidelity Investments TV Spot, ‘The Planning Effect: Future Generations’

Feature this scene: A couple enjoys a gathering with loved ones. An ad reader comes in to explain that the event represents how it feels to have financial assurance and a wealth plan with the right balance of risk and reward will get you there.

Traditional thinking by the industry purporting risk and reward are somehow a balancing act. The higher the risk the higher the potential reward, which is a bunch of tripe While I can’t expect everyone I contact to understand this, not everyone sees like Paul Tudor Jones or George Soros or Stanley Druckenmiller.

But, I can expect a few of you to get it, break out of the envelope the industry has made for you to understand you can take 10% of your investment account – for one tactical example – invest it with timing in low-risk high reward trades. Make 300% plus on that 10% of your account therefore 30% on your entire account, beating the market’s average buy and hold return of 11% per year where you will need to ride out bear markets.

Select trading ideas on your smartphone that finds lower risk higher reward trades with the above policy in mind.  Only $10/month plus incentives for winning trades that exceed a predetermined threshold.

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May 6, 2022

MarketMap-2022 The Scenario Planner

The GOP is CRAZY! and the Dems are a pack of limp wrist Betas

This lack of civility and the widening gap in American political norms hangs like the sword of Damocles over the markets and our way of governance.

In the market map issue #3 which was published in mid-January of 2022, we pointed out that when the Dow made seasonal peaks between the December 11th and January 15th bracket it had similar outcomes in terms of market behavior. We pointed out that during that 12-month period following the peaks the market behavior – the scenario of the market – was remarkably similar to each other from high pivot to selling panic and from the top to the ultimate low. In the three market parallels used here, there is a strong sell-off in May and June with an ultimate panic low in mid-October. That low in the fall of the year is associated with a national security event.

We also pointed out that those three tops were followed by national security threats that the market did not know how to deal when the events happened. And that this seasonal top pattern was a twofold caliber because there was an event in October of the year of the December-January peaks and there was another national security event that put pressure on the markets in the following year between August and October.

While there were other examples historically, we focused on the modern events that traders, analysts, and advisers could relate to and they are 1961, 1973, and 2000. If you refer to the COT (change of trend table) you’ll see that we highlight anniversary dates that occurred in these three parallel seasons. The 2018 experience was very close to meeting the seasonal envelope projected but its top was outside the bracket on 1/26/18.

Contrary Thinker sees the pattern being significant in 2022 based on its own history and other unrelated methods that suggest the same scenario. So, we’ll take a look at each in some detail.

In 1962 there was a high rate of change sell-off in May and June with a mini panic low on May 28th, 1962, and again on June 22nd. These two-anniversary dates are on the near-term horizon and today’s expectation is for the market to be 25% lower from here and enter a panic condition. Traders should be looking for we should be looking for those long bar days from opening high to closing low on those days exceeding 4% to 5% which on the Dow is about 1500 to 2000 points.

Next week the current tidal cycle opens up the likelihood of such long bar days to begin.

The form the markets are likely to take is a 1930s type trading market where in effect you have big swings going down 70% and then bouncing back 50%. These big swings will be great for good market timers. There are a number of reasons for this scenario, but one is clear and loop side. That is after 21 years of buying the dips and holding long stocks for the great bull market where market timing became a nonexistent thing with few knowing really how it works, the next ten to twenty years will be dominated by this group of specialists.

Alternately if the market turns out to be like the nifty 50 peaks in January of 1973 followed by the worst bear market since the Great Depression um at the time that bear market was one of the dullest low volatility declines in history and only had one countertrend rally at the end of eight months of 20%. Otherwise, it was really a dull decline we don’t think that’s going to be the case looking forward, because we’ve just exited a decade of very low volatility conditions, especially in 2017.

But I want you to pay attention to the key conclusions here of the December 14th through January 15th tops in that from those highs you can count

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May 2, 2022

Volatility Reports 5/2/22 {sample}

If Providence is the basis of seeing the future, does it follow that the majority of vendors on Wall Street are atheists?

“We will only prosper if we relentlessly search for nothing but the truth, otherwise the truth will find us through volatility.”

MarketMap™  issue #12 outlined the scenario that persist since January 1, 2022. The topping process began in mid-May and many shares made their nominal highs in the second half of 2021 and with the Nikkei topping on 9/18/21 and the US averages peaking with the FAANG Index on 11/4/21, the Russell on 11/8/21,  the leadership average NASDAQ 11/19/21, and the Dow and S&P 1/4/22.

Ahh, the world is not perfect and confuses some Perma bulls, please excuse the snarky comment, but if you are more than a manager of a mom and pop account for the long term and the thought of common stock or the market gives you a brain cramp, maybe you should be a buy and hold and learn to suffer through the max drawdown.

MarketMap™ called the two peaks in 2018, actually three inducing the secondary peak on 12/3/2018. MarketMap™ -2020 is called the top as well. Granted we saw the risk but did not think it would be the “shortest bear in history, but the best hedge is raising cash and avoiding the drawdown.  MarketMap™ went off risk in mid-may 2021 and here we are today.

But if you think the bear market will be short lives just like the last three – the two in 2018 and the 2020 “shortest bear market in history.”  you are wrong, dead set.

If you are an experienced and successful trader, you will understand that when you read educated and advanced market analysis, none of them come right out and tell their readers the bear will not end until the end of this decade. Why, because the industry promotes that “Bullish on America” point of view and they are bullish all the time.  Bears are linked to recessions and that worries people about their employment and they don’t want to chase away that group that is at risk in the employment market.

You can read between the lines with a body of experience and knowledge to know what they are saying.  But as fiduciaries, we should do no harm, protect our people’s capital and show them how to prosper without taking on great risk.

While MarketMap™ has nailed down the outlook for the next 6 weeks, the context of the averages is noteworthy. 

The Russell is on a ledge and the next breakdown will lead to a high rate of change decline.  Our Volatility model for the long term and intermediate-term both provide a springboard for that break to pick up a massive following. Both are signally a rule#2.

The daily bar is near a mini panic low, so a minor rally early this week will be short-lived, and Trade ideas on our provide Trader Exchange channel will use bearish strategies. The targets are noted in the middle chart, more on that as we get deeper into the week.

The three other major indices are set up the same way. The “Volatility Report” chart here does not reveal a clear low-risk bottom. All three of the indicators must be providing an extreme high in fear. On the contrary, none of them show that extreme. In fact, the NASDAQ supports carry over after a break.

I have annotated the S&P and COMPx with their downside targets.

You don’t speak to computers or chat robots at Contrary Thinker!

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Country Thinking is about letting go of traditional ways of thinking, the commonplace that no longer serves you well in investing and trading. Building from the truth, from first principles the robust into anti-fragile. Thanks in advance for your consideration, I look ahead to working with you for the duration.

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Great and Many Thanks

Jack F. Cahn, CMT

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

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May 2, 2022

Volatility Reports 5/2/22

If Providence is the basis of seeing the future, does it follow that the majority of vendors on Wall Street are atheists?

“We will only prosper if we relentlessly search for nothing but the truth, otherwise the truth will find us through volatility.”

MarketMap™  issue #12 outlined the scenario that persist since January 1, 2022. The topping process began in mid-May and many shares made their nominal highs in the second half of 2021 and with the Nikkei topping on 9/18/21 and the US averages peaking with the FAANG Index on 11/4/21, the Russell on 11/8/21,  the leadership average NASDAQ 11/19/21, and the Dow and S&P 1/4/22.

Ahh, the world is not perfect and confuses some Perma bulls, please excuse the snarky comment, but if you are more than a manager of a mom and pop account for the long term and the thought of common stock or the market gives you a brain cramp, maybe you should be a buy and hold and learn to suffer through the max drawdown.

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May 1, 2022

MarketMap #12 Sample

“Down cycles are not fun. But they form the basis for enormous future profitability.” – Steven A. Schwarzman.

Hey Steve, What a ton of drivel.

Published on: May 1, 2022

If you never heard of this fella, here is a thumbnail: Stephen Allen Schwarzman is an American billionaire businessman and philanthropist. He is the chairman and CEO of The Blackstone Group, a global private equity firm he established in 1985 with the former chairman and CEO of Lehman Brothers.

It’s clear the majority will agree with him because they have no idea of how to make money in a bear market.  It’s also obvious that his new partner (from 2007 Lehman) knows little about risk management or protecting his client’s capital. Besides, there is nothing in it for him to do in the public domain but hold the industries line “Bullish on America,” as we use to say at Merrill in the day.

But inside Merrill, it was another story for many of us. And at the risk of sounding self-aggrandizing, there are many that came out of that Technical Department that have made millions in market timing risk management and compounding profits.

And it’s FUN! It’s like your underrated team just won the Stanley Cup!

These numbers are current through last Friday 6/17/22. Count the number of calendar days back from the 17th 196 days and you will see Contrary Thinker went aggressive on the bear trades with the TOP of the Nasdaq. Hey, even a broken clock is right twice a day. The deal is you have to know it and do something with it.

I have seen many wealthy investors suffer for years because their long-term family heirloom stock is declining by 50%. But they cannot sell it because their cost is $2 a share the stock is currently at 80. You not paying the tax at all provides the psychological wherewithal to stand by helplessly watching their stock go from 80 to 50 to 30. If they had paid taxes annually, they would be better off.

Let us see it from another point of view because most investors know the power of compounding their rates of returns. The well-known Turtle leveraging system is based on this “power.” Yet the majority do not have the insights to take advantage of it or they are too lazy. So, they just have a buy-and-hold investment policy.

My point is simply this if you start with a reasonable sum of money let us say $10,000 and you make 10% a month, use the power of compounding, you will be a millionaire in four years.

This is not farfetched since many times you are making 30 or 40% or even doubling in an exceptional month but ride out the dips, the corrections, the bear markets, which you KNOW are coming.

So why not sell and look to buy the correction? Do you have to pay commissions?  Do you have to talk your broker into selling it? Do you have to put up with humility if you are wrong and the investment keeps going up? Man, that is rich! You need to stay focused on the process and get your head with all the pet peeves out of it.

The reason the leveraged ETFs and the reason deep in the money options appeal to the market timers is they know that they can double and triple their money in a brief period of time, with a sound trading strategy. Obviously, since everyone is not a multimillionaire the real secret is only trading when the situation is optimal, with high reward, and near price levels that keep a wrong move a small loss. Professionals trade entirely with less fear as the foundation of their operations because they have this investment policy or philosophy.

If you are not a member of Contrary Thinker you should do it today.

Getting back to having fun, this week is expected to open with a break to new lows. On Friday all the major indices closed below their 2/24/22 lows except the Dow, which has been pointed to as a smokescreen.

The first chart provided here is the daily and weekly Dow revealing both S-T price support and the next major support zone. The daily bar has prices sitting on a critical descending trend line. A move below it should not be ignored by the market. Gann trend lines happen to intersect on the daily bar at the intraday lows for the index on 2/24/22. A move below it is a bearish signal that will pick up a following before the week is out.

If Contrary Thinker is correct about a lower gap open Monday the outcome becomes near certain. The weekly bar has lots going on but it should be clear there are three independent methods used to calculate where the next support zone is running from 25,300 to 29,550 with a mid-range at 27,166.

That puts risk for May into June at 25% from here. The three methods are ratio math that projects support zone for the year (green horizontals.) The Fibonacci retracement of the advance from the 3//23/20 low (.382, .50, and .618). Plus the Gann angles that cross at 28,000. Also, note that the recent cross on 2/24/22 makes it a very important level that should act as an acceleration point if broken. Also not the next cross os in mid-June, which fits our COT scenario planner chart and table.

Long-term clients are familiar with this chart it is published every year in January so plans can be made for the year. Of course, we make adjustments as we go but there is nothing major and the dates will never be perfect. Yet the outline thus far is satisfactory.

You’ve got the background, NOW get the Trade-Ideas? Just $10/month for all of them! Use your smartphone here, clip and paste: https://tradeexchange.app.link/jack_cahn

Contrary to Thinker’s Five to One (average win to average loss) product trading bull and bear ETFs are suitable for most. These are real numbers, thanks from day one.

Members-only past this point to access the annual scenario map and change of trend (COT) calendar.
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May 1, 2022

MarketMap #12

“Down cycles are not fun. But they form the basis for enormous future profitability.” – Steven A. Schwarzman.

Hey Steve, What a ton of drivel.
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