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    CT Journals

    Jack Cahn

January 18, 2022

Volatility Reports 1/19/22

“Here Comes A Revolution!” – Saxo Bank Unveils Its ‘Outrageous Predictions’ For The Year Ahead

Time headline 1/3/2022 “Half the U.S. Believes Another Civil War Is Likely”

“Expert predicts potential US civil war, fall of democracy
A political expert has made a horrifying prediction about the future of the US with 2024 being the breaking point.” News.Com.AU
‘When one of the world’s leading scholars of civil war tells us that a country is on the brink of violent conflict, we should pay attention. How Civil Wars Start: And How to Stop Them
Book by Barbara F. Walter
In 2021, Billionaire hedge fund manager Ray Dalio placed the chance of a civil war in America in the next 5 to 10 years at 30%, citing “bad financial conditions and intense conflict.

I am not promoting this idea or using it as a false flag to cause anyone to sell stock. Except for a civil war here is not seen as a cause of a market decline in any survey I reviewed, it ranked at the very bottom. As a contrarian, that is a problem especially when all of the market indicators/systems are calling for a major bear.

Big changes cycle throughout history and build on previous successes and failures. For example when the gilded era ended in a bust and 90 years ago (45/2) was what I have been calling the Rooseveltian revolution to build American greatness. Forty-five years later under the Reagan admin, a new cycle of Neo-Liberal economics was kicked off, and its timing, like the timing of the previous cycle, was, how can I put it, “well-timed.”  It was great for Wall Street which was still a dirty word.

Be that as it may, forty-five years later it’s time for another big change. Back here in the world of finance, the selling is rotating from sector to sector and hints of hyper-correlation are popping up. MarketMap-2022 Issue #3a on the commodity markets is near publications.

Let’s get down to brass

The S&P 500® High Beta Index measures the performance of 100 constituents in the S&P 500 that are most sensitive to changes in market returns. The index is designed for investors initiating a bullish strategy or making a directional bet on current markets.

These higher-risk investors are on the ledge unable to mustard up a rally to a new high. That failure sets the stage for a more meaningful. The market does not adjust well to “failure.” From an EWT point of view, from the ATH the market traced out a clear five waves, as such, it calls the larger trend lower. So at least in the short to intermediate-term, the trend is lower

Contrary Thinker’s fast moving averages are pointing lower,  S-T and I-T.  Those two sets of triggers to sell high beta components should be compounded in the next day or two. Because from the long term to the short term the Technical Event Model (TEM) provides a background, a precondition, for a market that is “trend ready.”

For those needed to understand TEM better, it supersedes Wells Wilder’s ADX, The ADX is a component of the Directional Movement System developed by Welles Wilder. This system attempts to measure the strength of price movement in positive and negative direction using the DMI+ and DMI- indicators along with the ADX. What is important here is it measures after the fact the strength of the uptrend or the downtrend. It is post hoc, where TEM is before the fact, tells the trader when the condition is about to change.

CT’s featured chart tells a market’s narrative that it is on the verge of a high ROC decline and signs are pointing now at the high beta macro sector.

Today as the topping process rolls around, rotates, the vast majority continue to think in terms of “owning” something. Headlines the other day ” Is it time to look at China again?” showing one of the averages breaking a descending trend line.  Point is, you don’t hear or read about the protection of capital or selling into rallies, or working up new credit lines. Because they will be needed.

Rather from the public streams, I curate the most bearish comment goes like this:

I agree in fact, but it does nothing for the older Mom and Pop accounts (over 45) because they don’t have twenty years to wait for their assets to come back to break even.

New trades and hedges will be considered going into the open. Members access the URL to the Google Sheet.

Back Stories

“Here Comes A Revolution!” – Saxo Bank Unveils Its ‘Outrageous Predictions’ For The Year Ahead

Saxo Bank has today released its 10 Outrageous Predictions for 2022.

The plan to end fossil fuels gets a rain check

Facebook faceplants on youth exodus

The US mid-term election brings constitutional crisis

US inflation reaches above 15% on wage-price spiral

EU Superfund for climate, energy and defence announced, to be funded by private pensions

Women’s Reddit Army takes on the corporate patriarchy

India joins the Gulf Cooperation Council as a non-voting member

Spotify disrupted due to NFT-based digital rights platform

New hypersonic tech drives space race and new cold war

Medical breakthrough extends average life expectancy 25 years

Click here to view original web page at “Here Comes A Revolution!” – Saxo Bank Unveils Its ‘Outrageous Predictions’ For The Year Ahead

Become a member, and I guarantee that you will see the Contrary Thinker Team catch the market by the tail, big swing markets, and provide you with Alpha achieving ideas

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Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2021

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 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.

— 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 for your financial situation. Use only risk capital when trading futures or options

— Privacy Policy, we do not share your information with thrid parties. Full policy details here. 

January 16, 2022

MarketMap2022 Issue#3

A “bear market” is a decline of more than 20%. Preceded by a bull market of more than 20%.

The “New School of Technical Analysis” has moved beyond arbitrary definitions.

MarketMap-2022 Scenario Planner will focus on similar expectations based on peaks with near-identical tidal extremes during the same seasonal period.

The seasonal bracket is the best fit for Dow Jones Industrial peaks from

December 11 to January 15.

Bull market peaks that occur in December or January produce a seasonal pattern that repeats itself. Seasonal patterns, for example, similar intervals from top to a panic low. Plus, they produce two AOD (long bars) declines that occur at a fixed interval as well. These mid-winter seasonal peaks have also been followed by geopolitical events that have caused financial distress in the markets. This latter point is critical as the market does not anticipate national security events well.

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January 11, 2022

Volatility Reports 1/11/22

The Santa Claus Rally is Melting Away.

Since the spring of 2021, it seemed like everyone was waiting for the rush to value stocks. Well after a whip-saw double top the flow of funds into value shares vs the glamour growth stocks is here.

The first chart is the ratio between the two indices. The big advance from the 2018 low was all FAANG and related companies. From a traditional TA point of view, an irregular top has been put in place, with the nominal new highs seen in the left-hand chart window labeled (B).

The indicator below each chart is the relative performance of growth vs value, which is pointing lower.

The irregular top has extremely bearish implications but adding on top of that from an EWT perspective the advance from the 2019 pivot is an extension. By rule, extensions are retraced back to the price where the extension began. The implication for the growth stocks is a high risk while value shares are expected to decline at a lesser pace, aka perform better.

Here is a textbook example of via the SENSEX how the market corrects a fifth wave extension. Note how the decline ends were the fifth wave extension began.

The SENSEX unfolded in an  A-B-C decline. Alternatively, the ratio chart above shows the irregular top that would decline in a five-wave structure, with as much damage. So the bar chart structure of the decline is academic in terms of risk assessment, as they both imply 70% risk for the FAANG.

The FAANG index points to the assumed starting point of the extension back to the triple bottoms at (2), 2, and (ii).

The following chart was posted in the LI group with a brief comment that the glamour shares are set up for a forceful trend. The Technical Event Model (TEM) on the weekly bar is signaling a TE#4, a context that supports carry over after a break is triggered. Please note the index broke below its wedge channel, and how should see follow-through.

The daily bar – the right-hand chart window – is on a new set up TE#2 calling for a trend. The minor recovery today does not change this outlook. Sell rallies.

With the next COT still a few days away and only a very few signs of a mini panic in our indicators, the media, and the Twittersphere, there is more decline to come in this macro sector. And as pointed out at the end of last week, cycles support the increase in the ROC, for the trend to be more “pro-directional.”

Adding to the pent-up horror bulls should be facing in the next few weeks, is the monthly bar charts signaling they are ready to trend. TEM is on a new Rule #2. Once moving averages begin to cross under for the big boys or the 3 to 5% band is broken, the selling should become more intense. In the FAANG index chart above right, you can see how this market has signaled lower prices with its 5% alert back in December.

There is a 70% risk in the old leadership with the majority of the damage being done in the first half of 2022. If you have not taken profits, please do, if you are looking for hedge ideas and not a member, please join up, and do not buy these stocks no matter how great sounding the sales pitch.

Back Story

Around The World

Click here to view original web page at Around The World

In this month’s edition of Around the World with Academy Securities, our Geopolitical Intelligence Group (GIG) focuses on providing their perspective on the following geopolitical risks and potential surprises for 2022:

1. Will Russia Invade Ukraine in 2022?

2. Will there be a China | Taiwan Conflict in 2022?

3. Potential for Military Action against Iran in 2022.

4. Risk of a Major Cyber Attack in 2022.

Contrary Thinking Begins Here
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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

— 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

January 4, 2022

Volatility Reports 1/3/22

Markets do not experience panic sell-offs from top tick, the clock hit reset by the Dow on the 29th.

Furthermore, breakouts to new highs do not necessitate more bull market. The dilemma is as old as Shakespeare, to be or not to be, or ” do I trade the break or fade the break.

PLUS, I will not make any excuses for a pet peeve here, but smiley faces drawn on stock charts is not TA and they are not chart patterns. If it is not in Murhpy’s book, it is not TA. Rather it’s “making xhit up as you go along.”

I was just saying to some other perma-bull that they can spitball it all they want because the odds of seeming to be correct are backed up by the data on “calendar” annual returns. He put it this way, that in any random year the “odds” of being up are 73%. He goes on to point out the longer you hold, the greater the chances are you are making money.  He concludes that the perma-bears are doing something wrong.

I’ll make sure I will let Jimmy Rodgers know that, but Jimmy is not a rare exception.  I have two heroes, two masters that I take literally in their rules and approach their returns to prove it, George Soros and Stanley Druckenmiller.  Their primary rule is 110% ruthless ability to go in for the kill and never let the other side up, which is contradictory to the purported sage wisdom of the industry.

So the pivotal question you and I need to ask is

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January 4, 2022

Volatility Reports 1/4/22

Just as financial repression of rates is unnatural, so is the suppression of risk in free markets. The logical outcome of a riskless market is a market that collapses in on itself because the nature of reward hinges on some amount of risk.

Socialized markets have all the perceived risks wrung out of them. It’s what I call risk repression. In this regard, I suggest reading anything by Christopher Cole, CFA, and his idea of the bull market in fear, and trading tail risk.

The New School of Technical Analysis does not use as a primary tool of oversold/overbought Stochastics. Rather what Contrary Thinking members use the oscillator of implied volatility.  Members are familiar with this chart with the bull market spiking fear when there was nothing to be afraid of when the decline was modest. So modest the massive host of bulls see that fact as the wind at their backs for more of the same in 2022.

My second chart pick to assist capital managers, advisors and traders understand where they are in the big picture of things, is how the current sent of peaks fits the 2 1/4 year cycle portrayed in MarketMap-2022 Scenario planner. With the ATH before two major corrections in 2018, the series of highs in bullish sentiment from the peek 11/22/2019 and now 2 years later the series of differences from the high in bullish bravado on 8/6/21.

There are multiple inferences here. Actually starting with the late 2015 correction, and again the February 2018 sell-off, and the fourth quarter 2018 correction while all timed by Contrary Thinker, they were all ignored. Me and the team used to get “can does ” in previous decades. But with the advent of America First, not so much.

It was all about the long term with the sell-off being part of the secular bull market. Even in early 2020, and yes my group is just as good if not better than Senator Richard Burr’s broker who told him to sell.

As a sidebar, I am a square shooter, no one date has doubted my words, and many have seen the “sell” advice in publications. But no matter, buy the dips, and barrow to the max on the next sell-off of 30%.

Looking back from this vantage point of 2022, event the bear from 2000 into 2016, look mild to many. The thought that a market that travels over ten years with five bear markets could never happen here, again.

Lastly, the SKEW index remains at historical highs, signally that large capital fears tail risk. On the left deflation and on the right inflation. TEM on the SKEW index supports a breakout, which is the realization of one of the risks. 

Back Story

Dip-Buyers Beware: “The Reflexive Short Vol Trade Has Left The Building”

Click here to view the original web page at Dip-Buyers Beware: “The Reflexive Short Vol Trade Has Left The Building”

Something’s different this time.

For the first time since the collapse in March 2020, the S&P 500 has failed to rebound back to new highs after testing its key uptrend technical levels…”

Contrary Thinking Begins Here
MarketMap Issues #1 and #2 are ready for immediate download.  $99.00, 45 days with no subscription required, and discounted membership during the trial
Quarterly Membership $495.00
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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

— 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

December 30, 2021

MarketMap-2022 Issue #2

Both fiscal and monetary policy has always been able to “re-inflate” the economy and markets out of trouble. Throughout 2021 the consensus in this regard is they are painted into a corner.

There is your back story for your clients, but the catalysts remain unknown. It will not be a piece of known bad news.

Can math be stranger than fiction? Or is the following simply a coincidence, if coincidence can exist at all?

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December 21, 2021

Volatility Reports 12.21.21

The Short Volatility Play has Run its Course

Contrary to Thinking is more than having a good “bad” attitude, it’s about knowing when to have an opposing point of view and when to run with the herd. It also has much to do with looking at reliable indicators that no one else is looking at. CT likes to analyze the SVXY, an EFT providing daily leveraged exposure to short-term VIX futures. It is designed to capture the volatility of the S&P 500, in a commodity pool wrapper. As a geared product with daily resets, UVXY is designed as a short-term trading tool and not a long-term investment vehicle.

A chart of this fund is used as a proxy for the S&P. The weekly bar, left-hand window you can see the first leg of decline finding support in our I-T support zone; and after a rebound is now testing trigger prices that if broken suggests the market is moving lower. The 53 to 54 price area is both a Gann price and a Smooth Bollinger price level. That level is also coincidental with the high side of CT’s I-T (December) support zone. Given the number of various ways to formulate these triggers, the inference is, that if they are broken follow-through should be expected.

But what gives that a superior weighting is our Technical Event Model on the weekly bar providing a TE#4. A setup that is telling traders the market is in breakout (down) mode. It is breakout ready.

The middle chart of the daily bar has two systems working on it. One is the simple tidal high and low picking system, which is short as indicated by the down red arrow. The historical results of the model are inserted below, which supports the sell signal as being valid. The other system is the triple cross that has two out of the three trend-following indicators on sell signals (light blue down arrows.) and the adaptive MA on the bar chart nearing a “death cross” to complete the sell trifecta.

One additional note here on method – for you system geeks – CT combines the triple cross as a setup for the tidal high and lows to be the triggers for entry.

The daily bar on the right is all about the Technical Event Model. I have shown to my people how major tops have been made in Bonds, Gold, and Dow on panic buying that had sustained for months into the final peak; and how the story the market was telling revealed risk to where the panic buying began.

A good example of this can be seen in the right-hand chart but with panic selling into the “V” low.  The mini-panic of six days is highlighted by the red vertical dashed lines. Rule #1 here calls for a choppy affair until the panic is worked off, which can be seen by the market’s recovery to where the panic selling began. that recover into the 16th recycled TEM to a new context supporting “change” and trend-ability, that is what we have witnessed thus far. That “trend-ability” remains until a new TEM extreme is reached.

Bottom line is that headlines are yanking on the market’s chains with Covid19 excuses, from really good to really bad. Overnight I read headlines that the Pac-Rim recovery was due to the market seeing through this uptick in the virus. I don’t think the headlines matter and that any attempt at recovery today will be met by more selling.

Back Story

At this time of year, lists are published with suspected outside world factors that could upset the market’s apple cart. Below are two of them, which CT would only see them realized at or near a table low. It remains our premise that a geo-political event will be the market’s undoing. More on that in MarketMap-2022 Issue #2.

How Do Russians Feel About a War With Ukraine?

Click here to view the original web page at How Do Russians Feel About a War With Ukraine?

Militarization stopped being a way to mobilize Russians in support of the government in 2018. Russians—in particular young people—don’t want war.

” War is the business of young people and conscripts. But 66 percent of Russians aged between 18 and 24 have a positive or very positive attitude toward Ukraine. That’s despite a backdrop of unceasing vitriol directed toward Ukraine on state television, and the persistent, oft-repeated idea that it is external attacks that require Russia to take defensive measures.

To put it simply, before launching an offensive, it’s worth thinking about who will fight in that offensive and how willingly, and to what extent an active conflict will prompt people to rally around Putin. The evidence suggests that even in the best-case scenario, the mobilization effect will be nonexistent.

Biden’s Full Plate: Ukraine, Taiwan, Tehran 

Authored by Pat Buchanan,

Russian military pressure on Ukraine, however, is but one of several crises where America finds itself at the center.

Biden this week ordered a diplomatic boycott of the Winter Olympics in China. U.S. athletes may participate in the games, but no U.S. government official will attend in a formal capacity.

The Winter Olympics will take place on the 50th anniversary of President Richard Nixon’s historic trip, where the U.S., in the Shanghai Communique, acceded to the contention of Chairman Mao Zedong’s People’s Republic that Taiwan “is a part of China.”

Yet U.S. inaction if China attacked, invaded or forced the submission of Taiwan to Beijing would shake the credibility of U.S. treaty commitments to Japan, South Korea, the Philippines and Australia.

Still another crisis may be brewing with Iran.

The answer seems a simple one. While the Iranians have the knowledge, capacity and experience to build a bomb, they have, like Japan, Brazil and South Korea, elected to forgo the option, as the risks inherent in an Iranian bomb are greater than any probable rewards.

Truly, Biden has a full plate of foreign policy crises.

His guiding principle in dealing with Russia, China and Iran should be a simple one: Consistent with securing the vital national interests of the USA, keep us out of what Winston Churchill called “unnecessary wars.”

For such is invariably the death of great powers.

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2022

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 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.

–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

December 20, 2021

iCahn Day Trade Stock Index Futures

%BB Dynamic Breakout and Reversal

The development of a trading system first considers its time horizon

Since the strategy %BB-DBR is day trading then by definition, it must exit on or before the end of the day. This is a key to understanding how and why day traders do and act as they do because they must be correct for a limited period, not days weeks months but within hours.

With that being the case our job is to find a pattern that will become profitable by the end of the day. A traditional day trading system is looking for a setup leading to what is called a range day. That is a trading day that opens near its low closes at or near its high and the system takes the trader long. It does not matter what kind of entry, it could be a breakout or a reversal.

So, if the market opens and declines from the open, a reversal pattern takes the systems shortly, and prices closed at the low of the days is the ideal pattern. Therefore, when the developer finds a pattern that is profitable with good risk to reward ratios without the constraints of money stops, he has a technically sound strategy. That is one that tells him he is PROBABLY correct by the end of the day his position will become profitable.

Here is an example of a breakout that closes at the end of that day at the high of its range. The open was near the low of that day’s range, followed by a breakout and the exit MOC.

The efficacy of entry is just another way of pointing out how much the position had to go underwater before it became profitable. Some trades are perfect getting in at the low and out at the high; some never go underwater, others are less efficient and do go underwater before going profitable or going out for a loss.

Money Stops put first in trading development is the opposite approach. The developer uses an arbitrary money profit target and a money stop-loss that fits his account size first and from that basis searches for a valid trading strategy that is profitable.

With our approach, the money stops, or percent stops are brought into the systems AFTER we have a profitable system – the money stops are brought in like an envelope.

Refer to our text on money stops, link here. One of the critical elements that a successful trader needs to get their head around is the difference between money and price. Money management is not the same thing as risk management. This is not a little point that is squabble about.

You cannot make a good money management program and apply it to a bad trading system and make it better. NO MATTER HOW GOOD THE MONEY MANAGEMENT METHOD.

You can take a good money management strategy and apply it to good trading systems and make it better. Money management is about how much the trader should risk and money stops (both loss and profit). The size of your trading position is in direct proportion to the value of your portfolio.

The rule you hear about being chased by the vast majority is the 1% rule to use a stop that is equal to 1% of your account size on the trade. The market could care less.

Risk management is nothing to do with stop losses or anything relative to account size and from our school of thought nothing to do with the trade by trade p&l – based on neither real nor hypothetical trades. Fancy algorithms based on the trailing P&L are just elaborate ways of chasing the equity curve.

Proper risk management is based on price; it answers the questions should I or should I not take a risk. Our systems have a risk management formula built-in, and we use the same model as a governor for opportunity management. See 14-page User Doc, with rental or purchase.

You can download the TradeStation Reports here, be sure to check out the amount used for slippage. 
Three Months for the Price of One, only $119.00 with the right to own outright GFE for half price of $2,495.00 before your three month period ends



 

Do you like to hack around in concept idea code, systems, and indicators from my library over 20 years of development?  Look at this holiday offer on over 1000 strategies and 1000 indicators.

 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2021

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 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.

–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

December 16, 2021

Trade Ideas on Your Smart Phone for only $10/Month

The alchemy of trading volatility (VX) is not magic for the fool. You must be the sorcerer and not his apprentice

Cycle peaks are clustered in this time frame, from the peak on Nov. 18 for the Dow into today the 16th and fill out Monday the 20th. They all relate to their own 2 to 2 1/2 year cycle, which creates a variance of a small degree. One cycle is 2.2353 years, for example. To pick out a few notable ATH pivots caused by the 2-year cycle, a similar cluster hit in April of 2000, another July of 2007, and again in August of 2008, also mid-January 2018, among others.

A similar configuration of cycles converged at the March 2009 low +/- 1 month.

While nothing here is perfect, there are four major 2 1/2 year cycles hitting now +/- a few days that are known for their influence to change the direction of the markets.

With volatility modeling calling for a period of volatility breakout and weekly range expansion. Plus, traditional TA – like the AD line, and the 52 weeks high/low ratio among others giving “off risk” signals, the cluster of change of trend (COT) market events should not be ignored.

Even if you have been on the early side of the selloff leaving some investors and traders to deal with a wide trading range and their stop’s being hit, hang in there. Like the famous trader Marty Swartz double down, if stopped on attractive positions.

Online Trade Idea Products:

High Delta Short-Term Puts and Calls,
$10/month and $50 bonus if you make 25% or more.

You do not hear this hard and fast rule promoted by the industry, but it is the grounding principle for successful trading, “The way to build superior long-term returns is through preservations of capital and home runs…When you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig.”  Stanley Druckenmiller. It is not only Stanley but the best from P.T. Jones to Richard Dennis. Do not take suboptimal trades.

In the mid-’80s I was mentored by Bob Prechter at EWI and his mentor Dick Dimond. Dick teaches time of day execution and I learned to use EWT and time of day timing to make a small fortune trading high delta OEX 100 puts and calls.

I made my first fortune in the 1987 trading delta and was long put in the crash. The goal and policy of this product are to find trades that are greater than doubles with small relative risk, using lower risk deep in the money puts and call options on stocks, segments, and the averages.

Tidal Wave System 10 to 1 reward to risk potential  Bull and Bear leveraged ETFs
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“The way to build superior long-term returns is through preservations of capital and home runs…When you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig.”  Stanley Druckenmiller. It is not only Stanley but the best from P.T. Jones to Richard Dennis. “Do not take suboptimal trades.” That is do not trade for an average, why take the risk!  This is head and shoulders above the industry.  With that in mind, the method isolates trades that are 10 to 1 or better reward to risk setups.  With such a method, one winner will be able to overcome most drawdowns.

Bull n Bear Trading for an Average ETF
$10/month and $25 bonus if you make 10% or more.

It’s like the 10-1 program, the focus is more on the percent win rate, but still, the focus is risk management. The trades are short-term less than four weeks, with price-based profit targets nearer to entry for a 4 to 1 reward to risk ratio. It trades leveraged ETFs on the stock averages, offshore stock averages, and S&P sectors and micro sector ETFs

Everything Else Bull & Bear ETFs for Bonds, Currencies, Inflation Commodities, Precious/Rare Metals
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The focus is on intermediate-term trends, where the reward to risk precondition can be anywhere from 5 to 1 or as high as 10 to 1 sometimes better. The focus here will be on new bull market leadership after bear markets and fad sectors that fall out of favor. The universe of ETFs here includes everything except the standard stock averages and S&P sectors.

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Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2022

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 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.

–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

December 12, 2021

Volatility Reports 12.13.21

Trading Fact of life #22:  an optimist is more successful at trading.

They make opportunities out of difficulties. Pessimists will pay attention only to information that fits their point of view. They will see nothing else. Optimists will look for opportunities no matter which way the wind is blowing, long or short.

Keep MarketMap-2022 in mind and reference to the new two-year cycle, it will come into play over the coming eight years maybe longer. Be that as it may, one of my “fear” oscillators has proven insightful when the regime changed to a more volatile market starting with the mini-crash in early 2018. You can go back to late 2015 for a similar setup but what is key here is the extreme “no fear” of risk seen at the peaks and slowly diverging into the primary decline.

Like all “divergence” signals, it all comes down to which one is the final one that tips the market over the ledge. The featured chart shows the similarity of the patterns and the recovery of the “bravado” into last Friday’s close. Given that the market has rallied onto a change of trend time window, that points down into the 19th +/- 2 days, the next phase of decline is expected.

Here is another view of a similar idea, showing the effectiveness of the fear index divergence leading to a meaningful decline by the averages. In fact, one can see how “smart” money has been trading a bull market in fear since the peak in late January 2018, with CT’s VX fear indicator diverging for four years. What is more important here is the divergence from the June/July to date, providing a clear, “off risk” signal.

At this point, the main focus is on the timing of and the implementation of a sound bear strategy, and the daily bars are providing TE#4 signals as discussed below.

All of the daily bars on the major and offshore stock averages are on new TE#4. A setup that prepares the traders to expect and trade volatility breakouts, which is another way of saying range expansion. Traders should expect range days where the open is near the high and the close is near the low and supports are triggered. In inverse is true if resistance is taken out.

Based on that part of CT’s volatility model outlined above, the expectation is for the breaks to come lower, for the lower side of breakout bands and support levels to be taken out.

From a sentiment point of view, the rankings done by a handful of different services and organizations provide a widely disparate mixed bag. Unlike the VX data cited above, providing a much clearer picture of market psychology. The stream of information providers has strayed off the bullish path in many cases and are referencing some of the commodity markets, a rare event, reflecting doubt I reckon, on their insights into the stock markets.

I had to feature the SPT daily bar here as the exception to the other daily bars because the SPY reveals its panic low – the first vertical red dashed line, followed by a one-day rally, which is typical after a “V” panic low. However, that one day rally cycled TEM to a new extreme TE#4 – yellow dash vertical line – a pre-condition that called for a range expansion.

Please note the effectiveness of the TE#4 being followed by two long bar day declines, a textbook example of what TEM provides for the trader. There is a lot to see on this chart, but the focus is the way TEM cycled back to a panic low on 12/3/21, producing the “V” low as it is known for. There is more to say about 12/3-that I will come back to in a minute, but to finish this thought the market’s advance on Friday, which a few of the content providers on Twitter area calling a new buy signal on the 5-day A/D oscillator, is negated by the “emotional” panic buying that put it there. TE#1 has a 90% chance or higher of being a reversal, in this case, an inverted “V.”

Now here is a fact, the low on 12/3/21 happened on a solar/lunar eclipse. I know these kinds of factors have no cause-and-effect proof and are only of interest to a few. Be that as it may, it’s a fact that it by accident happened at the low. That’s not to say that all solar or lunar eclipses catch highs and low turning points or to give them a probability rating, but the fact is there and by the way, the peak on the peak on 11/19/21 was a lunar eclipse, but I digress.

What is rare about the solar eclipse at the recent low happening for the astrology crowd with a southern lunar node. Here is a straightforward explanation of the meaning of the lunar nodes from an astrological point of view.

The north node is “your true north or your North Star.” In this case, it would be the market’s constructive behavior that it should follow, like a destiny, if you will. But the eclipse happened conjunct the south node. It represents ineffective actions, qualities that should be left behind if the market is going to fulfill its destiny. The inference would be the action of the market was not in line with its “destiny.”

Bottom line, a high is expected in the very near term. If not early this week, then on the 20th of December.  Contrary Thinker will be looking for clues from the previous leadership and elsewhere to provide motivation for new trade ideas including but not limited to leveraged ETFs, high beta single-leg Puts, and Calls on FAANG stocks, segments, and the averages including the offshore markets.

Information about getting trade ideas on your smartphone for only $10/month. 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2022

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 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.

–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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