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CT Journal
Jack Cahn
February 25, 2020
Volatility Reports 02.25.20 Risk Markets and Hedge Tactics
While there may be a new shallow set of parameters to new buy dips with the goal of holding for new all-time highs, there are no signs of a meaningful bottom here
The short term volatility model is only showing the Dow hitting a panic event while it was entering I-T support. In a vacuum that is a sign for a snapback today, but follow-through is doubted.
All the markets after yesterday’s decline look very similar so the Dow is as good of a proxy as the others.
From the left, OB/OS readings remain overbought after the 3 1/2% sell-off. It is also easy to see the shallow – buy dips – in the uptrend via the weekly chart. I highlight each with a vertical green line. The low-risk buy is highlighted in red, a situation which does not exist today. In fact, our twin paid of oscillators are not even modestly oversold.
On a S-T basis, the daily bar, CT’s panic index has hit 70.57 and our twin oscillators are modestly oversold and in gear.
In MarketMap-2020 I pointed to the early February low and a mid to late February high. The date range for a low was the 5th to the 9th and for the high from the 16th to March the 2.
The tidal cycles will be flipping over to point lower today and Wednesday for the stock indices. A recovery today or tomorrow should be greeted with additional selling.
Lastly, once a low is made it will be tested within days before there can be much confidence in its ability to hold, short term.
Short term the decline is expected to continue into the early March period, with the 9th and 10th being ideal.
If this is the first leg down of a new bear market, do not expect a larger down day than witnessed yesterday.
Long term investors and capital managers should be in cash or two-year notes. More long volatility ideas on the way.
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 My indicators and strategies can be withdrawn for private use without notice, at any time.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
February 24, 2020
The Outside World Febrary 24, 2020
There is no outside world, there are only people, a society, and the market
Everyone knows why they just don’t know when. Except for Contrary Thinker that knows when the “fragility” of the market exist and warns its clients; every day since Contrary Thinker’s MarketMap-2018 said the first risk-off signal on January 26, 2018, the finger was firmly pointed at no ability to foster a “soft landing” when the time comes.
Fed watchers put it this way that the Fed recognizes their ongoing monetary interventions have created financial risks down the road. The Fed must be aware that most of the policy tools are spent; they are likely ineffective at mitigating financial risks in the future.
This leaves them being dependent on expanding their balance sheet as their only weapon, leaving them at the whim of social unrest, which is also the case in China, where the results will be massive.
No matter how much of a Pollyanna you want to be, the earth is starting to move regarding social unrest. the wealth gap is not an imaginary thing; I heard about it in an econ 101 class in Australia years ago.
Hell, since 2007 – if not longer – the group that has seen an increase in net worth is the top 10% of the population. Like everyone knows this is not economic prosperity
It is a distortion of real economics out of fear instead of the intestinal fortitude required to save the system for everyone.
From 2009-2016, the Federal Reserve held rates at 0%, and flooded the financial system with 3-consecutive rounds of “Quantitative Easing.” During that period, average real rates of economic growth rates never rose much above 2%.
Leaving the Fed with inflation targets above 2% because inflation at 1% is too unstable, too hard to fine-tune, and keep inflation from collapsing into a deflationary spiral. Also, econ 101.
Here are two Underwater Equity curve charts. This notion was popularized by my friend Jack Schwager. It presents a unique way of evaluating equity performance because you can view the relationship between time and magnitude of drawdowns as they relate to previous and new equity highs.
The top chart is the underwater of the buy and hold since 1997 for the a one lot of the ES.
The next chart is a volatility breakout system, short only scalping for the day with the Turtle contract sizing strategy being used.
These types of charts enable the trader to look at the performance from a pessimistic viewpoint. It pinpoints how much percent risk occurred and how long it took to rebound back to hit a new equity highs.
A traditional equity curve plots the closing equity value, or account balance, for a trading system bar-by-bar in relation to time. The underwater equity curve focuses on losses bar-by-bar in relation to time. Now you can inspect all the drawdowns through a visual chart of drops in equity.
Here are two addtional screen shots. The more comon way of looking at the P&L. The top equiry curve is the one lot of the S&P being help since 1997. Its clear since the March 2009 low the bull market taking hold.
The next chart is the equity curve – net 53.50 a trade – since 1997 of the same volatility breakout system as described above. The big take away here is the profit run the strategy is happening since the initial change of regime peak January 26, 2018. So volatility has been increasing without much fanfare.
The best advice and most insightful vision are not curated from the social media space, they are right here and as anti-social as the market. Become a Contrary Thinker today
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.
February 24, 2020
Short Trading Strategies and Volatility Update
February 24, 2020
February 12 Historical Top
February 18, 2020
Set up by the mini Russell provides engagement today.
December 19, 2019
The Market Vs. the Outside World
On rare occasion do I find one day declines of any great magnitude happen on what is seen from the outside as dramatically bad days. No one is going to argue that the outbreak of Ebola anywhere in the world is good news. But how the market defines what panic is and what is not, is a different breed of cat, from headline Journalism. In the same way that bear markets have a standardized definition, so panic days on Wall Street are standardized.
A quick review of the “panic” dates outlined out by Yardeni does not line up with many days that declined more than 3 ½%, or a mini panic day.
It’s wise to keep these numbers in mind, with the largest one-day declines in 2019 to date were 3.8% and 3.7% on August 5 and 14 respectively. The largest one day fell in 2018 occurred on February 5th at 7.4% and October 10 at 4.3%. There was no outside media event on those days.
In 2017 there was not one down day from open to close over 1.6%. We all recall the “lowest volatility” year in history. So, the North Korean Crisis was a non-event for the market and the Trump Impeachment scare also was a non-starter.
In 2016 on June 24 the market witnessed a 4.9% decline. On January 15, 2016 there was a 3.7% decline on the day. Both with no physical outside cause on the day.
On August 24, 2015 the market experienced a mini panic of 7.8%, nicked named the ETF flash crash, which was a price event. That event was in line with a panic day and the typical low of the three-month correction. Lastly in 2014 on October 15 the largest one-day decline for the year was 3.7%, the remaining down days were more in the order of 1 ½% or less.
Since I have been talking about the great importance of waiting to be successful, many of my ole Twitter and Facebook following are putting it in their list of traits to be a winner in the markets. But to them and the vast majority it is only lip service and they will not do it.
However, from a Hedge Strategy engagement point of view, it is the foresight of the rare long bar decline days and their clustering into days or weeks that provide optimal trades that push returns above average, a/k/a Crisis Alpha. The same applies to one-day advances of greater than 3 1/2 %.
Great and Many Thanks,
Jack F. Cahn, CMT
Contrary Thinking Since 1989,
Copyright 1989-2020
Jack F. Cahn, CMT ContraryThinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. www.ThinkingMansTrader.com, 800-618-3820
— ContraryThinker 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.
November 26, 2019
Panic Buying in Biotech Sector
November 20, 2019
JPM Play the Break or Fade the Break?
Another way to say it, will the market continue to trend or will be correct. To dig deeper, will be a break to new highs and follow through with a similar rate of change as has been booked thus far since the 10/3/19 low? Or, will it fail and sell-off, form an inverted “V” shape top and give back gains with a high rate of change?
CT’s featured chart shows JPM at an extreme. with the market in both L-T and I-T resistance zone. Plus the longer-term chart on the left reveals an uptrend that is old, feeble and persistent but due for a change, as well as the I-T basis in the weekly bar. <more below>
The Short Term chart has the TEM model recycling to a fresh Techcnail Event #2, suggesting a high rate of change trend is back by the tension in the market. Like all volatility models, it does not suggest a direction, even in the face of the media’s bias of referring to stock market sell-offs as volatility.
However, the bigger picture of the JPM that divulges that a 13-year horizontal triangle was the springboard for this breakout. As such, a post triangle thrust is terminal trends, not the kick off of a new one.
Watch this space.
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CT covers the financials, forex, stock index futures, commodities, ETFs, inverse ETFs, and long volatility ETFs and Algo strategies.
Great and Many Thanks,
Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
Copyright 1989-2020
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.
November 20, 2019
Crude Oil Waiting on the Break
Gain Better Control of your Strategy Engagement with CT’s Technical Event Model
As an example of strategy engagement, the use of the popular and highly reliable horizontal triangle. One of the main reasons some traders don’t do well in the markets is their inability to wait. A key strength of all great traders you will ever read about.
Please, if you know an active day trader who trades daily and is doing what Soros has or what Trout has or Dalio let me know, I will give you a free subscription to VR for 6 months.
In any event, this chart of the crude shows the horizontal triangle we have been watching for a few months. First, Contrary Thinker is not engaged in trading Crude here. That does not mean some systems are not working and some that are working very well.
Key I-T R&S Zones for break
The following numbers are from my %BB-DBR trading Crude Oil. Over the last ten years made 325k with contract management. That’s all good, and that is how the groundbreaking systems development began back in the ’90s and progressed into the first decade of the new millennium.
Today, however, system trading is more sophisticated. It is more like the way most investors and traders think anyway. They make a forecast, and after they have a forecast, they believe they come up with a trading plan – a strategy – to take advantage of the forecast. They typically do this without a highly accurate dynamics forecast and have no timing for the forecast.