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CT Journal
Jack Cahn
August 11, 2020
Crude Oil Tracing out a Bearish Wedge
Contrary Thinker headlined November 11, 2019 “Crude Oil Waiting on the Break”
I encouraged visitors to Gain Better Control of their Strategy Engagement with CT’s Technical Event Model. This is what separates the difference between robust trading for an average trade and anti-Fragile trading which only engages a strategy when conditions are optimal.
Volatility Report pointed out key I-T price levels for a break six weeks before the breakdown.
Today – 8/10/20 – the bounce appears to have run its course and the question is will the decline only retrace a part of the advance or will there be new lows.
Since momentum peaked in June the oil market is tracing out a wedge, a weak pattern that by itself suggests an S-T collapse in prices. TEM reveals that the long term market remains in a panic condition, the rally did not work it off. The I-T, like the background of the equity markets, sets up for a forceful trend. While we are biased to the short side, the market is near breakout and breakdown price levels that reduce risk. The S-T model sees the trend as being old and feeble, which is obvious via the wedge pattern.
The weekly chart on the left-hand side shows the market is churning under long term resistance, which was long term support. so a move above the low end of that zone would be a concern for bear traders. On the same chart, my CMB index has given a sell signal and is not in gear with the smooth RSI, as a rule, a negative. Waiting for the smooth RSI to cross over would be another confirming sign to go short and or use an Algo system that scapes breakdown trades with turtle contract sizing.
The chart-window on the right is our %BB-VIX on the oil market telling traders that players or seeing little risk here, a situation that has preceded the previous sell-offs.
The same tale is being told by the %BB-VIX on the left in the following chart, which is a S-T point of view. It is the right-hand chart of the oil perceived risk index that has posted up a Technical Event #2, a signal that precedes a high rate of change trend, which fits with the above scenario.
Contrary Thinker will post real-time “engagement” of the strategy when the set up is ideal, and ideal only for low risk and high reward potential.
LinkedIn Volatility Reports visitors, take advantage of Contrary Thinker’s Membership today before your access runs out.
Great and Many Thanks,
Jack F. Cahn, CMT
Copyright 1989-2019
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 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.
August 8, 2020
Middle-class prosperity is an illusion
But everyone has an iPhone!
This is more than likely the greatest threat to our nation, our free markets, and capitalism. When the middle class is unwittingly held back for an extended period, it is like an earthquake ready to heave.
Over the last twenty years, America’s promise of upward mobility has become a lie. The lie is so bright and blatant that several billionaires and intelligentsia point out that if something is not done about the “wealth inequality,” there will be massive social unrest.
It is noted by several of my respected colleagues that the wealth gap is at the highest level in 100 years, at levels last achieved before the 1929 crash that led to the Great Depression. This is not Bernie Sanders talking here, and these are people inside our industry, they see what is coming and want to save the system, and to be clear this is not a sales pitch for the centralized ownership of assets or the absolute authoritarian rule of taking from those according to their ability and giving to those according to their needs. Communism does not work, and no one is promoting that idea.
The following stats are from 2016 and sustain today with the top 0.1% of households controlling an equivalent amount of the wealth as the bottom 90%. Further, from 1973, real family income for the top 1 percent has grown over 150% while incomes for the lowest 20% of earners has remained stagnant. The median household income adjusted for inflation in 2011 was just below its level from 1989 and $4,000 lower than in the year 2000.
The illusion of middle-class good times is based on sustained low-interest rates, consumer debt, and cheap imports. The takeaway is that an accommodative monetary policy is the cause of the problem.
The Bernanke-Yellen Fed believed that accommodative monetary policy reduced income inequality by lowering unemployment. This is where nonlinear thinking comes into play because this monetary policy assumes that lower wealth inequality and lower unemployment have a linear correlation. They do not. In contrast, the wealth gap has grown exponentially in a nonlinear fashion. In real-time, the wealth gap peaked the year before the Great Depression started when the country was close to full employment, and the joblessness rate was only 2.08%.
Here is one of the best examples-based Bernanke-Yellen model can create a situation where full employment with extreme income disparity co-exists, like today.
“If we measure the average income in a hypothetical village of 100 people, 99 of which have minimum wage jobs, the last of which is Warren Buffett, who employs the rest, you have income disparity and full employment.” Got it? Get it? Good.
So it’s just not the everyday investor or speculator that gets caught thinking in a straight line, the Fed believes the treatment of the wealth gap problem, as outlined above, is through the application of a linear relation to solving a nonlinear wealth and income gap. This does not compute.
To date, since 2000 the Fed – including Powell thus far- produced a linear decline in unemployment via an exponential growth in the monetary base. What occurs following the massive growth in money supply is asset prices increase. They appreciate in a nonlinear fashion for the top 1% of wealthy families that own real estate, stocks, bonds, and have access to low rates benefitting disproportionately.
On the other hand, when the middle class earns a dollar, they spend that dollar on goods and services in the real economy! When the top 1% makes a dollar, that money is likely to be reinvested in assets, it does not go into the real economy.
The Fed has boosted aggressive gains in asset prices, from high Beta stocks rolling to Gold, Silver and now Bitcoin. Still, because the money is not getting in the hand of the middle class, there is no significant inflation in real wages or core CPI, the ideal situation for the stock market, and finance, but you can’t eat paper.
The boogie man of wage inflation is no place to be found. Hence the global central banks are running currency devaluation race that exacerbates the income/wealth gap and producing vast political risk, which I pointed out at the end of 2017 after the tax cut.
What Powell needs to show the markets is that he has the cojones of a Paul Volker. Show the market’s that you cannot hedge a tail risk with a linear model; and if that tact persists the pitchforks, the guillotine come out and tail risk becomes a bloody nightmare.
Great and Many Thanks,
Jack F. Cahn, CMT
Contrary Thinker since 1989,
Copyright 1989-2020
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 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.
–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
August 7, 2020
Volatility Reports 08/7/20 Stock Market
For the week 95% or more of the market content streaming in social media is bullish on stocks and on all risk assets across the board.
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From the top, here is the bottom line: Contrary Thinker has a few small short positions on and two of our aggressive trend following future’s hedge systems engaged – long scalping VX and short scalping NQ – which have had no trades for the past week or longer (see track record posted in the group.) The following analysis is part of the “all clear” CT is waiting on to become more fully engaged on the bearish short side.
SVXY is the ProShares Short VIX Short-Term Futures ETF, which provides investors exposure to short VIX futures contracts. Put simply, investors who buy SVXY are short S&P 500 volatility futures. It is a leveraged way to trade long S&P futures without the assumed unlimited risk of futures, with more bang for the buck vs the SPY, etc.
Reflecting the growing mania for stocks is this market’s attempting to break out. The peak by the nominal indices on 2/12/20 was not confirmed by this basket of risk-takers, yet the climatic low was in gear. What is more important is that mini panic low broke L-T support, which now acts as long term resistance.
The rebound from the March low peaked 6/5/20 at the same time as the Dow but this speculators market is now in long term resistance. The market is drifting higher, and overbought, and in gear. This part appears bullish on a short term basis.
The dynamics behind this market is like the backdrop of the averages themselves, with the TE#2 supporting a trend; and suggest strongly that breakouts (down) and trend signals (x overs) should get follow-through, independent of direction. Today this unique view of the bull market is mid-range, sitting between the high side and low side of its I-T S&R zones, as well as being in L-T resistance. Also, I-T bands have collapsed on price. Just like the spike in %C high lighted by the green vertical lines – see next chart – denotes a coming run for the roses, one way or the other. As a trader follow the short-term break. As a long term risk manager, raise cash. Gold Miners may have one more bull run after a S-T correction, more on that later.
A breakout by SVXY would add impetus to the equity markets; and a breakdown would be a leading sign of investor risk to come.
While the CB’s have been able to crush near term volatility, medium-term volatility remains on a higher plateau. the next featured chart is the six-month VIX with one of our leading indicators posted with it. As you can see the last two spikes in volatility were preceded by our fear index breaking higher, above its MA. Something we are waiting on among others, for the ideal set up.
To stay with the sentiment and what fits with the latecomers buying into the “short volatility” market, CNN’s fear and greed index have reached an extreme greed reading. This composition of the emotional makeup of market participants is now in gear with the extreme Call Option buying in both the Nasdaq and S&P markets, From a Contrary Thinking point of view, such extremes normally occur at periods of the trend change.
The sentiment behind the market as characterized by the following headlines should not be viewed cynically.
You can do the math in the first post.
The types of posts I am seeing over the last view weeks read like the next post. Chasing performance and looks similar to the peak in January 2018.
Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free look runs out.
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
August 6, 2020
Hot Money the US Dollar and Currencies
CT’s call for low in July around 96 on the US Dollar index was early, but that has not changed the long term point of view, which remains bullish. The low in 2011 was the end of a secular bear market. The six-year advance a cyclical bull market that kicked off a new very long term bull in the greenback. On a short basis, the index should have made a low panic Wednesday, August 5, 2020.
The ETF that follows the index from the 2011 low traced out a long term five-wave structure. This is the beginning of a new long term bull market. That puts the buck in a cyclical bear that can retrade as deep as 23-24 basis the UUP. Our featured chart shows prices in L-T support in the middle chart, a weekly bar. The daily bar reflects out the “panic” index hit an extreme (yellow) and the TEM – volatility model – reaching an extreme of fear selling, high-lighted in red on the daily bar.
The “panic index” on all-time frames has now hit an extreme high of selling, a hallmark of a low.
The longer-term chart seen below on a weekly bar for the Dollar index futures demonstrates a few important facts. The peak this past March was the end of an Intermediate-term advance wave (1) of the much larger uptrend wave [3]. If that count is true, a 62% retracement is in the current area, which, as noted above, coincides with an extreme panic reading of 75.88.
The VX-%BB index suggests a COT in the downtrend has already turned higher and should support the index here. What is typical of a TE#1, a panic low as measured by our volatility model, is a V” low followed by a test and backing a filling.
So while a low is likely in place or very near, a low risk set up to bu\y UPP for an S-T trade is not ripe yet. When that sets up, CT will suggest the trade.
The featured image in the header of this page reflects the massive bearish piling in the buck by the broad majority of hard currencies types and Euro champions. Such extreme bearishness is a clear sign of a turn, at least short term. Investors should expect a “W” bottom.
Back Story
King Dollar? Rabobank Warns “Staying On Thrones Means A Battle At Some Point”
In short, you thought China was the new tech king? Perhaps it is, yet the old US king –who comes across to some like the one in the 1977 film ‘Jabberwocky’ (“King Bruno the Questionable”)– has just shown it can still take off more than a few heads too with just a wave of a hand.
However, this is not just about lines on charts. It’s about lines on maps. Staying on thrones usually involves a battle of some kind at some point.
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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.
August 6, 2020
MarketMap 2020 Issue #13
Change of trend time window is popping up from today the 6th into mid-August. It’s easy to take your eye off the ball if you are hung up on every tick up and down during the day and forget about when major change is expected. These changes of trend dates (COTs) are notable when they cluster with other price based evidence, like TEM, OB/OS, and sentiment.
The first chart is shown here you have seen before, but we update the secondary peak on the right-hand side being this week. The method used to create this chart is under wraps, and very different from the typical methods of calculating cycle peaks and throes. I plan to disclose the formula in an upcoming e-book.
MarketMap’s COT from late July into mid-August is clearly seen here; and the decline into December is in gear with the Bradley chart seen below.
The Bradley Astrology is well followed and has its merits. I take what it has to say more seriously when it is coincidental with the COTs my independent methods generate. The real-time high by the S&P in early June is copacetic with the Bradley peak in May. As mentioned the peak this month and decline into the end of the year is foreseen here as well.
Early this year we high light the ten-year cycle overlay, the decennial theory. the scenario maps are based on history on 140 years. The year “0” was expected to make a peak late in the first quarter – early in the second, and the market experienced a debacle. After a bounce into late summer early fall the tendency is for a lower market. Lastly, the very long term low is not likely until 2021-2022. More on that as we go along. The key here is the 10-year cycle is in gear with what we said going into the year and what we expect in the current time frame.
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Remember, small is better, just ask the dinosaurs. Contrary Thinking Behind 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
August 2, 2020
Volatility Report 8/3/20 Video
First Trading Week of August TEM Set Up.
Context is the language of the market, how it feels today: tense, old and tired, or vibrant. It is the context of the market that precedes the dynamics of price. Not as the old school preaches, that momentum precedes price direction, because for one it is reactive and too late and for two it can be wrong.
The Intermediate-term expectation is for the last four weeks of a more forceful trend. Except for the NASDAQ, the other man in averages has been sideways gridding efforts. The S&P late last week showed some life as it churned under the L-T resistance zone. While some bulls still expect a melt-up, like the market’s just witnessed in gold, with cycles pointing lower for the next two months or better, we will maintain the bearish approach for now.
The Composite NASDAQ is in a Fibonacci resisted sone that runs from 10,594 to 11,055. The OB/OS model is overbought and out of gear, a sign of pending weakness. The trend-following phased moving averages (MA) on the cross under would be a strong sell signal giving the setup. With a little optimization, the I-T and the S-T TEM are both on TE#2, presaging a high rate of change trend.
Relating back to the above video, the S-T daily bars should act as a trigger for the I-T volatility model highlighted above, to get into gear. The S-T on all four primary stock averages is on a TE#4, hence a trend should be up a meaningful following is on the near term horizon.
Great and Many Thanks,
Jack F. Cahn, CMT
Contrary Thinker since 1989,
Copyright 1989-2020
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 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.
–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 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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The world stock index, net the US market did not confirm the highs in 2018, 2019 or 2020. Here it the weekly chart with dates and a proposed EW count. Such a wave count on the backside of the ascending channel break leads Contrary Thinker to suspect a rapid decline from here. In EWT terms, this market is going into the 3rd wave of a 3rd wave.
Supporting the above bar chart work is our volatility model that measures the anxiety and tension in the market. The overbought or oversold condition of risk. On the right side is the I-T %BB-Oscillator measuring implied volatility at oversold levels. The chart-window in the middle is TEM on the same data reflecting a spike in %C and a new TE#2, suggesting a forceful trend. The EFA’s volatility data is sitting on support, a move above the high side of the zone would be a reversal and add more support to the bearish case.
when VXEFA does make its move above the high end of S-T support, the two long volatility – bear ETFs should be considered for a short to an intermediate-term play with targets in the I-T resistance zone, at least.
Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free look runs out.
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 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?
The top chart shows all three-time frames with their EWT counts, the Russells failure to get back above L-T resistance at points [5], and (2) and the failure to get above I-T resistance at point 2 or (3). Regarding that failure, it was a class book retracement of 62% of a fifth wave extension to the beginning of that excitation, within the range of wave “iv” of lesser degree. Lastly in EW terms, the daily bar reveals how the most recent rally by the Russell failed to hold above S-T resistance.
The key chart above from a dynamics point of view is the weekly chart that three weeks ago reached a Technical Event #2 that reflects a tension behind the market that supports an I-T dynamic trend. The vast majority of cases it is a leading indicator of such dynamics. While long term the background remains on the brink of renewed panic, that is emotionally torn levels reached in March that have not been worked off that investors’ time horizon. The trigger should be the daily bar, the S-T, which at the point of failure hit a TE#3. A situation that called the uptrend feeble, laboring, low volatility, and due for a change.
Supporting A new term trigger in long volatility is our volatility of volatility model TEM of the Russell’s implied volatility data has hit a near-identical configuration as it did in late September 2018, preceding the Xmas debacle. The chart on the right is the daily Russell VX that is in line with the daily bar of the Russell itself, that repressed volatility that is persistent but due for a change. The Russell VX is sitting on S-T and L-T support, its time for change to succeed or fail.
Unless there is a two standard deviation gap higher on the open today – 7/27/20 – the aggressive hedge system on the RTY will be engaged starting as always with a minimum lot size relative to your account size.
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Back Story
“Stupid And Ridiculous”: Rabobank Says The Fed Will Cause Everything To Come Crashing Down In Epic Ruin
Submitted by Michael Every of Rabobank
Could we please have the intellectual honesty just to admit the system as it exists today functions to give more money to ultra-rich people? This is no longer a ‘free market system’. Water does not find its own level. It is channelled through canals cut by an establishment, and some fields are watered very well and others left arid. This is not ‘capitalism’ as anyone teaches or models it, where money is made from productively investing in making things. It is speculative financial-capitalism, where money is made by watching money being made by central banks, which is then channelled into the stock of firms who often don’t make things. Given the homilies that central banks are now coming out with about inequality, one could even say it is even oligarchy excreting noblesse oblige. Yet perhaps it is even worse: central banks saying “Let them eat stocks.”
Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free runs out.
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 23, 2020
Contrary Thinker Rants
I am not setting out to write a critique here, I am simply posting what I see the majority of crossing my computer screen and seeing them for what they are, based on the first principles of our trade as well as understanding the consequences of a majority point of view at a market extreme by any historical measure.
Long time no talk Tom, but I can say this: I can certainly hold my Scotch better than him. Be that as it may. Tom is not a forecaster, he is a strategy developer. He has maned projects from historical event-based systems on high-speed sun computers to the sequential systems. The event-based systems he told me directly found nothing worth trading and I have a copy of the sequential that he gave me and in code with upgrades stopped working years ago. In any event, he is bullish for the I-T it appears.
What will not change for the majority of the bulls, which is to our advantage, is their gross miss understanding of what volatility is. In their minds, it is either a non-offensive word used for a sell-off or an asset that has a value. Both of these are opposed to what it is which is the state of tension between expectations and reality. So when I see the comments posted below, they are meaningless content. The person could have said the stock market is up 25% and crude oil is up 50% off their lows and been more meaningful. But this is somehow supporting her bullish outlook.
One of the first lessons you learn on Wall Street is the best performing mutual funds of last year will not be this year’s best. Another way of putting it is “don’t change the equity curve.” But in general, that is basically all you hear, read, and watch from too many analysts: how much the investment has gained and somehow that is reason to buy it or at least buy into the argument. So it’s clear this content provider is bullish and excited about the markets.
But a key take away here regards the “rule of alternation” which our friends at Elliott Wave International made popular. In the below statement, its the YTD that is key. While we all know everyone does not buy or sell on January 1, the calendar is our human way of accounting for things, especially money.
However, I first gained an understanding of alternation under Bob Farrell at Merrill and he used calendar demarcations when he discussed a prediction of change. For example, after the lowest volatility year in history in 2017, our publication MarketMap2018 suspected a more changeable year in 2018; and we got a year with two major sell-offs. Furthermore, the sell-offs alternated, one in the first quarter and the second in the fourth quarter.
Top outside news events list by a major content provider is all bullish.
Just more of the same. I don’t want a medal pinned to my chest, but the information I provide is aimed to be educational, instructive, strategic and executable. Rather than a sales pitch about how “wow-wee-zow-wee” the market has been.
The last time I read about records like the one pointed out here was just prior to the peak in late January 2018, when the previous rally in the S&P and Dow did something similar.
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Back Story
Calibrating The Craziness
A pattern to which investors have become all too accustomed, the Fed pounced into action soon after stocks fell precipitously in March. And pounce it did. In a set of measures that were mind boggling both in terms of magnitude and breadth, the Fed sent a strong signal of its commitment to support markets. In addition, it kept rolling out new policies throughout the second quarter in order to quell any remaining doubt as to its intent.
Click here to view original web page at Calibrating The Craziness
In conclusion, this market has been far more resilient than I, and many other value-oriented investors, ever thought possible. Passive flows go a long way in explaining this phenomenon. They also suggest whatever craziness we have experienced can continue for some time. Fundamentals really don’t matter much in this environment and as result, stock prices have little information content.
Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free look runs out.
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
July 23, 2020
Volatility Reports 7/23/20 Long Bonds
Until inflation becomes an obvious problem to the bond market and the Fed, rates will continue to support the equity markets for the short to intermediate-term.
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Long Term government bonds have a current negative correlation with the S&P. Putting the longer-term outlook on hold, the near term presents a low-risk opportunity to go long the high-quality bonds. Bond futures and ETFs have worked off their period of panic buying with a sideways trading range. This high-level base has traced out a horizontal triable that projects a high rate of change advance starting in the very near term. The 30-year futures have started to break out already. The underlying tension is the markets are high, in that it supports a breakout that picks up a following based on our readings of volatility. The weekly Technical Event Model is on a TE#2 from three weeks back. with the tidal system also pointing higher on the weekly chart, all of the evidence is bullish for the bonds. 15 to 30 point profit; risk failure back into new L-T support at 160 1/2.
Since the bonds have a negative correlation to the stock market and the risk market reaching extremes in bullish advisories and sentiment readings, a sell-off in the stocks will benefit the bonds, at least one last time before inflation becomes an issue.
The Vanguard Extended Duration Treasury Index Fund may also be a good play here, with a target range from 57 to 59. Stops would be a failure back into the new L-T support zone at 49 ( 3 to 1 or better). It too is supported by our volatility modeling.
Back Story
“Powell Is Now Helpless”: Even A Modest Market Wobble Threatens To Devastate The Real Economy
“We’re not even thinking about thinking of raising rates,” declared America’s Fed Chairman, all but eliminating uncertainty about the Fed policy path through 2022. The S&P 500 had completed a historic recovery from the pandemic lows to trade higher on the year, its price utterly disconnected from today’s economic devastation.
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Great and Many Thanks,
Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
Copyright 1989-2018
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— 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.
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— 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