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    CT Journals

    Jack Cahn

June 24, 2022

“No Free Lunch” Milton Friedman

“The times they are a changing”

I have pointed out that good market research provides insights into the change of trend (time) and dynamics of the trend (context) and direction of the change (price). The problem comes when the market’s vibration (oscillation) changes. When an expected low happens but from a strategy point of view you have tightened up your profit-stops protecting profits yet have to provide a smaller profit as opposed to taking a larger profit when the change was expected.

The problem is – as you will see in the chart- at some point when the trend is expected to change point (in terms of time, price and dynamics instead it will be an acceleration point, which is what we are in the game to capitalize on. In other words to max out the profits.

CT pointed out going into this week – with a redraft and update regarding one-day wonders and suggested the COT should produce a rally and potentially a one-day wonder. The market gave us what we expected and in panic buying, (poor) right into MarketMap’s change dates expected next week.

The featured chart here shows the 60-year cycle side by side. Moreover, the way a bear dies is when investors are throwing stock away at any price. I’ve highlighted that in the 1962 chart. That capitulation has yet to happen in 2022.

And no humankind has not evolved beyond being human and it will happen again. What the 2022 bear market has done is cashed in 14% or higher in profits while not getting the media’s full negative attention or the public’s with the AAII cash vs stock holdings is still near historical lows.

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June 19, 2022

Volatility Reports 6/21/22 (Video)

Open positions tied into the market’s position

A 20-minute video covers all open positions, how to use the respective trade idea products, clues on doubling down, and the strategy we are looking at this coming week.

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June 19, 2022

One day wonders dominated in 2008 & 1932

People that know market history invest with an unfair advantage

Going into the new holiday Monday, June 20, 2022, I thought it is time to post a historical brief from my collection. A historical brief was published one day after a one-day wonder of 2.2% on the Dow in the fourth quarter of 2018. Contrary Thinker had called for a top and a correction at the end of September. But after the one-day wonder on the 16th of October, the bulls got their bravado back. Their timing was wrong.

I refer members to a video they will have access to shortly that reviews the market’s position along with all open trading positions and expectations for the next three to four weeks.

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June 13, 2022

MarketMap™-2022 Planner #14

MarketMap™-2022 Planner from Issue#1 through to date builds a body of knowledge and a point of view that will enable you to protect your capital and make the most with your tradable cash. 

Just like an oscillator has to remain overbought for an uptrend to exist and oversold for a downtrend to persist, cycles act in the same manner. Focusing on the current bear trend that began for the NASDAQ at ATH 11/19/21 and DOW & Co on 1/4/22 it is easy to see the cycles in the chart shared in our LinkedIn group, seen here.

I will let you go back and cross-check the change dates from Issue#1 forward. One fixed rule in cycle formulas is that if there is one inversion – where a low cycle pivot did not produce a recovery – there has to be another inversion to get the cycle back in gear with itself. On this featured chart, I labeled inversions “Inv.”  The numbered count “one” through “six” is a nominal EWT count, putting the decline in wave seven down or the heart of the bearish trend.

So going into the COT date around 4/1/22 the cycle is back in gear with the most recent COT a high pivot on 6/2/22. Since that high, the downtrend has reasserted itself. I hear from a number of members that are aware of the tidal cycle, which is associated with the new and full moons, which is true with a number of nuances. Nevertheless, that lunar cycle of 27.7 to 29.5 days, is one of several cycles at play. So, you have simply two weeks up into a high pivot followed by two weeks lower into a low pivot.

However, MarketMap™ has several methods for determining pivotal dates and they are all different, based on various methodologies.  The next featured chart is the annual scenario map that is right in line with the market thus far.

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June 5, 2022

Volatility Reports Commodity Based Inflation

The perfect storm is a combination of unfavorable circumstances that come together in the same time frame.

Today, the lid that was over what world because of the pandemic has lifted for better or worse, putting increased demand on goods and services.

The “build it back better” program was needed more for American infrastructures and to advance the transition to new clean industries.

Supply chain bottlenecks, primary in China with covid shutdown; and Black Sea blockade.

The invasion of Ukraine by Putin has cut off both oil and gas supplies adding to the pressure on the supply and demand equation.

Some intermediary companies are hiking prices more than the rate of the wholesale prices under the fog of media hype.

Drought in numbers 2022 – Restoration for readiness and resilience

Source ODHA Posted  

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May 30, 2022

MarketMap #13

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

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

Aniversary Dates

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May 21, 2022

Volatility Reports 5/23/22

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

 

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

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

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

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

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

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

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May 9, 2022

Volatility Reports 5/9/22 Risk Assessment

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

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

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

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

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

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May 6, 2022

MarketMap-2022 The Scenario Planner

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

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

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

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

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

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

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

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

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

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

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

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May 2, 2022

Volatility Reports 5/2/22 {sample}

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Great and Many Thanks

Jack F. Cahn, CMT

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