• Background Image

    CT Journal

    Blog

November 19, 2018

No Christmas Party for U.S Markets

Technical Event Model – Volatility modeling

Market backdrop provides a springboard for a dynamic trend.  In the new millennium, the Read More

November 12, 2018

US Dollar Eyeing Key Breakout Level

You need to login to view this content. Please . Not a Member? Join Us
November 6, 2018

MarketMap 2018 4th Quarter

CONTRARY THINKING

What is typical of a major market top is how most professionals in the industry speak about normalizing the corrections.

Contrary thinking looks for one of two circumstances to correlate with such major turning points.

The one is when data or events remain the same but the marketplace’s interpretation of the events changes. The other is when the data/events change yet the way the market is interpreting the events remains the same. The one is a shift in mood, and the other is a denial of change both imply a regime change regarding the market; and possibly the economy.

These interactions give subtle clues of change that allows the contrary thinker to act before others, before the majority.

So today while the facts have remained the same, the interpretation has turned to the above-referenced normalization process, which is par for the course after the first signs of the new bear markets.
This normalization process sounds like this industry-wide: “Wall Street has seen 56 pullbacks (retreats of 5-9.99%) in the past 73 years; the S&P index dipped 6.9% in this last one.”

And they will add that, “…the benchmark fully rebounded from these pullbacks within two months.”

They are also eager to point out that since the March 2009 low there have been 5 or 6 setbacks of 10% +/- while the S&P is still up 335% even after the October decline. But here is the catch, there working assumption is they can not time the markets. Furthermore, the inference is that if they can’t no one can.

That’s because as one “wealth manager” puts it based on the current bull market history: “…waiting out the shocks may be highly worthwhile. The alternative is trying to time the market. That can be a fool’s errand. To succeed at market timing, investors must be right twice, which is a tall order.”

Why would it be a “tall order?” It only makes sense on what he says next: “Instead of selling in response to paper losses, perhaps they should respond to the fear of missing out on great gains during recovery and hang on through the choppiness.”

Wow! Instead of looking at price-based timing models to avoid the risk and to find opportunity, he is reacting to the profit and loss trail, which is post hoc, reactive and emotional based. Hence this wealth management is not based on any “discipline” I recognize. It is based on the profitable of the portfolio. This explanation is what brokers normally say about their client’s failure because its based on fear of loss and FOMO.

Another sign of an important top is in place along with the above apathetic attitude is the modest appearance they are giving to the risk. The rare bearish voices have only modest expectations for the decline.

Lastly, the majority of financial news pundits are kicking the can down the road with 2019 being the consensus.

With that said, done and dusted, our focus is on risk management point based on an objective model not a rationalization or cherry-picked array of Technical Analysis. It is the independent use of price-based tools, strategies, and macro filters to provide actionable and straightforward support.

You need to login to view the rest of the content. Please . Not a Member? Join Us
November 6, 2018

The S&P’s November to Remember

What follows is a blurb from the 14-page big issue Volatility Reports that is going out today covering all the various time horizons and where the market is at this eventful period.

You need to login to view the rest of the content. Please . Not a Member? Join Us
November 2, 2018

Yenning for an Opportunity

Japanese Yen FX

If you liked the 90’s the yen may be a flashback to the bull run in the last 90’s. The rules are, to follow a  buying surge because they almost always pick up a following.

The last four times %BB-Oscillator broke above .72 there was a multi-month advance. When %BB moves above .72 it is a momentum surge caused by the market’s realization of some bullish underlying fact that kicks off the trend. In this first chart, the length of the trend after the signals presented long-term opportunities for bull trading.

The context this buy signal occurred in supports a forceful trend. The Technical Event Matrix is registering twos for all three-time horizons. Technical Events Rule #2  precedes trending moves in most cases and provide a bias to trend following types of systems.

There are some other triggers to go along with the %BB-Osc signal. The triangle pattern – while it may not be a valid triangle in EWT terms – has the historical volatility background that supports it. In other words, a move above the descending trend line would be a breakout.

Furthermore, if the yen can get above the high end of the 20-year base, there is a point and figure count or measured move that targets 180.00 The base and triangle both project 160 to 180 for the USDJPY, a buying power for the yen not seen since 1995.

Along with the application of trend following systems to the yen, here are some bullish ETFs for considerations.

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 to 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.

October 31, 2018

Volatility Report October 31, 2018

S&P ENERGY SECTOR

Looking at XLE and $IXE are presenting trading opportunities seen as low risk, let me explain.
This S&P Sector provides exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries.

You need to login to view the rest of the content. Please . Not a Member? Join Us
October 23, 2018

Market Timing is Dead

If irony evades you, you are in the majority, heads up.

Contrary Thinkers know,” the market programs the investor to do just the opposite of what he should be doing.” Contrary Thinkers also know that investors are not hard-wired to fail at achieving alpha, like so many others, would like you to believe. Its all a matter of being a Contrarian. Read More

October 22, 2018

Fanng stocks losing their bite

It is becoming more doubtful the bell weather Fanng stocks will reverse a series of sell signals from the high pivots in September. Failures to hold new intermediate term (IT) support along with a break below classic neckline formations add to the bearish outlook. The red arrows hight light these breakdowns. Both Amazon and  Google broke below I-T support and continue to trade under that level, a bearish indication.

GOOG is sitting on long-term (L-T) support (old L-T resistance) where the inability of this market to get back above this level would further the bearish outlook.

One of our favorite shorts is Netflix.  Of interest in the above daily bar chart is the 100 point risk the stock has until it reaches the high side of our L-T support zone.

 
Once the neckline breaks the head and shoulders top targets a decline of 100 points or better. Further, our measures of rational vs. emotional buying peg all of the buying from 190 into its historical pivot as panic or FOMO motivated. As such, it will flip easily once the decline puts pressure on these traders.

These diverse methods provide price targets clustering, which adds confidence. Now, its a matter of market dynamics to provide insights into when a forceful move can be expected.

Netflix’s background or set up on a long-term basis is similar to the Dow/S&P peak in late January when it peaked on panic buying followed by a mini-crash on panic selling. With Netflix, the panic buying into June provided a pivotal high with a decline that did not lead to panic selling, at least not yet and there has been no new long-term TE. From an I-T point of view, the dynamics only mostly support a forceful trend this week and S-T the market has not worked off its panic selling.

Puts

NOVEMBER 2018 (EXPIRATION: 11/30)

Strike Last Net Bid Ask Vol Int
NFLX1830W337.5-E  16.20 +0.74 20.45 21.50 1 59
             

My initial trading experience used only high delta puts and calls. These are deep – I mean deep – in the money options. Today it is difficult to avoid time premium, without giving up lots of liquidity – as inferred by the volume/open interest.  The weekly November 337 ½ put is 5 ½ points in the money and with six weeks to work has 16.00 premium. I would look deeper and keep an eye open for any OI.

However, the potential is there with a conservative target of 264 leaving the puts 60 points in the money.  The bid/offer spread is a full point; some option brokers are better than others.

It’s easy to get started, and the only thing that will keep you from quitting is your success. 

Premium Publications Merging Strategies into Forecast. The newest and most reliable risk, asset and strategy management advisory in the industry. No matter your size or investment policy, the volatility report will put you at an advantage. These are individual and student rates.

ContraryThinking Starts Here

Great and Many Thanks,

Jack F. Cahn, CMT
A Contrary Thinker Trader Since 1989,
Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA.  800-618-3820

— Thinking Man’s Trader 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.

–Thinking Man’s Trader 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 to your financial situation. Only risk capital should be used when trading futures or options.

NO WARRANTY / NO REFUND.TMT 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.

October 17, 2018

One day wonders dominated in 2008 & 1932

Based on the evidence this is what I know

In the wake of the extended bull market since November 6, 2016, and more recently the advance from the April lows it will be hard to resist bullish actions the day after a 500 point rally by the Dow.

Read More

September 26, 2018

Nikkei and Bitcoin two to Watch

Volatility Report September 27, 2018

Nikkei 225

I wanted to focus on the NK for one simple reason; it is making a major pivot high in the current time frame. As such it has spilled over implications for the reaming stock market that are making new all-time highs in the same period.

The weight of the evidence is clear, but I did not hear anyone pointing to the recent spike up by the index before it occurred, and I am not hearing anyone now calling for a major peak. The chart pattern is a classic horizontal triangle, which based on EWT only occur in 4th of B waves. Here it is taking place after nine years of advance in a 4th wave position.  Based on 100 years of observation, the thrust out of the pattern is always a high rate of change affair that equals the widest high to low points in the pattern.

Math would be from “a” top “b” added to “e” for a target of 24.762. Or a more ambitious calculation is from “Three” to “a” added to “e,” which puts the NK near the high side of its long-term resistance zone at 25,328.00

Furthermore, based on the same historical observations, the “post triangle thrust” is the end of the trend not the beginning of a new one.

What supports these Amercian facts is the fact that our volatility model – the Technical Event Matrix – is registering panic buying, which is nearly always (99% likely) at a change of trend. In this case, the best case for the bulls is from up to sideways before the market flips on the trend followers. This FOMO is on a short and intermediate basis.

Given our MarketMap COT dates for the Dow coming in here at the end of September, the first phase of a cyclical bear market is expected.

Bitcoin

Triangles imply thrust, high ROC moves.  From a trading opportunity point of view, Bitcoin sets up for a straight-line trend after it breaks out of the wedge formation seen here.

For swing traders, the use of a band breakout, or a moving average crossover should get you into the trade. Use the largest width of the triangle measured from the last pivot inside the formation for a target.

This chart is the NYSE Bitcoin index, but the coin itself and the futures have the same pattern calling for a $4,500 to a $5,000 swing.

For Long Term investors: given that Bitcoin is a leading example of speculative exuberance and was a foreshadowing of the Dow peak in January, I suspect it will be a leading index of the Dow today.

If I reverse engineers this from the bearish outlook for US Stocks, expect a 4,500 dollar move to be a spill for this market going into the end of the year.

Furthermore, given the patterns are repeating here, if we use the Chinese markets as a similar pattern the expectation would be for a crash in Bitcoin prices.

A move to new lows, a move below 5,883 on the NYSE bitcoin index, should lead to lower prices; and this could lead the US equity markets into their bear markets.

Commodities with Related ETFs

Crude Oil

Tradition cycles have always phased the bull/bear directions of the markets from bonds to stocks to commodities to descending bonds followed by stocks followed by the commodities.

The turning point map for Crude Oil seen here syncs with additional independent modeling forecasting further uptrend by the commodities in general and oil imparticular.

 

The bar chart of the Crude Oil futures has traced out a 10-point wide triangle where prices have broken out. A measured move targets 80.00.

The post triangle thrust fits the Maps change of trend dates with a peak in the next two or three weeks.

S&P Sectors with related ETFs

Transports
  1. The transportation index has failed to hold the break to new highs.
  2. A head-and-shoulders top has formed with a breakdown confirming the top.
  3. Volatility measures allow for the trend to follow through.
  4. I-T target 10,000.

Oil sector (USO)
  1. The shares are following similar patterns to the underlying crude oil futures, which remains bullish and trending.
  2. The monthly sequence of Technical Events is textbook. Moving from a panic low extremely high volatility, a TE#1 (red vertical dashed line) to the end of base building marked by extremely low volatility, a TE#2 (green vertical dashed line) into the current time period with a TE#3 (the cyan blue dashed line) making the low volatility laboring trend.
  3. While the longer-term uptrend is maturing, the shorter-term backdrop is an extremely low reading of volatility. A set up for a short-term run at new recovery
  4. The middle daily chart shows a horizontal triangle breakout. Like the crude oil that targets $80.00, USO targets 50 – 17.00

Offshore Stock Averages with related ETFs

FTSE (PRF)
  1. Like the Dow, the major UK average made new highs at the same time. Unlike the Dow, however, it was not able to hold its breakout. Unless there is a quick recovery, the I-T has turned lower.
  2. The failure to breakout highlights here is an I-T sell signal with targets that are 5% to 6% lower
  3. The new high was emotional on panic buying signaled by our volatility model’s technical event #1. On the I-T model, the uptrend is low energy and laboring.

Great and Many Thanks,

Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
Copyright 1989-2018
http://www.thinkingmanstrader.com
www.ContraryThinker.com coming soon

Thinking Man’s Trader 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. www.ThinkingMansTrader.com, 800-618-3820

— Thinking Man’s Trader 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.

–Thinking Man’s Trader 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 to your financial situation. Only risk capital should be used when trading futures or options.

error: Content is protected !!