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July 20, 2021

Volatility Report Fang Index

The Fang’s days are over, traders see low-risk high-reward short selling here.

Almost a year ago I pointed out that Tesla was: “From a risk management point of view, the type of L-T buying for the last eight months is FOMO, panic buying, see the left window of the monthly chart, as easy to flip as the gold markets flip recently.

Contrary Thinker will be looking at the S-T charts for a sell signal. The I-T to L-T risk is 600, where it began its panic buying.”

Today the Fang+ index is looking at a double top that happens to be at predicted COT dates. The 2/19/221 dates were astrological and set a theme of corrections for the year and the COT on the 14th was a Solar-Lunar COT, an Astrological COT date, and the exact date of the secondary peak of the Nasdaq dot com peak in 2000, which is also in gear with the 45-year cycle (22 1/2 year).

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January 2, 2021

What Contrary Thinker Told its Membership

The One Factor that Trumps the New Market’s Giddiness

Published on: Jan 22, 2020: “All measures of market sentiment are at highs or extreme highs, from put/call ratios to CNN’s greed index, you name it. The outside world’s focus for this outright giddy disposition and  talk of a potential “melt-up” in equity values focuses on the following four elements…” Read it here. 

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September 2, 2020

Volatility Reports 09/02/20 Stock Market

“Best first day of September for the S&P +.75% since 2010.”

“The S&P 500 was up 7% last month. Here’s what it did the next month the past 15 times it was up at least 7%: You might notice a pattern. 5.0% 5.9% (3.1%) 0.5% 0.8% 5.7% 5.1% 9.4% 5.3% 3.4% 3.7% (0.5%) 0.1% 3.0% 4.5% for an Avg 3.2%” 

Does the above type of handicapping work? I doubt it.
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Sentiment among financial professionals propagated in the public sphere is predominantly bullish, as the above headlines. I have compiled over four weeks the content from the Twitter space provided by a sponsored compendium of TradingView. To date, 99% of all stock market posts are bullish in the face of the bulls proclaiming the market is climbing a “wall of worry,” Gives me a mind cramp.

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August 29, 2020

Volatility Reports 08/31/20 Stock Market

Fed’s Bullard says the recession is over but rates will ‘stay low for a long time’

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Short volatility investors, fully invested asset allocation bulls, would find this news from the Fed over the weekend comforting. Bullard also believes reports on the economy will be “one of the best quarters ever for economic growth in the U.S.” The market’s optimism is in gear with his thinking.

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August 25, 2020

Volatility Reports Stock Market 08/25/20

The foresight from the 2016 election, the crashes (2) in 2018 (aka volatility regime change) have implications for today’s market, the election in November 2020 and the 2021 markets

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Literally every advisor/content provider being shared and re-broadcasted in the various forms of media are focus on reporting the new highs, the continuation of the uptrend, and the record-breaking market experience from March 23, low.  This background sentiment has been clear for the last 4 weeks.

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August 7, 2020

Volatility Reports 08/7/20 Stock Market

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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?
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July 16, 2020

Volatility Reports 07/16/20 Nasdaq

Nasdaq Hyperbolic Peak, in place. What supports this idea is equivocation by so many advisors and analysts on what this market is doing, and their subject lines or intros being “questions.”
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I’m sure not many recall the peak in early 2000 by the Nasdaq composite. It ended a secular bull market from the low in 1974. A great bull move. I wanted to point out the pattern at this inverted V top. For one it broke the upper channel of the long term trend from the ’74 low. Such “throw overs” are equivalent to investors paying any price for these shares of stock. The type of emotional investing old money likes to see for profit-taking.

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July 16, 2020

Volatility Reports 07/16/20 Nasdaq Hyperbolic Peak

Volatility Reports 07/16/20 Nasdaq Nasdaq Hyperbolic Peak, in place. What supports this idea is equivocation by so many advisors and analysts on what this market is doing, and their subject lines or intros being “questions.”
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I’m sure not many recall the peak in early 2000 by the Nasdaq composite. It ended a secular bull market from the low in 1974. A great bull move. I wanted to point out the pattern at this inverted V top. For one it broke the upper channel of the long term trend from the ’74 low. Such “throw overs” are equivalent to investors paying any price for these shares of stock. The type of emotional investing old money likes to see for profit-taking.

Contrary Thinker’s volatility model on the monthly bar seen here signaled the uptrend was old, persistent and ready for a change. Please note that after the high in January and a month of decline the recovery – bounce – took a few months on backing and filling on the low side of L-T resistance – blue line – that was coincidental to 62% retracement before the other shoe drop.

Here is a snapshot of the composite from the wave [4] low in 2002, which reveals a similar set up at today’s highs. the throw-over the upper channel and the TEM reading of old, feeble, and ready for a change on the monthly bar. That is the Technical Event (TE) #3.  What else is nice is wave (5) is 2.618 times wave (1) and wave (5) is related to the length of the previous correction, wave (4) by the Fib-ration of 1.381.

On an S-T basis, the daily bar is saying that the tension behind the market is ready for a trend change as well, with a TE#3. The key price levels that would suggest a lower market are shown in the data window.

Read More

July 6, 2020

Volatility Reports 7/6/20 Short Term Indices

The background based on price is coiled up like a spring. A trend-following or breakout (down) signal will get carryover. Charts with breakout points will be posted with the opening of the day session.

Last week I pointed out that our volatility model – a leading indicator, never lagging – for both the intermediate and short term signaled a trending move was on the horizon. that the bulls have a chance for the 1929 or 1987 melt-up that they are looking for.

For s-t and day traders’ money is money, trade either direction, it does not matter if my outlook suggests deflation for the long term followed by hyperinflation in the recovery effort.  I saw a connection of mine post a brief headed ” the low is in for the year,” which tells me nothing. Granted I did not read the brief, but the headline should be captured in the writer’s content. In other words, the low could be in for the year and there could still gibe back 20 to 25% from here, and not make new lows until 2021. The sell-off does not need to be like the last three we have witnessed. It could be more like the 1973-74 slow Chinese water torture, low volatility, and dull bear market.

The big take away here and breaking old school thinking out of their box it’s how you get there that is key and to be clear about risk and opportunity.

Contrary thinker’s featured chart is the S&P futures going back 23 years with our Tidal Wave model. As a system, it can be refined into a day trader with the TEM as a filter. From a forecast point of view, it provides a basis for the outlook.  Since the near-perfect sell signal after the February island reversal, the buy signal was early setting the cycle system into inversion, that is buy mean to have a short bias and sell means to long bias.

 

A few things stand out in the above chart. for one is the island reversals at the February top and the June secondary or lower peak. Neither one has had their gap closed, a bearish tendency. Both reversals were failures to hold long term and intermediate-term support zones. As mentioned TEM is a new signal for trend-ability.

While the headlines since the 8% down day have been one-sided bullish and every random count I take in social media has the bears at 3 to 5%, the market has made little headway. Here is the Globex three hours before the open, and only the Nasdaq futures are in virgin territory.

The NQ is in the S-T resistance zone and a move below 10,451 would be a sign of weakness.  Support for July is at 10,334.00. The other majors have run into S-T resistance and fallen back thus far.  More on that after the open.

As intimated above, the mentality of small-time investors, measured by the put/call ratio provides an indication that the bottom of the pyramid is buying, providing liquidity for smart money to pad off into, to take profits. Smart money needs a broad base of small buyers to be well entrenched in their buy one day dips strategies so they do no collapse the market.

Given the speed of two of the last three declines since early 2018, bibs are being pulled and the market hits the panic stage quickly. However, from a market mapping point of view, there are only one of two places the bear market can be stationed, and this is a bear market rally in the big caps and an irregular top – Gartley’s butterfly formation – in the Nasdaq, with the new highs.

Referring to the above 1973-74 parallel, the current rally would take four to five months off the March 23, 2020 low before a dull and slow bear market took hold making new lows in 2021.  That time mapping brings the market into a July or August peak. The let’s get it over quickly scenario puts the market at the (2) point on the chart. Given the snap back to normal mania and the tension in the background measured by TEM, collapse is very possible here.

Here is the textbook example of an irregular top. Keynotes about the topping process are the nominal new high made by the (b) wave. This new high is not confirmed by market internals like the A/D line, which is the case.  The new highs are being led by a handful of marque stocks, not robust advance. The limit of the advance is typically 1.236 times the length of the (a) wave; and the subsequent decline takes prices back to the beginning of the major (5) wave advance.

Running those rations on the real chart should put a cap around 10,542. My I-T resistance zone has its outside resistance at 10,549 for July. The (C) wave sell-off would target 6,000, the low from 2019, and about equal to the overshot on the high side.

Lastly, referring to MarketMap 2020, there is a change of trend expected early this week. If it is an inversion the market should change from side-ways to down. If prices continue to move higher, the next orthodox time frame for a COT is the week of July 20.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

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