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March 20, 2022

Volatility Reports 3/21/22

Meaningless Facts

Without context analogical inferences have little meaning. From the get-go, analogies have a handy cap of no grounding in first principles.

So, after 2 ½ months of a downturn, the majority of retail types are grasping at straws confusing time periods and purporting long-term implications from short-term models.

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March 3, 2022

Volatility Reports 3/3/22

We are all traders of Volatility

The primary source of performance for capital managers is (1) asset selection and (2) short volatility or short correlation exposure. When the asset groups’ diversification converges on one (1) all that remains is being “short volatility” for the majority.  Selection does not matter. In other words, capital managers are long everything! Hence it is not a shock that the majority underperform during a crisis.

The emergence of the components for variance swaps to hedge is just one example of a bull market in fear since 2008-2009 but also it requires the use of “market timing” to be effective.

Without getting into the methods of “short variance swaps” the bottom line is “Regardless of the asset class, the true source of alpha seems to be moving between short and long volatility exposure—the volatility risk process and not the underlying asset.”  Artemis Capital Management

In other words, the method that can achieve Alpha the industry commercializes as unfeasible is market timing!  If you buy into that propaganda by the industry, you are reading the wrong newsletter.

The first chart featured today reveals a number of important factors. With that in mind, here is some background backing up a number of Contrary Thinker’s assertions.

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March 1, 2022

Volatility Reports 3/1/2022

Leading Indicator

the leading risk taker’s market is just about finished here with its countertrend. The Bitcoin bulls can’t see past the end of their nose, but that is fine for those of us with vision and foresight.

I know for many some price-based analysis is just not complex enough, because it does not speculate about the whys and how comes and what the pundits contrive to be the meaningfulness of cryptos. While it’s simply a branding game at this point independent of their practicality, given the multi-millions spent on SuperBowl advertisements. So while they fight it out, one thing we know is that Bitcoin is the premier market for risk takers and traders. As such it is a leading indicator of risk taker’s mood.

That bullish mood is

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February 28, 2022

Volatility Reports 2/28/22

Vice-President Kamala Harris said in her meetings with European leaders, this is “a defining moment” for the future of the world.

The impact of the collapse of the Russian economy is being used as an excuse for the bear market around the world. Rather as Vice President Harris puts it well as a defining moment. How will western-style democracies and western values hold up? In the study of BIG HISTORY, the academics see the current period as a threshold, time will tell.

With that said, my best advice to advisors, investors, and managers is not to be swayed by headlines. The media only sees them as excuses for what the market is doing and it will not be until the end of the trend that the truth is understood.

In the short MartketMap Issue#7a I said that “After the mini panic low 3/23/2020, there was an ADV/DEC ratio buy signal along with an Upvol/DownVol ratio surge buy signal with the long bar days.

However, from the low on 2/24/22, which many of my competitors called a panic there was no such buy signal. Rather the high/low diffusion index on both major markets continued to show distribution. Our featured chart shows the indicator here still holding above 1.00 telling investors there are more new lows than new highs. this indicator is not the only “bearish” indicator in play now, Contrary thinker does not work such tools in a vacuum.

The charts also give clues on a number of issues. The SPY chart shows how old support is not resistance, high lighted in blue; and that price level is coincidental with the Gann 1×1 trend line cross-over. From a trend following point of view, the SPY has broken below the smoothed Bollinger Bands and continues to trade below it, suggesting the trend is down.

From an EWT point of view, each leg of decline is only a first wave, setting up a one-two series, which is almost always the lead up to a waterfall high ROC trend. In this case a downtrend. Last Friday’s rally appears to be a one-day wonder into new resistance, high lighted in blue.

Just as bearish is the NASDAQ comp with a clear five wave structure leading to a wave [1] end on 2/24/28, right in line with MarketMaps COT calendar.

In MarketMap™ 2022- Issue 7a I explained why Friday’s rally was typically a one day wonder:

“One of the elements of a bull market, especially in the early stages, there are one-day long bar declines, shakeouts that at most suggest a 10% correction. they happen 99% of the time within a few days of a high pivot.”  I went on to say that,

“The inverse is true of a bear market, that near a low pivot – especially one that is being called a panic when there is no evidence of a panic – a one-day wonder is a natural occurrence to shake out the weak hands and keep the Perma bulls compliant.

Contrary Thinker’s expectations are the same. Both time and price suggest that without a bell ringing panic extreme, there is more decline.  I stated that “A minor recovery is expected into March 3-6. From that COT high the decline remains on track for a low in mid to late summer and panic in May is possible.”

Any recovery early this week will be used to add back closed-out mega-profits from late last week plus new bearish ideas.

The decline from here should last two trading weeks with the second week prone to long bar declines, something that exceeds 4%, which has not been seen yet.

Check-in with Trade Exchange for new ideas, they hit there first. An updated user doc is forthcoming.

Are you getting your investment advice from memes? Leave the public domain. Are 30 years of successful experience worth $10/month? Use this URL and put it in your pocket – smartphone and other handheld devices.

Trade-Ideas? Just $10/month for all of them! Use your smartphone here, clip and paste: https://tradeexchange.app.link/jack_cahn

Great and Many Thanks,

Jack F. Cahn, CMT

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 client’s 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

February 25, 2022

Volatility Reports 2/25/22

Headlines after the close Thursday “7 of the 11 sectors closed higher. Tech led, gaining 3.42%. Consumer Staples lagged, dropping 1.72%.”

The full-time providers of market information are all in unison after the recovery Thursday. A few point out how sentiment is one-sidedly bearish, which is bullish from a contrarin point of view. but all of them assuming they are professionals as they post this content full time, are bullish.

  1. Russell 2000 digging in at the AVWAP from COVID lows for the 2nd time this year. Along with momo divergence, finally getting some signs of a bottom $IWM
  2. Neutral Sentiment Plunges as Bears Move Back Above 50%
  3. The big difference between today’s reversal and the reversal on the 24th can be summed up in one word… PANIC!  We saw it today, but not on the 24th.
  4. S&P 500 Information Technology 1D  Bullish divergence is displaying at support.
  5. Investors Intelligence Bulls minus Bears is now at 1.2%, nearing those extreme pessimistic levels where we’ve seen bottoms in stocks since the mid-90s, with the exception of 2008.

Also, one thing that has become such a glaring insult to a trained market analyst, strategies and trader is the spitballing that is chronically posted, and to what end is unclear. But #3 above, there was no panic yesterday, not even a mini-panic.

What the good ones know is it’s the consensus of the purported professionals on how one builds a contrarian case.

Also, the bulls are in retreat. Here is a chart posted with the head lines “RSP holding the line.”  The RSP is Invesco’s weighted S&P ETF. But what is clear is how the index broke support, and now he has had to retreat to the next “bar chart” horizontal line. The keyword is the bulls are in “retreat.”

The brief MarketMap™ -2022 Issue#7a sent to members before the open suggested the lower gap open into our COT time window could lead to a reversal on Thursday or Friday.

Yesterday on the opening weakness 1/2 of the bearish option positions took profits and a number of the ETFs some had better than 25% profits and a few laggards were disposed of off.(see Trade Markets App.)

Trade-Ideas? Just $10/month for all of them! Use your smartphone here, clip and paste: https://tradeexchange.app.link/jack_cahn

Bottom Line and Strategies going into today:

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February 17, 2022

Volatility Reports 2/18/22

Don’t get caught in the slope of hope.

The Superbowl baby bitcoins promoting their brand of cryptos rings similar to the Dotcoms paying megabucks for Superbowl advertising space in the 2000 Superbowl, the last time the Rams won the big game.

BTC is the risk-takers market of choice, it is not a hedge. In fact, I saw a headline after it rallied on Tuesday that it was in response to Russia withdrawing troops. So the content providers are not sure what role it plays. 

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February 13, 2022

Volatility Reports 2/14/22

“Being mindful of your calendar can help you avoid mood swings”

An anniversary reaction is renewed feelings of grief or anxiety on or around the date of a traumatic event.

Gann was one of the more prominent names that anchored cycles to anniversary dates.  How he anchored the cycle is a mystery to many.

I can say that technical analysis is about the scrutiny of mob behavior aka the market.

It follows that Contrary Thinker being the romantic I had to bring up the concept of anniversaries today because it is the 93rd anniversary of the “Saint Valentine’s Day Massacre.”

On the morning of February 14, 1929, seven members and associates of Chicago’s North Side Gang were gunned down in the Lincoln Park garage. Is there a lesson here? Yea, if you forgot Valentine’s Day, don’t look up, and more likely, “live by the sword die by the sword.”

In any event, going into the trading week, the expectation is for a pick up in the rate of decline and the possibility of a massacre based on the time element discussed in MarketMap Issue#6 and price-based analysis presented in Volatility reports.

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February 10, 2022

Volatility Reports 2/10/22

Actions speak louder than words, and they are telling a bearish story.

While the little guy is shying away from the market according to the AAII stats propagated on the internet, the big boys are still chasing risk. From the bitcoin futures to the high beta stocks and FAANG shares, their actions reflect a one-sided bullish sentiment in the highest form of risk-taking.

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February 2, 2022

Volatility Reports 2/2/22

“Get your motor runnin’ Head out on the highway Looking for adventure In whatever comes our way…”

Born to Be Wild Steppenwolf

Before you have a price target or a call for direction, you need to know HOW the market is going to get there. You could end up with a year like 2000 locked in a range of 20% with the best month being up 15% and ending the year at the same price where it began.

Context – the market’s pre-condition – will tell you what to expect with the right tools. It does not matter your time frame, do you trade the range or do you trade the trend, that is the question.

I have covered the background of the monthly chart previously, so no need to rehash that again. Today looking at short-term conditions and what should follow after triggers are hit is focused on the short term (S-T).

Featured here are the short-term (S-T) bars on the main stock index futures.  The progression by each market is the same so I have focused on a particular Technical Event (TE) in each chart window to be as clear as possible for newer members.

Starting from the left,

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January 29, 2022

Volatility Reports 1/31/22

The frantic chatter from the public stream is misguided and uncertain.

All talk about panic and wash out and the market meeting expectations that every expert advanced for a 10 to 20% decline seems to be the majority view of the professional advisor/content provider. The problem is the so-called “correction” has no signs of a correction. That is it looks and feels just like a BTFD event and 99% in line with all the previous dips of 2021.  But no signs of a correction, no long bar day decline that exceeded 3 ½%.

There is some confusion that a few believe will be sorted out by the bulls, back to “how the markets are supposed to work.”

I hear that it just can’t be that crude oil is making a seven-year high while some of the grains are coming back real strong all in the face of a strong U.S. dollar and the weakness of other currencies. This is not normal, they are saying.

How can that happen when

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