MarketMap #12 Sample
May 1, 2022
May 1, 2022
“Down cycles are not fun. But they form the basis for enormous future profitability.” – Steven A. Schwarzman.
Hey Steve, What a ton of drivel.
Published on: May 1, 2022
If you never heard of this fella, here is a thumbnail: Stephen Allen Schwarzman is an American billionaire businessman and philanthropist. He is the chairman and CEO of The Blackstone Group, a global private equity firm he established in 1985 with the former chairman and CEO of Lehman Brothers.
It’s clear the majority will agree with him because they have no idea of how to make money in a bear market. It’s also obvious that his new partner (from 2007 Lehman) knows little about risk management or protecting his client’s capital. Besides, there is nothing in it for him to do in the public domain but hold the industries line “Bullish on America,” as we use to say at Merrill in the day.
But inside Merrill, it was another story for many of us. And at the risk of sounding self-aggrandizing, there are many that came out of that Technical Department that have made millions in market timing risk management and compounding profits.
And it’s FUN! It’s like your underrated team just won the Stanley Cup!
These numbers are current through last Friday 6/17/22. Count the number of calendar days back from the 17th 196 days and you will see Contrary Thinker went aggressive on the bear trades with the TOP of the Nasdaq. Hey, even a broken clock is right twice a day. The deal is you have to know it and do something with it.
I have seen many wealthy investors suffer for years because their long-term family heirloom stock is declining by 50%. But they cannot sell it because their cost is $2 a share the stock is currently at 80. You not paying the tax at all provides the psychological wherewithal to stand by helplessly watching their stock go from 80 to 50 to 30. If they had paid taxes annually, they would be better off.
Let us see it from another point of view because most investors know the power of compounding their rates of returns. The well-known Turtle leveraging system is based on this “power.” Yet the majority do not have the insights to take advantage of it or they are too lazy. So, they just have a buy-and-hold investment policy.
My point is simply this if you start with a reasonable sum of money let us say $10,000 and you make 10% a month, use the power of compounding, you will be a millionaire in four years.
This is not farfetched since many times you are making 30 or 40% or even doubling in an exceptional month but ride out the dips, the corrections, the bear markets, which you KNOW are coming.
So why not sell and look to buy the correction? Do you have to pay commissions? Do you have to talk your broker into selling it? Do you have to put up with humility if you are wrong and the investment keeps going up? Man, that is rich! You need to stay focused on the process and get your head with all the pet peeves out of it.
The reason the leveraged ETFs and the reason deep in the money options appeal to the market timers is they know that they can double and triple their money in a brief period of time, with a sound trading strategy. Obviously, since everyone is not a multimillionaire the real secret is only trading when the situation is optimal, with high reward, and near price levels that keep a wrong move a small loss. Professionals trade entirely with less fear as the foundation of their operations because they have this investment policy or philosophy.
Getting back to having fun, this week is expected to open with a break to new lows. On Friday all the major indices closed below their 2/24/22 lows except the Dow, which has been pointed to as a smokescreen.
The first chart provided here is the daily and weekly Dow revealing both S-T price support and the next major support zone. The daily bar has prices sitting on a critical descending trend line. A move below it should not be ignored by the market. Gann trend lines happen to intersect on the daily bar at the intraday lows for the index on 2/24/22. A move below it is a bearish signal that will pick up a following before the week is out.
If Contrary Thinker is correct about a lower gap open Monday the outcome becomes near certain. The weekly bar has lots going on but it should be clear there are three independent methods used to calculate where the next support zone is running from 25,300 to 29,550 with a mid-range at 27,166.
That puts risk for May into June at 25% from here. The three methods are ratio math that projects support zone for the year (green horizontals.) The Fibonacci retracement of the advance from the 3//23/20 low (.382, .50, and .618). Plus the Gann angles that cross at 28,000. Also, note that the recent cross on 2/24/22 makes it a very important level that should act as an acceleration point if broken. Also not the next cross os in mid-June, which fits our COT scenario planner chart and table.
Long-term clients are familiar with this chart it is published every year in January so plans can be made for the year. Of course, we make adjustments as we go but there is nothing major and the dates will never be perfect. Yet the outline thus far is satisfactory.
You’ve got the background, NOW get the Trade-Ideas? Just $10/month for all of them! Use your smartphone here, clip and paste: https://tradeexchange.app.link/jack_cahn
Contrary to Thinker’s Five to One (average win to average loss) product trading bull and bear ETFs are suitable for most. These are real numbers, thanks from day one.
Members-only past this point to access the annual scenario map and change of trend (COT) calendar.
This work by Jack Cahn is licensed under a Creative Commons Attribution-NonCommercial 4.0 International