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November 2, 2020

MarketMap2020 Issue #18

 

November 3, 2020

I know that if you have been with me for some time, I expect a significant swing high or bottom. I look for the opposite of the news media. At major highs, expect good news. A significant big swing low, the report will be dire.

This past week’s headlines were excellent: The US economy grew at a record pace in the third quarter, increasing at a 33 1/2% annual rate recovering about 2/3 of the ground lost earlier in the year due to the economic collapse from the pandemic shut down.

Moreover, most media headlines remain focused on Corona virus-related and how a double-dip recession is in the cards. That seems to be the backstory for the decline from September 2. Still, Contrary Thinker does not believe it will be blamed for the dramatic deterioration expected coming after today’s minor one day rally.

Regarding bad news, Contrary Thinker does not believe there is going to be negative news for the economy that will lower the market. Things are recovering.

Instead, the “big top” that began February 12, 2020, is the expectation of a constitutional crisis and political conflict not seen since 1860. That was our lead story on January 23, 2018, when we warned our people of the pending correction.

Today while the news media covers this potential of a disputed election, the Trump administration is threatening. Yet, the market pundits are not considering such drama impacting the markets.

Also, there is no white knight in the wings. The Federal Reserve Board has outright said that they want inflation to increase; that is a financial result, not an effect on intangible shares. The point is the Feds focused on the economy real economy, not the stock market; hence they are not going to come in to rescue the stock market during a sell-off again; their focus is on their real economy. Furthermore, not during the election season, which may drag on into January 20, 2021.

The exact reason Powell stops a return to normal is starting a new round of QE was the Trump factor, which is dead or at best dying.

Our cycle work is the same or remarkably like the setup that we had back in late March of 2020 when the market capitulated on March 23. Granted, the peak on February 12 projected its cycle for the year, which the Fed busted. But that left the work by the market left unfinished. It also begins a new Event-Based Cycle based on the Tidal high peaking with the Dow and S&P September 3, 20202.

That event-based cycle amount others calls for a downtrend into the end of the year. From November 9 into November 14, 15th show up as the more extended bar period we expected last week, including panic low. However, the POST panic low is not expected until the end of the year, at the soonest.

The same way the period from 10/23 through 10/30 saw a sustainable decline period, the next similar period runs from 11/8 through 11/14 with a panic low on 11/13 plus or minus a day. Last week Contrary Thinker expected a long bar day of greater than 4% to confirm the bear market. While it is not as likely this week, if there is a declining range day of 4% or more, it still kicks off the series of HROC decline.

I have reprinted a part of the MarketMap from March 27, 2020, to cement Contrary Thinker’s scenario going into the first quarter of 2021; and the risk of 36% plus from current recovery levels.

Decennial Theory (MarketMap-2020 Issue#6)

Issue #1 of Market Map 2020 points out the recovery of the first year of a new decade that contains the start of most year markets. Furthermore, from the year 1860, recessions have had their start all with an outside event trigger. In 1860 it was the civil war.

Year

DJIA High DJIA Low % Decline The interval from High to low Months

1890

5/17/1890 12/8/1890 -22.6 205

6.8

1900

9/5/1899 9/24/1900 -31.8 385 12.8
1910 11/19/1909 9/25/1911 -27.4 675

22.5

1920

11/3/1919 8/24/1921 -46.6 660 22.0

1930

9/3/1929 7/8/1932 -89.1 1039

34.6

1940 11/7/1940 4/28/1942 -32.5 537

17.9

1970

12/3/1968 5/26/1970 -35.9 539 18.0
1990 7/16/1990 10/11/1990 -21.2 87

2.9

2000

1/14/2000 9/21/2001 -19.9 616

20.5

2020
2020
2/12/2020
9/2/2020
Avg = 7/23/2021
Avg = 3/29/2022
Avg = -36%
527
17.6
Average w/o outliers 517

17.2

 

The above table shows the damage done in these years. I have averaged the number of profits taken – percent decline – and averaged the time spent in the bear mode throwing out the shortest and the longest.  These numbers are very much in line with all bear markets over the last 120 years.

 

Great and Many Thanks,

 

Jack F. Cahn, CMT

 

Contrary Thinker since 1989,

Copyright 1989-2020

 

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA

92264 USA. 760-459-4681 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.

 

–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

Contrary Thinking Starts Here

Great and Many Thanks

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 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.

–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

 

 

September 29, 2020

MarketMap2020 Issue #17

The collection of the Twitter posts from Friday and Monday rank sentiment at an extreme bullish level with  72% bulls, 23% equivocal, and  5% bearish, suggesting the buy dip mentality remains for  Smart Monday profit-taking liquidity.

I labeled the equivocation segment based on the content provider simply posting a chart without drawing a concise conclusion while one was intimated, all of them bullish, leaving this contrary thinking indicator at 95% bulls.

Coming into this time window, both MarketMap and Volaltity Reports has put advisors, managers, and traders on alert, that any rally unless it was a momentum surge would stall and the bear market will reassert itself. The rally over the last two trading days were not A/D surges.

In fact, while the old school may be looking at arbitrary definitions of bull, bear, and corrections, what Contrary Thinkers can gain confidence from is the occurrence of any long bar day decline that exceeds the widest one day range since the peak September 2, 2020.

For the cash S&P, a long bar decline greater than 4.4% or 148 points will confirm a long term bear market, for the Nasdaq Comp a range day decline larger than 6% or greater than 670 points from the day high to low, would be long-term bearish.

The current time frame

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September 18, 2020

MarketMap-2020 Issue #16

Cycles began to flip over on Wednesday as the market realized and continues to find its form over the next five to six weeks.

Our table of Change of Trend Dates (COTs) has been updated with new data. One is from a friend of mine that is also a respected competitor, the other new column on the right comes from a new study based on Lunar Nodes first propagated by financial astrologer Louise McWhirter work in the early 1900s. Her 18.6-year cycle is already part of our longer-term work but I have reduced it to the short term because I found it produced dates that clustered with other independent cycles. Read More

September 4, 2020

MarketMap 2020 Issue #15

“It’s like déjà vu all over again.”

“Bears need love too”

It is worth repeating part of my comment regarding the reversal from the highs on 9/2/20 that “Doing the math, counting forward ten days was yesterday the 2nd. With a potential high pivot threatening, the bulls will attack long volatility futures that are breaking out as they go back to the mean reversion selling of the volatility complex. Hence the key for bears is the ability to hold the break.

I also said in this LinkedIn group space that “Markets do not crash from a major peak.” In other words, a long bar day declines of 4 or 5% off a high is more typical of a bull market shake-out vs the beginning of a new bear trend.”

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August 13, 2020

MarketMap 2020 Issue #14

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August 6, 2020

MarketMap 2020 Issue #13

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July 15, 2020

MarketMap 2020 Issue #12

Change of trend time windows is popping up from early next week into mid-August. MarketMap-2020 discusses the methods and reveal the dates in this report

MarketMap-2020 issues early in the year provided ContraryThinkers with a hint that a peak was going to happen in the early part of the year.  One of the cycles was working back from 2020 with the Fibonacci series.

I said: “…working back from 2020, subtracting the beginning of the summation series from the current time window pinpoints the years of all meaningful – tradable – peaks back to 1929. I have highlighted them in the above charts.

The major or corrective tops posted in 1929, 1966, 1987, 1999, 2007, 2011, 2015, 2018, are all in the series counting back from late 2019 and the year 2020. Among other reasons, the market began to put in a major top precisely two years ago.”  In 2018 and 2020 fits as a major top year and 2020 fits with the Decennial cycle. Thus far it is proved very true.

By the way, reaching back 144 years – from 2019-20 – it pinpoints the panic of 1873. This financial crisis triggered a depression in Europe and North America that lasted from 1873 until 1879. In the United States, the Panic was known as the “Great Depression” until the events of the early 1930s set a new standard.

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June 5, 2020

MarketMap 2020 Issue #11

“There were so many people who thought we had to retest the bottom,” said Cramer.

The best salesman on Wall Street went on to say, “Billionaire hedge fund investor David Tepper told CNBC in May the stock market is one of the most overpriced he’s ever seen, only behind 1999. Hedge fund manager Stanley Druckenmiller said in May “the risk-reward for equity is maybe as bad as I’ve seen it in my career.”

He was ranting by the end of his morning segment after the Dow was surging 700 points based on the unexpected unemployment numbers that those who waited for a test of the low will be forced to buy now, and there was little or no risk of Convid comeback and the economy should be reopened.

Sounds like Crammer wants his audience to chase the equity curve.

Obviously with the Fed in Trump’s pocket along with the ten big banks following Steven Mnuchin’s lead, only time will tell if the market regime changed as CT predicted back in January 2018 or if the market herd has gained risk immunity.

Well, every cartel cracks sooner or later.  At the end of 2017 I pointed out that the government had painted itself into a corner by using up all the tricks of the trade from QE to tax cuts at a time when it was not needed. Rather it would be needed to provide a soft landing when the next recession hit.

After looking at a Trillion dollars of debt on that basis, the trigger happy Fed and Treasury have dug the hole even deeper, to the extent that the risk is now hyper-correlation from either end of the normal volatility curve.  As we all know, the market does not like instability.

So, here are two historical charts, which puts today’s market in perspective, I think.  The chart on the right is the expanding triangle that formed after the post-WW-II 17-year long bull market consolidated. It began at 1000 on the Dow in 1966 and ended in October – December 1974 (when I joined Stix &Co).  It took another eight years from that low before the next secular bull broke out from the base.

The chart on the left is today’s market reflecting the same pattern and putting it at the beginning of a new bull market that after a rally to test the old highs will fall back into a trading range for the next seven years +/- a few years either way.

However, given that today’s market is likely inside the base building and has not experienced a bear market yet with its economic repercussion it is not likely in avoiding more declines greater than 20%.  The next comparison chart shows features the same expanding triangle of 1976, peaking at 1000 and leading to a bear market exceeding 25%. Note that the rally from the end of the triangle at point (E),[4] was truncated, it failed to make new highs. Given our outlook for a peak in June, this idea should keep hedgers and investors on the front foot.

Today and early next week the tidal systems flip from down to up, hence the down cycle was inverted aka it failed. Today you can see the effects of the cycle turning back up. The window for a peak begins to open June 13, which is a Saturday.  It runs from that date, let us include the 12th into June 22, a Monday.

Contrary Thinker will be looking for its volatility model in that time window for a “no-fear” background that is exploitable and it will be looking for its OB/OS model to be giving out of gear ( as opposed to negative divergences) for a sell signal. Lastly, for strategy engagement, the market will need to be on the right-hand side of a high pivot.

The Short Term TEM on the four primary indices will be posted in the LI Space shortly, for the background.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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 for 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

June 3, 2020

MarketMap 2020 Issue #10

Hope Permeates the Headlines with the
Felling of Back to Normal Conditions

Contrary Thinker has a number of new members and I welcome you on board, please feel unencumbered to ask questions or provide feedback in the private LinkedIn Group. I will send you a user doc on the Volatility Model shortly.

With that in mind, we are not in the business for the transaction and as an advisory, we do not consider opportunity risk, because a loss is hard to makeup – its simple math. Our point of view is the waiting is for low risk – ideal setups – that provide 4 to 1 or better risk-reward.  We did that this year with the collapse in late February into March 23, trading only long volatility systems and aggressive short-selling systems on the indices and crude oil.

Since the low its back into a holding pattern. We prefer the high volatility periods because they are less risky and the setups are direction neutral in some cases.  To make a point by extreme example, volatility can run at either end of the curve, hyper deflation, or hyperinflation.

with that in mind, forecast are just that, scenarios to keep capital managers on the front foot and prepared for what is coming – sooner or later. The forecast also provides risk outlook and market conditions outlook. For example, since 1/23/2018 we have been long term risk-averse and see each rally to new highs as an opportunity to at least raise cash.

Again, and this is not bragging as Contrary Thinker did it, we called the peak in late September 2018 and the most recent peak on February 12 and 19.  As it is a well-known fact throughout the investment community that a top is Harding to isolate than a bottom if you are looking for the master at calling peaks, you are in the right place. I am not talking about nominal highs for bragging rights, rather the low-risk setups to the right-hand side of the nominal peak to get my people positions to take advantage of the decline, to cash in their hard-earned profits.

Contrary Thinker has the guts to point out the low-risk lows, as you will read below; but from a long term point of view, the low on March 23, was not a low-risk low, even though it was a good long side trading opportunity.

Market Map is part of the comprehensive system we use, to pin down dates for changes in trend, and build scenarios. The first featured chart is published several times over the last year to 18 months. It shows one of my cycles calling for a peak late in 2019 and a spill from Mid-February 2020.  The cycle projected the low to happen in April-May. but it happened early,

No harm no foul as the aggressive long volatility systems were disengaged to avoid any whip-saw. action, which is the Achilles heel of our systems.  The long-only VX futures system made 60% over the few weeks, max DD was less than 1%.

18 1/2 year Tidal Cycle

 

Based on the early low and counting forward the next high in the US stock averages is expected in June -August, a time window I will refind here.

Event-Based Cycles

ECBs are tied into historical peaks that had the same seasonal and tidal configurations as the current one under consideration. Both the 1934 and 1966 had similar peaks leading to bear markets after pullbacks in April. Both scenarios have their next high pivot in mid-June followed by steep declines in July and September.

 

Going back 140 years – not showing pre-1920 that are similar- here are three additional late winter peaks but in March with the same tidal configuration.  All three show a tendency to peak in mid to late May to Mid June and collapse into July and September, like the above chats that peaked in February.

 

The suggestion is that a peak – be it at new highs or under them is not important – is expected between now and mid-August, and this is not a new secular bull market.

Unparalleled Market Events

It is without argument that the 1987 crash had no reason behind it that anyone could prove. The spill was unprecedented in terms of percent decline and the time it took. the collapse in 2020 is also a stock market event that was sudden – a known unknown – and the price damage and the amount of time it took was historical.

However, when you look back at all of the “out of the blue” selloffs the ones with “W” lows, where the low was tested preceded more bull market. A base was built as you can see in 1987.

However, when you look at the 2000 – 2003 bear market the 9/11 panic on the re-open was a “V” shaped low. That low did not lead to a new bull market. In fact, the low was tested and broken until a “W” low was established in 2003.  You can also is that the counter-trend recovery peaked 3 1/2 to 5 1/2 months later, a scenario that fits the above narrative.

While the chart is not shown, the 1929 panic was followed by 4 1/2 months of recovery, similar to the pattern outlined above and it too was a historical event.

Contrary Thinker via its “Volalaity Report” will provide the market background that will likely set up the market for its next decline.  No hurry from here. The most recent post worked over the Bitcoin market, which is a leading risk market and should be telling before the peak.  More on that later.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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 for 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

March 27, 2020

MarketMap-2020 Issue #7 Spring

March 27, 2020

Event-Based Cycles (EBC)

The date of the peak – February 12 is near the demarcation of the winter season and the early spring season used to calculate this cycle. We anticipated the mountain to hit in what we call the late winter season with a cut off February 10, but the height hit on the 12th. Be that has it may the tidal formula we use has that peak nearly identical to the ones that occurred in 1906, 1934, and 1966. This does not throw any previous scenario based on EBC out the window as the peaks that happened in the early spring period produce similar-looking declines with a similar change of trend dates.

 

Here are two clear alternates for the shape of the decline.  In the previous Market Map, I suggested that the peak of 1937 and the decline in 1938 fits the character of a potential all-time high of 2020 in the early spring season February through March season

However, what is different about 1937 is it was not a new all-time high, whereas 1966 was. Plus, the tidal factor lines up near perfect with the top on February 12, 2020.

In either case, the market is in a brae trend into October, where 1937 has a low in June a recovery into August before a panic into October. The 1966 fractal is an ongoing downtrend, without much looking back.

MarketMap-2020 Scenario Map and Table.

I used the market map calendar to reveal in the last letter a scenario where a bounce would start around March 10, carrying prices higher into the next change of trend date (COT) dues between March 16 and April 1 for a near term perk before the trend continued lower. A segment of the calendar is shown again here.

 

If the scenario is in line with the 1966 bear market, a decline here will finish off the first leg of the bear market, followed by a S-T tradable rally into the April 14-28 time window expected to be a peak again, that fits the 1966 fractal leading to a panic in May. This month has the second most panics in history next to October.

The idea of panic or at least a one day fall that equals or exceeds the 13% range day decline on March 16 is expected.  To key in on the dates to expect that challenge, the table below on the long bar dates will be helpful.

Key Long Bar Dates

Gann had a thing about anniversary dates. I refer to them as significant splash dates that ripple throughout history.  The ten-year cycle provides the investor and trader with information that can easier be overlooked and had a tendency to repeat. The long bar range day that happened on March 16, 2020, is a prime example.

It is more than their occurrence in the first year of the new decade. Instead, they occur in the same mathematical calendar segment that runs from late winter to late summer and inside the last phase of TMT’s Tidal Cycle trading system.

In the table above, all of the highlights of the date in red occurred in the last half of the down cycle in the Tidal system. Therefore, a massive market pivot here in the 3/6 to the 4/1-time window should lead to a downtrend at least equal to the February 12-28 decline. Expectations are for climatic action in mid-May because that match’s the 1966 scenario and the long bar dates highlighted above.

Markets make lows, not on good news; they make meaningful lows of lousy news and climate action by the markets. So, while the bear market should reach into 2021, an I-T low is expected in mid-May.

Decennial Theory

Issue #1 of Market Map 2020 points out the recovery of the first year of a new decade as a year that contains the start of most year markets. Furthermore, from the year 1860, recessions have had their start all with an outside event trigger. In 1860 it was the civil war.

 

The above table shows the damage done in these years. I have averaged the number of profits taken – percent decline – and averaged the time spent in the bear mode throwing out the shortest and the longest.  These numbers are very much in line with all bear markets over the last 120 years.

 

Market Theme

Going into 2018, I said ” the theme of greatness should continue.” In 2017 it was the most significant low volatility year on record. From February 6, 2018, the extension of the bull market made it the greatest of all times in terms of time and price. That market motif will carry into the bear market cycle. So Contrary Thinker expected it also to be the greatest of all times.

 

Back Story

James Bullard of the St. Louis Federal Reserve has written a must-read conceptualization of the current situation.

The Federal Reserve has risen to the occasion.

The markets continued their rally for the third day.

If you like what we provide here, subscribe, includes “Volatility Reports.” this is critical as it provides the market background, its level of tension that precedes full-blown trends or dull choppy trading ranges. For all time frames.  

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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 for 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

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