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