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    Prepare For A Bear

    May 26, 2020

May 26, 2020

Prepare For A Bear

 

What the market is saying is not noise but the relevant facts. You just need to look beyond nominal prices.

 

Prepare For A Bear Market

(Source: Robert Shiller, Yale)

Like the traditional appraoch, today a strategy suugest that long-term investors are best off on the sidelines. A model portfolio shows how purchasing power can be preserved for large amounts of capital. Fundamentals Financial markets have been extraordinarily challenging lately. Most investors were equally surprised by the market crash as well as the subsequent rebound.

The quarantine put a fair number of folks with time on their hands as first time investors and new online brokers jumping on the oppprounity worldwide from the USA to Australia the numbers of first time sahre investors trying to make a living from the confort of their confinded space spiked.

The put/call ratio MA durring the “Greatest of all Bull Markets” suffered corrections at least or something greater each time it moves above the dotted line ay 65%.

(Source: Tradingview, ESI Analytics)

If there is an outside world that is to blame for the big shifts in sentiment this year its COVID-19 obviously.  However, here is the headline that is driving the opening higher gap in the Globex pre-market. 

However just a thought, if the coming-out parties this holiday weekend and the push to get the economy going re-ignites the virus, it comes back in only 5 days to two weeks, way before the vaccine is ready at year-end.  But that reasoning can’t fight the tape by itself. 

Volatility Report ” Two more crashes to go.”

For over two years I have pointed out the risk and strongly suggested the market would correct its mistake all the way back to the election of 2016. The Transports did that convincingly and the industrials only a minor touch. When the market’s background became fragile to the extent that minor excuses or rationalizations would tip it over, Volaltiy Reports and Market Map pointed these windows of change as well. 

Contrary Thinker’s model has not wavered, it remains based on the decennial theory, were the year that begins with “0” since 1860 the beginning of the Civil War- has produced a recession or something worse. And from a market point of view, it has produced a bear market. 

Early this week the tidal forces we monitor via our systems running in TradeStation flipped in this time from up to down. Along with that cyclical change the volatility background has changed as well at the opening of this week.  The following series of charts reveal just that, as the current uptrend – kicked off my out Technical Event Models Rule #2 (green vertical line), a condition that states the underpinnings of the market are ready to trend, it has now run its course and is due for a change.

 

All three-time frames are recording Technical Events #3, a context that calls the current trend – be it up, down or sideways – old, feeble, persistent but due for a change. Each chart has annotations and prices level that would signal the beginnings of a reversal, a change of trend (COT).

The risk in the S&P – basis the futures – is 250 to 300 points in June going into July.  This is based on the weekly range expansion expected given the context of TE#4. MarketMap-2020 has COT lows expected from July 3-July 9.

New Highs by the Nasdaq are not a factor regarding new bull or bear market rally. Rather, its advance from the early May low supported by the TE#2- see chart in left window- followed by the break above the low end of Long-Term Resistance and tested succsfully. This price level was mentioned in a LinkedIn Group post, that it needed to hold for the uptrend to sustain. That 8943 level remains key. With today’s open expected to be 9,551.25, keep an eye on S-T new support at 9,521 – see the data window in the middle of the above charts.

Lastly, the out of gear sell signal on the right hand chart has proved to be effective in calling the turns, much better than the old school “divergenes.”

Last Day for the Morrial Day week end deep discount, link 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. 800-618-3820 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

 

 

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