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    CT Journal

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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.

What the big take away is from the above table is the peak thus far hit on 9/2/20, which happened right on cue with the cluster from 9/2 to 9/6. In the current time frame is the next cluster of COT dates that have consistently pegged stock market highs. From 9/13 into today is the date window a high pivot is expected. A few new added features in the table. the Annual One Day decline, date when a long bar decline that equals what can be considered a good annual rate of return happens in a signal day.

The market had a long bar decline on the 3rd and the 10th, with another expected today or Monday.  A mini panic low – aka long bar decline – can be expected on October 2, +/-  the range of the COTs, from September 24-October 3. I would be looking for more bull market in fear selling to kick in early October. The period of 9/2 through 11/13 (far right column) should be a period that brackets off the majority of this bear leg lower.

For your long term, scenario planning here is the long term decennial cycle overlay provided by our friends in the UK Dogs of the Dow. While the overlay is based on date back to 1896 there are differences when looked at the individual years. So Contrary Thinker does not use this in a vacuum-like anything else. With that in mind, a low late this year should lead to a bear market rally into April May 2021 when the “Sell in May and Walk Away” rule will work after having a year off.  Until there is a major bear market low earmarked by all of its features, the ten-year cycle suggests mid-2022 before getting back to long term investing in risk assets.

The chart here of the Nasqaq 100 futures demonstrates a few factors. The left-hand window one can see the COT low expected on 9/2 inverting. Inversions are not an excuse they are a signal to expect an acceleration in the other direction. In the same chart, the MA cross under on the 3rd sell signals confirmed by CT’s CME index and Smoothed RSI.  You can also see the tidal cycle flipping from up to down with the red down arrow.

The right-hand window reveals the market’s failure to hold S-T and I-T support, a bearish clue. and again the Tidal cycles flipping to down three days ago. TEM today is a new TE#4. A condition we have not seen for a white, where range expansion is expected. In other words, breakout strategies should get carry over. So a break of range or new MA cross under signals gains in the probability of working out.  Starting today and looking into next week, the daily ranges should challenge 400 points.

The key level for a break lower is 10,788.00

Volatility Reports have pointed out how the US markets (here the cash S&P is used) peaked on the monthly bar reflecting panic buying, irrational buying. Buying that is not grounded in reason that is easy to flip. With that behind the market, the weekly trend following system is giving early warnings – highlighted in “pink” in the right window, where we have all four of the trend following indicators of the trend following system crossing under. This is an I-T signal.  The I-T background of the cash S&P is a new COT that tells the trader the sideways trend over the last two weeks is old and due for a change.

Key levels are clearly presented on the following chart with resistance starting at 3397 but main supply at 3429 to 3471. A move above these prices would change the trend to flat, for now. On the other hand,  and in keeping with our bearish scenario, a move below 3306 would be the early warning that a key level like 3882 will be tested. This is a L-T support price.

Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free look runs out. We apologize if you find you are not able to access the group or blog, consider being a Contrary Thinker 

 

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 10, 2020

Recap of major markets

Today 9/3/2020 the markets are flashing “DANGER” and no one is paying attention, NO ONE. Today 9/10/20 the majority continue to find a rationalization for more bull market.
Recap of major markets, click to enlarge charts

Bonds:  Like the bitcoin, gold, and silver panic buying high, the bonds were the first to make their FOMO peak back in March after seven months of emotional or poor buying, which was pointed out at the time. The expectation after such an event is nine out of ten for a sideways choppy range, that works off that condition setting up the next cycle.  As a rule, this kind of irrational buying is easy to flip. so after a period of distribution investors should expect these accesses to be corrected back to where they began.  That level runs from 144 – to 152, which takes the market below the end of the Elliott Wave (4), a bearish sign.

If we take the Fed chairman at his word, the real economy is his focus vis-a-vis 2% plus inflation and improving employment. Why? Because full employment is no longer an inflationary concern. The stock market is no longer their focus the real economy is their objective.

Use the breakdown levels to entry bear strategies or add to the existing short positions. I-T trends are pointing lower, tidal forces cycles are pointing lower and the background supports an I-T dynamic trend. So a break below 173 and the neckline should get carry over.

Euro Dollar:  Since its major bull market peak in 2008, the downtrend is a new secular bear market, that is being corrected today. The dollar bashers are retail and they are out in numbers gaining confidence in the counter-trend, the first leg of which has run its course.

US Buck: Began a new secular – very long term – bull market in 2011. The recent correction is counter-trend, which found support in both I-T and L-T support on a mini panic washout and extremely high bearish sentiment. Even the analyst that see the low are backing off the bullish outlook for the buck as it may impact negatively their bullish outlook for stocks.

Crude Oil is breaking out of its bearish wedge. I do not think I heard one content provider say that the wedge was anything but a continuation pattern bound to resolve itself to the upside. While longer turn Contrary thinker is bullish on “inflation” in the short to intermediate-term the rally in Crude appears counter-trend and the rally in the commodity indices looks like the first leg up of a new bull market.

While Crude is a main component of the commodity indices, I have real doubts that it will be a leader, as carbon fuels are dead leading to the bridge fuels like NatGas, Solar, and Wind.

Gold The long term outlook remains unclear but the ner term action should clarify that. The following chart is being used for that and for a short term quick profit opportunity short the market via a trend-following moving average system. Ironically, if the market breaks lower, the long term outlook becomes more bullish. But more on that later.

What is clear here is how the horizontal trading range is being picked up by TEM with the TE#2 signal that is in effect for eight days. This trading range is about to break, and CT is looking for a break to 1760.00. Even if the S-T is bullish, the near term has one last pullback to mid-range to set that up.

The intraday chart highlights how Contrary Thinker implements a strategy, refer to the annotations in the chart.

 

Historical Action

For whatever reason, this chart was used by a content provider to prove the public was trigger happy to jump into the bear (inverse) ETFs to use as his “contrary opinion” proof that a top can not be in place. The fact is that institutional types and capital managers use ETFs and ETNs that includes major banks, hence the billions of dollars and high daily volume. This is just not the bastion of the “small investor.” I don’t think the mom and pop type investor or even the guru want to be on Twitter have a clue what they are.  The point is the volume spiked going into the “shortest bear market” of all time – as the media liked to call it.

Today you can add my clientele to the current spike.

In the previous report where I pointed out the dramatic and bearish reversal by the Fang stocks plus five. A signal that is rare and bearish when 52-week highs are immediately followed by a 5% plus decline. A pal of ours on CNBC shared the following chart where he highlights the same occurrence by the Nasdaq 100 itself, a bearish signal.

 

Public point of view for contrary thinking. Based on the old fashion “odd lot traders” or the pink sheet traders that play penny stocks. When you see a surge of interest is slicing shares and long out of the money call option buying, the bullish frenzy is high, and time to raise cash and look for bearish opportunities.

The above chart speaks for itself. However, the next chart reflects how extreme the amount of time value is being spent buying low delta call options. WOW.

Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free look runs out. We apologize if you find you are not able to access the group or blog, consider being a Contrary Thinker 

 

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

 

 

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