CMT context direction neutral
May 4, 2020
All the techies who missed the big top are getting itchy here looking for reasons to sell.
Contrary Thinker did not miss the top (called it 2/12 and 2/19 ) and engaged long volatility strategies (Sunday night 3/23) to hedge traditional portfolios and to profit in 80%/20% split Cash/Futures combination. Here is a link to the 16-page pdf that shows you how we did, track our thinking.
The majority in mid- March called to a quick return to normal as seen in the Goldman scenario posted at that time. Today after a 30% bull market in five weeks the majority on Twitter was back to being bullish. As we go to the open today with just a hint of decline the TA’s that missed the February peak is getting serious about a real bear market. Hedging their advisory and grouping together with the same idea to watch the FANNG sector-based ideas propagated by their seniors to add credibility to their advisory’s caution.
Contrary Thinker labeled the peak in January 2018 a REGIME Change. Since that date, short only volatility breakout systems on the ES have beat buy and hold the stock index future ES. CT called the peak in late September 2018 and again engaged long volatility systems into early January. On February 12, 2020, we reintegrated “risk-off.” We have been faulted by the buy-side only managers for missing the bottoms, our advisory is built of capability and trust. Since the low December 23, 2018, and the low March 23, 2020, we have not given buy signals or risk on advisory.
We did, however, disengage our hedge – the long volatility strategies – when buy signals could have been made, “risk on.” But it was not worth the risk we expect. Furthermore, in the face of the before mentioned long volatility breakout systems in an 80/20 split portfolio with 80% in 2-year notes and 20% in futures, the performance has been above average.
Furthermore, as everyone knows bottoms are easier to isolate then peaks and that is CT’s specialty picking the lows is easy and the low in March was signaled weeks before it actually happened, a telling sign for divergence like 2007-08.
The above chart shows the pealing off of the defensive stocks. The group was bought in panic as the flow of funds exited regular shares. Now it is inferred that either the funds are rolling back into the advancing stock market or there is no place to hide in the face of the coming decline.
The above chart of the Dow utilities reveals a background that supports a forceful trend. A move below 753 would be the next sign of the downtrend unfolding and confirmed below 528.
Like the fixed zones we use the variable bands show the same failure reversals and the confirming breakdown six days later. What is also conspicuous on the chart it CT’s Technical Event Model (TEM) giving a Panic-Event Signal, highlighted in red.
Today the last two peaks have failed to hold and any trend that can pick up a following here will be dynamic, with the last TE being a rule #2.
similar to the variable bands used on the S&P index, the four markets showed here using our fixed zones; and it is clear that all four of the indices have failed to hold. With these reversals being preceded by Techcnail Event #2, there will be a carryover of the downtrend.
Risk-off, raise cash use risk-free investments.
Hedges- Long Volatility Strategies – remain off. While the nominal high may be in place for the secondary bull market posted on 4/29/20, CT will wait for the model to give a clear engagement signal before we go “staus-on.”
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April 20, 2020
April 15, 2020
MarketMap Issue #8 2020
Two More Waves of Panic Expected
You see in social media permeating the public domain the fractal overlays of 1929 with the most recent panic sell-off. The problem with this parallelism it is not anchored to anything at all except the similarity visually when resized and overlaid with each other.
ContraryThinker uses a method discovered in 2000 that I have advanced called the Event-Based Cycle (ECB) that produces a similar peak to low intervals, it projects related date windows for tops and bottoms based on how the highs are anchored with each other mathematically. The charts below provide what is expected to be the scenario of the market going into late summer; along with an alternate scenario main difference of the low this year hitting later than the others.