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CT Journal
commodities
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
June 10, 2020
Monetary and Political Policy Blurred
Presidential Election Polls Preceding the Election will Predict the Stock Market, and all the polls are firming up going into the summer. Today it looks like a landslide favoring Biden, and because the Fed and Treasury are in Trump’s Pocket the Markets are now political and they (fed banks) will dump their holdings to protect themselves as it becomes clear the polls are right.
Today’s money is different because
- Unlike the pre-neo-liberal era when there was an industrial nation with workers, times have changed. According to Australian “MISES WIRE ” When the advanced nations had strong industrial cores, the periodic expansions of credit and their subsequent sudden contractions led to observable booms and busts in the classical sense, since the production of labor-intensive consumer goods dominated production overall.” Full Article
- When the neo-liberals – including Reagan, Thatcher and Clinton – liberated financial controls in the mid-eighties, London’s Big Bang, and the repeal of America’s Glass-Steagall Act of 1933, it allowed commercial banks to fully embrace and exploit investment banking activities.
Gold is for toss-up states updated 6.11.20
Peter Schiff: in his 20-minute video “Game Over For The Fed” pointed out what I said back after the 2017 tax cut, the government is out of tricks.
His key points are if the Fed couldn’t exit from the extraordinary monetary policy it launched in 2008 or 2018, how does anybody expect it to exit from the extraordinary monetary policy on hyperdrive that it is engaged in now?
Federal Reserve Chairman Jerome Powell even admitted that the central bank has “crossed a lot of red lines,” but he insisted he’s comfortable with the actions given “this is that situation in which you do that, and you figure it out afterward.” That is growing caution to the wind, for the market.
But now enter politics at best and maybe corrupt politicians, the arm twisting began during the 2018 mid-terms. Donald Trump likes low interest rates, and he doesn’t hesitate to let the world know. And to the point, let the Federal Reserve chair, Jerome Powell—know about it. Trump has publicly intimated the firing of Powell if he doesn’t get the message. Moreover, the White House press said Trump privately suggested that Powell wanted to “turn him into a Hoover. This did not stop until March 10, when Powel was still focused on combatting inflation and a bubble. No Pressure hey?
As a side note, there has been a long term debate if the Fed favors the banks and wall street not the public and the economy, with their focus on inflation. The logic of which ends with the conflicting goals of finance and the economy, banking vs workers.
Since 1980 it has been a balancing act but the diminishing bargaining power of workers resulting in the widest gap between the mega-wealthy and the poor being the greatest on the globe. It is this more recent rising economic inequality that is being called the second Gilded Age.
(The Gilded Age is defined as the time between the Civil War and World War I during which the U.S. population and economy grew quickly, there was a lot of political corruption and corporate financial misdealings and many wealthy people lived very fancy lives.)
The conflict as pointed out above is when the Fed raises interest rates, job creation declines, and the ability of workers to obtain their fair share of economic growth is undercut. A monetary policy that is accountable to working people would likely be less accepting of unemployment and more tolerant of potential inflation.
But the jawboning did not end with Powel, on March 17th Trump told the Treasury to go big. According to the Times, “We want to go big,” Mr. Trump said at a news conference at the White House, adding that he had instructed the Treasury secretary, Steven Mnuchin, to introduce measures that would provide more immediate economic support than the payroll tax cut holiday he had been promoting.”
Leading to The U.S. Treasury’s official figure for the debt of the federal government on May 27, 2020, is $25.6 trillion. So how does the government unwind its portfolio? How is the debt resolved? Taxes? Devaluation of the currency?
Here are the market facts, since 1900, the direction of stock prices in the two months prior to Election Day has predicted the winner 89.3% of the time- that would be from September. However, Sam Stoval at S&P did the same study and found “Looking at S&P 500 prices since 1900, he found that the market action between July 31 and October 31 has correctly forecast the outcome of the presidential campaign 82% of the time.”
So the change of political regime discounting begins in July. It did so in 2016 have a look. However, the work we did and published here show peaks happening in the current time frame.
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
October 15, 2018
MarketMap™ 2018 Annual One Day falls (AODf)
The 8.85-year Cycle
Just like any relationship, anniversaries are important to the market, and many traders know it may cost them if they do not recognize these occasions. As a nation, there are days we will not forget, like 9/11. Just like a rock thrown into a still pond, the effects repeat over time.
The same big splash effects happen in the market, and it does not forget. Since 1885, some ten major DJIA AOD falls (≥ -3.60%) occurred between September 10 and October 31. These are sizable price events.
There are many more than ten referred to above when you consider declines in the one-day class that are less than the 3.6% but happen with a negative geopolitical news or media event.
MarketMap draws many parallels to the 1972- 1974 period based on the events from 1973 (9-year cycle x 5) this week is the anniversary of the “Arab oil embargo” among others in the 9-year repetition.
While MarketMap came into the year headlining “Geopolitical Security threats will precipitate financial distress” it is noteworthy that the real-life headlines read “Saudis threaten retaliation after Trump warns of ‘severe punishment’” for the suspected killing of a self-exiled Journo, Jamal Khashoggi, one of Saudi Arabia’s most prominent journalists.
However, what has become the new normal in the last 18 months is nothing ever happens, the problems simple pill one on top of the other.
However, cathartic market action in the current timeframe may lead to a clearer vision of what the future has in store.
One of the “among others” referred to above is the weekly long bar low in the 3rd week of October, highlighted in this chart. That big splash in the 2nd and 3rd week of October 2000 was a 12.% decline to the intra-week low. The week of October 20, 2000, declined 6.2% before putting in a mini panic low to recover.
The dates that come up for an AOD fall are today, the16th or the 17th. They set up as panic days from open to close. The longest bar of a move tends to be the last bar of that trend. The long weekly bar that ended the move in 2000 was 6.2% the one that precedes it was 5.8%, for example.
Thus far, since the October 3 peak, the biggest decline is only 3.2%. Exceeding that daily range will suggest a low is nearby, and MarketMap will look for cross-checks to confirm a low. Also of note here, the AOD decline in February was 6.9% and in a period of great extremes, in this era of the “tremendous” where anything is the “probably the greatest ever done,” and after 2017 a year of the lowest volatility on record, expecting an AOD decline exceeding the 6.9% this week would not be a surprise.
The scenario has not changed: risk/reward favors selling with selective long V hedges. A low here in the latter half of October followed by a failed rally into the election with another decline into the COT dates mid-November. There is the potential of an alternate or second AOD decline hitting on or about November 23.
October 14, 2018
Volatility Report October 15, 2018
Momentum Surge in Volatility
Looking at the CBOE perceived risk data as well as the long volatility futures ETFs (bearish investment vehicles) across the four major indices there is a momentum surge. Our chart on the left of the 3Xbull S&P ETF gives a clear picture of two failed tops at all-time historical highs followed by breakdowns. Following January peak, the February/April low pivoted when %BB-Oscillator was a divergent overbought long volatility ETF “SPXU”– right-hand Our Bollinger band oscillator is not yet at an extreme suggesting more decline to come.
What else is clear is %BB SPXU never moved above .382 during bullish trends. Looking back over the complete history of this bear ETF %BB-Osc only moved above .382 when the market moved into consolidation at least or a meaningful correction. With that being the context of the market now on an I-T basis, expect more decline.
Bottom line is our measures on V have surged past a point that implies follow through or lower prices for the major averages.
