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March 31, 2021

Volatility Reports Bonds 3/31/2021

Just like most people by nature, I look for the truth. Yet today, it is flattering to see others finally talking in the same terms I found critical years ago, like the timing of market dynamics based on market context.

Like the following “When we get these types of extended moves away from the 200-day MA in the 10-Year Treasury Yield $TNX, we historical get a period of sideways action following”  Well, someone predicting the timing of a market condition, a trading range.

But the 80% deviation above the 200 MA as the indicator of a sideways market vs. a correction from the event is being based on the functionality of an oscillator.

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February 16, 2021

Volatility Reports Bonds 2/16/2021

The markets are in a time window for change. While the long-term correlation between the bonds and stocks will become positive later this year, the short-term relationship will continue on its counterbalancing framework.

With our focus here on the long bonds, it appears they have completed another leg of the new secular bear market.  In the first chart CT pegs the low hit last Friday as the end of short term wave one in the longer I-T wave (3).  Hence based on EWT, this market is just weeks away from going into a full-fledge – everyone sees the bear – sell-off.

The chart window on the left shows the Tidal Trend system short from right after the panic buying peak. Today all three trend-following indicators on that chart are trending lower. Our stand-alone “panic” index (not shown ) on the weekly chart is at 64 with 65 or higher being a bell ringer.

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January 12, 2021

Volatility Reports 1/12/21

The leading indicators for the stock market are ticking off the checklist.

Back on 12/30, the Bitcoin market was labeled a Bell Weather. It should be clear to advisors, investors, and traders that BTC and others are not StableCoin, something that can be used for a more secure currency one that can not be counterfeited. But given the volatility of the market, it is a risk asset. As such, it is a bellwether for other risk markets, it is not a hedge as advertised.

The key price level

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January 11, 2021

Volatility Reports New Bull Markets

The primary markets are pivoting in the same time frame as MarketMap’s COT time window due this week.

A short recap for the US dollar is posting up a low. The flip side of that is the Euro is reversing and about to resume its downtrend. The US long bonds are posting up a low as well.  As Volatility Reports pointed out in the December 30, 2020 Volatility Reports on the Bitcoin that:

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January 6, 2021

Volatility Reports US Dollar 1/6/21

USD In the 12/14/20 update

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December 21, 2020

Volatility Reports 12/21/20

Why take a 50% drawdown risk for the average annual return of 10%? Because major declines can’t be timed,  so they say.
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December 14, 2020

Volatility Reports 12/14/20 Recap

The traditional move late in the cycle is to buy offshore bonds in a stronger currency than the USD. This tact has worked over the last twenty years but that regime is changing.

USD makes a long-term bottom; one more decline to the low 90s is in gear and touch with the COTs due this week. The bar chart pattern is a horizontal triangle, which supports a thrust lower and a terminal move, not the beginning of a new trend.

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December 9, 2020

The Last Fourty Years Were an Outlier

Contrary Thinker deals in Time, your preparedness, not fear.

“Let me admit something. There is no Bond King or a Stock King, or an Investor Sovereign alive that can claim title to a throne. All of us, even the old guys like Buffett, Soros, Fuss, and me too, have cut our teeth during perhaps a most advantageous period, the most attractive epoch, that an investor could experience. Since the early 1970s when the dollar was released from gold and credit began it’s an incredible liquifying total return journey to the present day an investor that took marginal risk leveraged it wisely and was conveniently sheltered from periodic bouts of deleveraging or asset withdraws could and in some cases was rewarded with the crown of greatness. Perhaps, however, it was the era they made the man as opposed to the man that made the era.”

Bill Gross, Man in the Mirror April 12, 2013
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December 1, 2020

Volatility Reports Bonds 12/1/2020

Long Term Bearish Since Panic Buying Top on Long Term charts from March to August 2020. The dynamics are changing.

It’s been pointed out that the junk bonds are staying in gear with stocks even though they have not confirmed new highs for several years and continue to underperforming. I would still watch that group for a breakdown as a sign that risk assets are coming undone.

In the meantime, the amount of debt is not a concern to the fiscal policymakers in the wing, and fear is starting to break higher measured by the CBOE interest rate volatility data. In fact, contrary Thinkers volatility composite has tested olf support successfully and is moving higher, another sign that risk-taking is becoming extreme.

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November 23, 2020

Volatility Reports 11/23/2020 Stock Indices

The solar return of Sagittarius is the Season to be, ho ho ho happy.

Sagittarius runs from November 21 to December 22.  As an astrological Sun sign, it reflects the ideal that is captured by being: ” Generous, idealistic, humorous, but can promise more than can be delivered or tends to overcommit, and it’s a period that is impatience for results and a season where anything can be said or promoted no matter how undiplomatic (Donald Rumsfeld’s anyone?). It may be a coincidence to many that the holidays fall in this joyful Astro sign, yet I have always seen the curry haired member of the Marx Brothers (not Karl) as being the exemplar of the sign, if not the season.

Arthur “Harpo” Marx, born November 23, 1888, hit the stage at 17 years of age.  He was a comedian, actor, mime artist, musician, of five brothers’ second-oldest. Harpo’s comic style was visual slapstick. If you’ve never watched Saturday Night Live or a Chevy Chase movie, slapstick uses intentional violence and violence by mishap, often resulting from inept use of props to get a laugh. All of that is fitting for the season, assuming the market is a prop that is typically bullish.

In any event, the ninety-nine percent of market commentators are “cheerleaders” citing recent factual performance like “the best November in history” ( they have to be happy that the low was on the last day of October ) or that 90% of all stocks are above their 200-day MA the best in six years!”  All of which tells you how they sell their ideas by chasing the equity curve, the market’s direction is assumed and says nothing about risk/reward, which is the largest fault by the majority of investors, full stop.

Next to the cheerleading, here are the working predicates painting a bullish picture by my friendly competitors.

  • In the face of the pandemic’s inhumanity, the market is guilty of winning, but you can’t fight the trend.
  • Even more inhumanity to renters and others who do not get a stimulus package, but the market is always right.
  • Observing price and trend alone, the stock market is undoubtedly in a long-term uptrend.
  • Some continue to believe that the Federal Reserve is ready to act as a safety net if the market takes a turn for the worse (they mean the bearish side).
  • The seasonally best months of the year for the stock market began on November 1st (and end on April 30th). Everyone knows this, but they don’t know how and when to trade it.
  • The transactional types have been bemoaning the lack of good entry points for investing since before the election (see the above cheerleading), but they think they are starting to see some good set-ups now.
  • The majority doubts the election will be overturned, but it would cause market damage if overturned.
  • Massive hospitalizations are breaking the health care system; again, the market does not care.

The bottom line is every bulletin, post, and tweet that is pushed throw my notifications is bullish. One theme that the bulls are hanging their hat on is the bearish trend in the USD vs the majors. 

Since the election, I have received a fair number of emails and direct messages regarding politics.  To begin with, I am a Reagan Democrat and a Bill Clinton Republican, full stop. I vote for the person, not the party. There is no dogmatic ideology that runs the United States of America; it is an idea, and ideas change. I was asked if I thought Trump would overturn the election, the answer is NO, but he will make things as bad as he can for the incoming administration and blame any future detriment to the country on Biden and his team.  As I noted elsewhere, I believe that Trump will put on a big show being pulled out of the White House to gain notoriety with his fan base for the Trump Party’s future.  It goes beyond the damage he is doing to the norms of our Democracy, but the damage he will do to the markets, the economy, and national security.

The bull market from Trump’s election to February 12, 2020, and the seven-month recovery is Trump’s market; he owns it. Further, in his public pronouncements, he clearly stated. “If he (Biden) is elected, the stock market will crash.” 

Trump is running interference on anything that will help Binden govern; he will not give a booming stock market to the Dems. Lastly, what should be a clear difference between the two parties today is the Democrats play softball, and the Trumpblicans play hardball when it comes to power. The only time that tact stopped working for the GOP was for Hoover’s party in 1932 went over the moon. When a major swing happened to Rosveltian measures or bottom-up economics that the far-right called Socialism, a scare word still used today. The New Deal was carried on by Truman, JFK, and Johnson into the late 1960s, forty years. A regime change of that magnitude is occurring now. It will become clearer on December 21 and throughout 2021.

What is curious is how for the last four years, the use of politics in one’s analysis was a social “no-no.” today, with Trump on his way out, how it’s ok to talk about him trying to flip the election without legal grounding or the possibility that he may not leave until they drag him out by the scruff of his neck. All these things that MarketMap-2018 envisioned at the end of 2017 and today unfolded according to Hoyle, and the potential of the FBI escorting him out of the white house is still right up there.

But what no one except several political insiders is talking about and what is now popping up in the general so-called “liberal”  media is how Trump is purposely sabotaging everything he can so that the new Administration does not succeed or at least has more problems to deal with than it can handle from January 21, 2021.

I am sure that not many of us can relate to bitterness and resentfulness. This reflects about Trump, the poor loser, plus extras. Everyone hates to lose, but the extreme facts are clearly hitting the fan. It’s just not his holding back of the funding via loyalist  Emily Murphy at GSA Administrator that is putting the Biden team layers deep in empty office space. It’s the damage being done to national security, which I have been pointing out since January 2018.

The 9/11 Commission Report pointed out that the lack of a leading transition for the Bush administration after the Florida hanging chad delay of three of four weeks was a contributing factor to the USA being caught off guard, when reports were coming through NSA, ETC.  Do Biden and his team have any Global, national security threats to be concerned about? Yes, too many to count, from the public domain, and it’s common knowledge that all new presidential administrations are tested from abroad in their first year. The exception is the man who would be king, tested only by God’s act, a pandemic.

Moreover, directly Impacting the markets and the economy is Treasury pulling loan facilities for the FRB to provide the safety net if needed. In a recent post, I mentioned that the outgoing Trump Treasury would pull its pegs from under the market, and they are many. If you are a licensed professional, you may recall this from your series seven, the notion of “pegging.” when a Wall Street firm underwrites an IPO, it is allowed to sell short some of the new issues. Hence, there is buying support under the market as they release the new shares to the buyers. It’s called pegging; these types of operations exist by various means, like the Treasuries loan facility to the Fed. The point is: Trump will not leave the office with his bull market intact for someone else to take credit for. It is only a matter of time from now until January 21. More in MarketMap 2021.

Featured chart

When the number of stocks above their 200 days moving average (DMA) is above 80%, the inference is the market has been great and now is expected to begin to tread water at best. That the bulk of the performance is a has-been and rotation to the laggards are expected, which is the case. The last time  I saw this index as high as it is was back in April of 2011, just before a 20% correction.  While the fact of 90% stock being above 200 DMA only tells retail how great the run from the March 23 low, after the “shortest bear market” in history, it’s not a good reason to jump on the bandwagon, to bet on the pass line.

Back Stories
Will Donald Trump derail the economy by desperately clinging to power after being defeated by Joe Biden?

“For a man who has just suffered a humiliating defeat, Donald Trump still seems to believe he is holding quite a few aces.

While he has become just one of four US Presidents to be defeated after a single term during the past century, as expected, Mr. Trump has pushed the boundaries of the US Constitution and convention into unchartered territory as he desperately clings to power.

It is a threat that has yet to manifest itself on financial markets…”

“…On the weekend, however, a defiant Mr. Trump — who has at least 130 of his Secret Service detail in the grip of the virus — had this to say as part of a long and rambling monologue on the sterling performance of his administration, and particularly, it’s handling of the pandemic.

“Ideally, we won’t go to a lockdown,” he said. “I will not go — this administration will not be going to a lockdown.

“Hopefully, the — the — whatever happens in the future — who knows which administration it will be? I guess time will tell. But I can tell you, this administration will not go to a lockdown. There won’t be a necessity,” he said.

That puts Mr. Trump and his supporters on a direct collision course with the newly elected Mr. Biden, a proposition that does not bode well for the immediate future of the world’s biggest economy and even less so for America’s status as the global defender of democracy.”

Back Stories
Mnuchin-Powell Split Shows Rare Discord as Economy Struggles

”  WASHINGTON • The top two United States economic policymakers have parted ways over whether to preserve emergency lending facilities designed to shore up the economy – a rare moment of discord as the nation confronts the risk of a renewed downturn spurred by a surge in coronavirus cases.

The disagreement erupted late on Thursday, touched off when outgoing Treasury Secretary Steven Mnuchin released a letter to Federal Reserve chair Jerome Powell calling for the return of funding for several Fed lending programs that rely on the Treasury’s backing.

Minutes later, the central bank issued its own statement urging that “the full suite” of facilities be kept in place.

Investor reaction to the split was swift: Futures on the S&P 500 Index slumped 0.9 percent in early trading yesterday in Asia, with haven demand sending Treasuries higher and pulling down yields.

Treasury chiefs and Fed chairs typically coordinate closely in times of crisis, appearing jointly before Congress and working in lockstep to ensure funding markets run smoothly.

The two agencies were tightly linked in the financial and auto industries’ bailouts more than a decade ago. And they became tied statutorily in the Cares Act economic rescue package in March that appropriated money for the Treasury to support Fed backstops for everything from municipal to corporate finance.

“This is a significant and disturbing breach at a critical time for the economy,” said Mr. Tony Fratto, who worked at the Treasury Department during the George W. Bush administration.

“We need all the arms of the government working together, and instead, we see a complete breakdown.”

He noted that Washington remains at an impasse on fiscal stimulus as well.

Underscoring the success of the programs the Fed established, Mr. Mnuchin argued that some could be allowed to stop buying new assets at the end of next month. He asked that others be kept in place for an additional 90 days.”

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Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

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