August 2, 2020
First Trading Week of August TEM Set Up.
Context is the language of the market, how it feels today: tense, old and tired, or vibrant. It is the context of the market that precedes the dynamics of price. Not as the old school preaches, that momentum precedes price direction, because for one it is reactive and too late and for two it can be wrong.
The Intermediate-term expectation is for the last four weeks of a more forceful trend. Except for the NASDAQ, the other man in averages has been sideways gridding efforts. The S&P late last week showed some life as it churned under the L-T resistance zone. While some bulls still expect a melt-up, like the market’s just witnessed in gold, with cycles pointing lower for the next two months or better, we will maintain the bearish approach for now.
The Composite NASDAQ is in a Fibonacci resisted sone that runs from 10,594 to 11,055. The OB/OS model is overbought and out of gear, a sign of pending weakness. The trend-following phased moving averages (MA) on the cross under would be a strong sell signal giving the setup. With a little optimization, the I-T and the S-T TEM are both on TE#2, presaging a high rate of change trend.
Relating back to the above video, the S-T daily bars should act as a trigger for the I-T volatility model highlighted above, to get into gear. The S-T on all four primary stock averages is on a TE#4, hence a trend should be up a meaningful following is on the near term horizon.
Great and Many Thanks,
Jack F. Cahn, CMT
Contrary Thinker since 1989,
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November 6, 2018
What is typical of a major market top is how most professionals in the industry speak about normalizing the corrections.
Contrary thinking looks for one of two circumstances to correlate with such major turning points.
The one is when data or events remain the same but the marketplace’s interpretation of the events changes. The other is when the data/events change yet the way the market is interpreting the events remains the same. The one is a shift in mood, and the other is a denial of change both imply a regime change regarding the market; and possibly the economy.
These interactions give subtle clues of change that allows the contrary thinker to act before others, before the majority.
So today while the facts have remained the same, the interpretation has turned to the above-referenced normalization process, which is par for the course after the first signs of the new bear markets.
This normalization process sounds like this industry-wide: “Wall Street has seen 56 pullbacks (retreats of 5-9.99%) in the past 73 years; the S&P index dipped 6.9% in this last one.”
And they will add that, “…the benchmark fully rebounded from these pullbacks within two months.”
They are also eager to point out that since the March 2009 low there have been 5 or 6 setbacks of 10% +/- while the S&P is still up 335% even after the October decline. But here is the catch, there working assumption is they can not time the markets. Furthermore, the inference is that if they can’t no one can.
That’s because as one “wealth manager” puts it based on the current bull market history: “…waiting out the shocks may be highly worthwhile. The alternative is trying to time the market. That can be a fool’s errand. To succeed at market timing, investors must be right twice, which is a tall order.”
Why would it be a “tall order?” It only makes sense on what he says next: “Instead of selling in response to paper losses, perhaps they should respond to the fear of missing out on great gains during recovery and hang on through the choppiness.”
Wow! Instead of looking at price-based timing models to avoid the risk and to find opportunity, he is reacting to the profit and loss trail, which is post hoc, reactive and emotional based. Hence this wealth management is not based on any “discipline” I recognize. It is based on the profitable of the portfolio. This explanation is what brokers normally say about their client’s failure because its based on fear of loss and FOMO.
Another sign of an important top is in place along with the above apathetic attitude is the modest appearance they are giving to the risk. The rare bearish voices have only modest expectations for the decline.
Lastly, the majority of financial news pundits are kicking the can down the road with 2019 being the consensus.
With that said, done and dusted, our focus is on risk management point based on an objective model not a rationalization or cherry-picked array of Technical Analysis. It is the independent use of price-based tools, strategies, and macro filters to provide actionable and straightforward support.