• Background Image

    CT Journal

    DOW JONES

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

 

 

August 2, 2020

Volatility Report 8/3/20 Video

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.

 

You need to login to view the rest of the content. Please . Not a Member? Join Us
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

  1. 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 
  2. 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 

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

 

June 24, 2019

The Good Bad Attitude, Contrary Thinking

February 21, 2019

Low Volatility ETFs in the Headlines for Contrary Thinking

You need to login to view this content. Please . Not a Member? Join Us
February 16, 2019

Direction Neutral Risk Assessment

You need to login to view this content. Please . Not a Member? Join Us
February 15, 2019

“Ninety Nine Cents Won’t get you into NYC, it will take a full Dollar”

You need to login to view this content. Please . Not a Member? Join Us
January 20, 2019

Market Outlook: Long-Term Trend Following Models Are Turning Bearish

Volatility Report January 21, 2019

From the many analysts and capital manager reports, I read they almost all sight the well-publicized concerns but only a few are bearish. Not a good sign from a Contrary Thinker point of view. From the many I found one who at least toned down his bullish enthusiasm as seen in his summary: “Some popular long-term macro models are turning bearish on stocks for the first time since 2008-2009. Throughout 2019, other macro models will slowly turn long term bearish as well. The probability of a pullback/retest is still high. As the stock market rallies higher and approaches its 50%”

However, Volatility Report dated September 24, 2018, explained things this way, “The problem with the bulls waiting for a clear reason to sell is the vast majority point of view. Add to that fact that the majority of systems and strategies all have sell signals within the same price range when the signals hit it will be a rush to the exits.”

That is what the market witnessed from late September right into Xmas. The only thing that is slow, is the unfolding of a bull market mentality. Bear markets are fast, that is why they are preferable for aggressive trading and hedge funds. Plus systems are already engaged and when this low volatility advance has run its course and the first S-T volatility expansion hits, the bear market will be back off and running.

As a market analyst, I stick with the facts, the high probability ones opposed to wild ass speculation.  Like the following statement is 100% ungrounded, “Dow Theory signal confirms that the short-term trend is up for stocks. Several converging factors increase the likelihood of another short squeeze.”

Well, from a one world point of view, the new highs by the Dow and Nasdaq in September were not confirmed by the world index – net the USA. They have not recovered back to their highs of 2007. Regarding the Dow Theory is how the novice TA and social media bloggers do not know the rules of Dow Theory and that the December lows by both the Industrial and the Transportant indices confirmed the downtrend, with the Transports hitting prices not seen since November 2016, the beginning of the extended bull market CT expects the market to correct completely.

Regarding the speculation of a short squeeze, there is no sign of panic here, TEM has just reached a Technical Event #3, an event that tells the investor/trader the current trend is laboring, it is old, persistent and ready for a change.

Systems traders, our group, has a library of trading strategies that fit every trading style. All of our algo trading strategies have the risk and opportunity management model – Technical Event Matrix (TEM) – embedded their code. Our member investor/traders can implement a comprehensive system with no second-guessing. They have the governing model for visual control as well. Membership includes ongoing tutorials with open code; non-members locked code only with 45 days of support. Library Link Here

 

Great and Many Thanks,

Jack F. Cahn, CMT

Copyright 1989-2019

Thinking Man’s Trader 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. www.ThinkingMansTrader.com, 800-618-3820

— Thinking Man’s Trader 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 to your financial situation. Only risk capital should be used when trading futures or options.

 

November 27, 2018

How to Time Long Volatility Strategy

How to use the Technical Event Model

Here is an example of waiting for near 100% certainty set up. The overarching measurement for engagement of the long volatility strategy is our Technical Event Model (TEM).

One reason why a many will ignore this idea is they expect to see profits every calendar period for the system, but consistency is not the point here, at least not yet. Instead, can a trader use a filter to tell him when to trade a market strategy and when to trade it aggressively or not to trade it at all?  That is the point; we can work that into monthly and annual profit consistency later.

You need to login to view the rest of the content. Please . Not a Member? Join Us
error: Content is protected !!