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    CT Journal

    DOW JONES

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

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February 16, 2019

Direction Neutral Risk Assessment

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February 15, 2019

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

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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.

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November 19, 2018

No Christmas Party for U.S Markets

Technical Event Model – Volatility modeling

Market backdrop provides a springboard for a dynamic trend.  In the new millennium, the Read More

November 6, 2018

MarketMap 2018 4th Quarter

CONTRARY THINKING

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.

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November 6, 2018

The S&P’s November to Remember

What follows is a blurb from the 14-page big issue Volatility Reports that is going out today covering all the various time horizons and where the market is at this eventful period.

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