• Background Image

    CT Journals

    eurozone

August 13, 2020

MarketMap 2020 Issue #14

You need to login to view this content. Please . Not a Member? Join Us
August 6, 2020

MarketMap 2020 Issue #13

You need to login to view this content. Please . Not a Member? Join Us
July 21, 2020

Volatility Reports 7/21/20 Fang Index

Panic Buying is Gripping the Premier Fang Stocks

On July 7 “Volatility Reports” pointed out the occurrence of a TE#1, a backdrop of emotional buying. Furthermore, all of the below is in the context of the S-T tidal system flipping from long to short on the Nasdaq plus MarketMap’s annual fractal providing the big turn for the year this week.

You need to login to view the rest of the content. Please . Not a Member? Join Us
July 15, 2020

MarketMap 2020 Issue #12

Change of trend time windows is popping up from early next week into mid-August. MarketMap-2020 discusses the methods and reveal the dates in this report

MarketMap-2020 issues early in the year provided ContraryThinkers with a hint that a peak was going to happen in the early part of the year.  One of the cycles was working back from 2020 with the Fibonacci series.

I said: “…working back from 2020, subtracting the beginning of the summation series from the current time window pinpoints the years of all meaningful – tradable – peaks back to 1929. I have highlighted them in the above charts.

The major or corrective tops posted in 1929, 1966, 1987, 1999, 2007, 2011, 2015, 2018, are all in the series counting back from late 2019 and the year 2020. Among other reasons, the market began to put in a major top precisely two years ago.”  In 2018 and 2020 fits as a major top year and 2020 fits with the Decennial cycle. Thus far it is proved very true.

By the way, reaching back 144 years – from 2019-20 – it pinpoints the panic of 1873. This financial crisis triggered a depression in Europe and North America that lasted from 1873 until 1879. In the United States, the Panic was known as the “Great Depression” until the events of the early 1930s set a new standard.

You need to login to view the rest of the content. Please . Not a Member? Join Us
July 7, 2020

Volatility Reports 7/7/20 Fanng meets Fang

While advisors and capital managers should not expect the FANNG stocks to roll over at the same time, the signs are becoming clear that the buying behind these stocks is emotionally based, investor’s greed going over the top chasing profit potential, thinking in a straight line. To the experienced, this looks like a steak dinner with cocktails.
You need to login to view the rest of the content. Please . Not a Member? Join Us
July 6, 2020

Volatility Reports 7/6/20 Short Term Indices

The background based on price is coiled up like a spring. A trend-following or breakout (down) signal will get carryover. Charts with breakout points will be posted with the opening of the day session.

Last week I pointed out that our volatility model – a leading indicator, never lagging – for both the intermediate and short term signaled a trending move was on the horizon. that the bulls have a chance for the 1929 or 1987 melt-up that they are looking for.

For s-t and day traders’ money is money, trade either direction, it does not matter if my outlook suggests deflation for the long term followed by hyperinflation in the recovery effort.  I saw a connection of mine post a brief headed ” the low is in for the year,” which tells me nothing. Granted I did not read the brief, but the headline should be captured in the writer’s content. In other words, the low could be in for the year and there could still gibe back 20 to 25% from here, and not make new lows until 2021. The sell-off does not need to be like the last three we have witnessed. It could be more like the 1973-74 slow Chinese water torture, low volatility, and dull bear market.

The big take away here and breaking old school thinking out of their box it’s how you get there that is key and to be clear about risk and opportunity.

Contrary thinker’s featured chart is the S&P futures going back 23 years with our Tidal Wave model. As a system, it can be refined into a day trader with the TEM as a filter. From a forecast point of view, it provides a basis for the outlook.  Since the near-perfect sell signal after the February island reversal, the buy signal was early setting the cycle system into inversion, that is buy mean to have a short bias and sell means to long bias.

 

A few things stand out in the above chart. for one is the island reversals at the February top and the June secondary or lower peak. Neither one has had their gap closed, a bearish tendency. Both reversals were failures to hold long term and intermediate-term support zones. As mentioned TEM is a new signal for trend-ability.

While the headlines since the 8% down day have been one-sided bullish and every random count I take in social media has the bears at 3 to 5%, the market has made little headway. Here is the Globex three hours before the open, and only the Nasdaq futures are in virgin territory.

The NQ is in the S-T resistance zone and a move below 10,451 would be a sign of weakness.  Support for July is at 10,334.00. The other majors have run into S-T resistance and fallen back thus far.  More on that after the open.

As intimated above, the mentality of small-time investors, measured by the put/call ratio provides an indication that the bottom of the pyramid is buying, providing liquidity for smart money to pad off into, to take profits. Smart money needs a broad base of small buyers to be well entrenched in their buy one day dips strategies so they do no collapse the market.

Given the speed of two of the last three declines since early 2018, bibs are being pulled and the market hits the panic stage quickly. However, from a market mapping point of view, there are only one of two places the bear market can be stationed, and this is a bear market rally in the big caps and an irregular top – Gartley’s butterfly formation – in the Nasdaq, with the new highs.

Referring to the above 1973-74 parallel, the current rally would take four to five months off the March 23, 2020 low before a dull and slow bear market took hold making new lows in 2021.  That time mapping brings the market into a July or August peak. The let’s get it over quickly scenario puts the market at the (2) point on the chart. Given the snap back to normal mania and the tension in the background measured by TEM, collapse is very possible here.

Here is the textbook example of an irregular top. Keynotes about the topping process are the nominal new high made by the (b) wave. This new high is not confirmed by market internals like the A/D line, which is the case.  The new highs are being led by a handful of marque stocks, not robust advance. The limit of the advance is typically 1.236 times the length of the (a) wave; and the subsequent decline takes prices back to the beginning of the major (5) wave advance.

Running those rations on the real chart should put a cap around 10,542. My I-T resistance zone has its outside resistance at 10,549 for July. The (C) wave sell-off would target 6,000, the low from 2019, and about equal to the overshot on the high side.

Lastly, referring to MarketMap 2020, there is a change of trend expected early this week. If it is an inversion the market should change from side-ways to down. If prices continue to move higher, the next orthodox time frame for a COT is the week of July 20.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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 11, 2020

Volatility Reports 6/12/20

Looking back at the mini climatic low compared to the sell-off Thursday

Headline from contrary Thinker May 27, 2020 “late bear rally into panic buying and we pointed out that the “World Market’s recovery looks old and feeble,” based on our volatility models leading indication a Technical Event #3. That was eight trading days before the nominal price high and pivot.

In turn on Thursday the 11th the lower gap open left an island of buyers from June 6 through June 10, who will not be happy campers waiting to break even. All Contrary Thinker subscribers are aware of the time frames outlined to a peak in June. Whether it is a primary peak and the market only produces a failed rally or it makes a new recovery high before the onset of the next bear market leg is academic. From an investment, trading, and capital preservation point of view, the sell-off yesterday did not make a Short-Term (S-T) low.

That brings me to the main point of this issue, how to pinpoint high probability lows.  What I call “low risk.”

From right to left, you can see the three main indicators set up the low. The daily bar as early as February 19 made a mini panic S-T low. TEM reached a TE#1 and the panic index reached an extreme above 70.  That panic was the kickoff of the larger decline and provided a respite for a few days.

However, the weekly bar was not in gear with that low.  It is easy to see the same three indicators provide an extremely low signal in the last two weeks of March. TEM hit a TE#1 (%C below 40 and HV above 60) and the Panic index was above 70.  The monthly bar for March confirmed the low with its own TE#1 and a Panic reading at 70.

At that point you can go back to the daily bar and see the Panic index move back above 70 and a new TE#4, suggesting a change of trend condition from attending to range expansion.

When you look at Thursdays sell-off, there is no sign of a S-T low. The market peaks in low volatility TE#3 and has not provided a fresh event and the panic index is below 70. There is more decline to come.

A sidebar here, I have many long term clients that are very good trading and know these inside methods.  I missed this big tradable low. For two reasons, one is a tested low is ideal along with the above and that did not happen. Two I was 101% focused on the hedge program which did very well netting over 100k on 900k from February 24 to March 16. Once disengaged I was looking to do it again, which was partially put on for a few days with mixed results but no drawdown.

That decline, which we expected along with the amount of risk – expecting a 50% decline – hit fast, it was extraordinary, not leaving even the best hedger time to catch his breath. Part of my vision for Contrary Thinker was upscale communications, your input is something I listen to, keep me on my toes, I will appreciate your feedback.

One of the hedge fund masters I admire and work to simulate is Standley Druckenmiller. He missed the “V” shaped bottom as well. BOA moved their targets for the S&P higher after admitting on CNBC they missed the low.  Well, that may put me in good company but I would rather be right and I would rather provide the best advisory to my membership.  

Here is a short curated article on the Zero Hedge site about Stanley.

Lastly, heads up, hedges are going back on Friday or Monday. More on that and strategies in a private memo to full members only. New TradeStation workspaces that I use for the hedge program are going up before the open today. 

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

June 9, 2020

50-Day Stock Market Rally May Be Just The Beginning of the End

History Suggests Record 50-Day Stock Market Rally May Be Just The Beginning

Popular On Air Advisor says, “History Suggests Record 50-Day Stock Market Rally May Be Just The Beginning The S&P 500 has gained a record 39.6% since it hit its 2020 low back on March 23. Not only has that rally erased much of the year’s COVID-19-related losses, it’s also the best 50-day stretch in the history of the market. After such a strong rally, traders are understandably getting uneasy the market is overbought and due for a pullback. However, from a purely historical perspective, the strongest 50-day periods have generally led to even more gains over the year that follows.”

The analyst concluded that, ” since the S&P 500 was constructed in 1957 that the index has gained at least 20% over a 50-day period. In all seven instances, the index gained at least another 5.2% in the year that followed.”

But he does not do two things, one is go back to cover all the history of the stock market so there is some evidence of back fitting and two he does not say how the market may get there, which is tandemount to the capital managers p&l.

History tells a different story, for one so-called “V” recovery is not a historical record. There are many similar sharp – “V” shaped – and brief recoveries that lived inside of bear markets – like 2000-20003 and 1930-40, lastly making new nominal highs does not make it a new bull market by definition and mostly by its context.

 

2000- 2003

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 5, 2020

MarketMap 2020 Issue #11

“There were so many people who thought we had to retest the bottom,” said Cramer.

The best salesman on Wall Street went on to say, “Billionaire hedge fund investor David Tepper told CNBC in May the stock market is one of the most overpriced he’s ever seen, only behind 1999. Hedge fund manager Stanley Druckenmiller said in May “the risk-reward for equity is maybe as bad as I’ve seen it in my career.”

He was ranting by the end of his morning segment after the Dow was surging 700 points based on the unexpected unemployment numbers that those who waited for a test of the low will be forced to buy now, and there was little or no risk of Convid comeback and the economy should be reopened.

Sounds like Crammer wants his audience to chase the equity curve.

Obviously with the Fed in Trump’s pocket along with the ten big banks following Steven Mnuchin’s lead, only time will tell if the market regime changed as CT predicted back in January 2018 or if the market herd has gained risk immunity.

Well, every cartel cracks sooner or later.  At the end of 2017 I pointed out that the government had painted itself into a corner by using up all the tricks of the trade from QE to tax cuts at a time when it was not needed. Rather it would be needed to provide a soft landing when the next recession hit.

After looking at a Trillion dollars of debt on that basis, the trigger happy Fed and Treasury have dug the hole even deeper, to the extent that the risk is now hyper-correlation from either end of the normal volatility curve.  As we all know, the market does not like instability.

So, here are two historical charts, which puts today’s market in perspective, I think.  The chart on the right is the expanding triangle that formed after the post-WW-II 17-year long bull market consolidated. It began at 1000 on the Dow in 1966 and ended in October – December 1974 (when I joined Stix &Co).  It took another eight years from that low before the next secular bull broke out from the base.

The chart on the left is today’s market reflecting the same pattern and putting it at the beginning of a new bull market that after a rally to test the old highs will fall back into a trading range for the next seven years +/- a few years either way.

However, given that today’s market is likely inside the base building and has not experienced a bear market yet with its economic repercussion it is not likely in avoiding more declines greater than 20%.  The next comparison chart shows features the same expanding triangle of 1976, peaking at 1000 and leading to a bear market exceeding 25%. Note that the rally from the end of the triangle at point (E),[4] was truncated, it failed to make new highs. Given our outlook for a peak in June, this idea should keep hedgers and investors on the front foot.

Today and early next week the tidal systems flip from down to up, hence the down cycle was inverted aka it failed. Today you can see the effects of the cycle turning back up. The window for a peak begins to open June 13, which is a Saturday.  It runs from that date, let us include the 12th into June 22, a Monday.

Contrary Thinker will be looking for its volatility model in that time window for a “no-fear” background that is exploitable and it will be looking for its OB/OS model to be giving out of gear ( as opposed to negative divergences) for a sell signal. Lastly, for strategy engagement, the market will need to be on the right-hand side of a high pivot.

The Short Term TEM on the four primary indices will be posted in the LI Space shortly, for the background.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

June 3, 2020

MarketMap 2020 Issue #10

Hope Permeates the Headlines with the
Felling of Back to Normal Conditions

Contrary Thinker has a number of new members and I welcome you on board, please feel unencumbered to ask questions or provide feedback in the private LinkedIn Group. I will send you a user doc on the Volatility Model shortly.

With that in mind, we are not in the business for the transaction and as an advisory, we do not consider opportunity risk, because a loss is hard to makeup – its simple math. Our point of view is the waiting is for low risk – ideal setups – that provide 4 to 1 or better risk-reward.  We did that this year with the collapse in late February into March 23, trading only long volatility systems and aggressive short-selling systems on the indices and crude oil.

Since the low its back into a holding pattern. We prefer the high volatility periods because they are less risky and the setups are direction neutral in some cases.  To make a point by extreme example, volatility can run at either end of the curve, hyper deflation, or hyperinflation.

with that in mind, forecast are just that, scenarios to keep capital managers on the front foot and prepared for what is coming – sooner or later. The forecast also provides risk outlook and market conditions outlook. For example, since 1/23/2018 we have been long term risk-averse and see each rally to new highs as an opportunity to at least raise cash.

Again, and this is not bragging as Contrary Thinker did it, we called the peak in late September 2018 and the most recent peak on February 12 and 19.  As it is a well-known fact throughout the investment community that a top is Harding to isolate than a bottom if you are looking for the master at calling peaks, you are in the right place. I am not talking about nominal highs for bragging rights, rather the low-risk setups to the right-hand side of the nominal peak to get my people positions to take advantage of the decline, to cash in their hard-earned profits.

Contrary Thinker has the guts to point out the low-risk lows, as you will read below; but from a long term point of view, the low on March 23, was not a low-risk low, even though it was a good long side trading opportunity.

Market Map is part of the comprehensive system we use, to pin down dates for changes in trend, and build scenarios. The first featured chart is published several times over the last year to 18 months. It shows one of my cycles calling for a peak late in 2019 and a spill from Mid-February 2020.  The cycle projected the low to happen in April-May. but it happened early,

No harm no foul as the aggressive long volatility systems were disengaged to avoid any whip-saw. action, which is the Achilles heel of our systems.  The long-only VX futures system made 60% over the few weeks, max DD was less than 1%.

18 1/2 year Tidal Cycle

 

Based on the early low and counting forward the next high in the US stock averages is expected in June -August, a time window I will refind here.

Event-Based Cycles

ECBs are tied into historical peaks that had the same seasonal and tidal configurations as the current one under consideration. Both the 1934 and 1966 had similar peaks leading to bear markets after pullbacks in April. Both scenarios have their next high pivot in mid-June followed by steep declines in July and September.

 

Going back 140 years – not showing pre-1920 that are similar- here are three additional late winter peaks but in March with the same tidal configuration.  All three show a tendency to peak in mid to late May to Mid June and collapse into July and September, like the above chats that peaked in February.

 

The suggestion is that a peak – be it at new highs or under them is not important – is expected between now and mid-August, and this is not a new secular bull market.

Unparalleled Market Events

It is without argument that the 1987 crash had no reason behind it that anyone could prove. The spill was unprecedented in terms of percent decline and the time it took. the collapse in 2020 is also a stock market event that was sudden – a known unknown – and the price damage and the amount of time it took was historical.

However, when you look back at all of the “out of the blue” selloffs the ones with “W” lows, where the low was tested preceded more bull market. A base was built as you can see in 1987.

However, when you look at the 2000 – 2003 bear market the 9/11 panic on the re-open was a “V” shaped low. That low did not lead to a new bull market. In fact, the low was tested and broken until a “W” low was established in 2003.  You can also is that the counter-trend recovery peaked 3 1/2 to 5 1/2 months later, a scenario that fits the above narrative.

While the chart is not shown, the 1929 panic was followed by 4 1/2 months of recovery, similar to the pattern outlined above and it too was a historical event.

Contrary Thinker via its “Volalaity Report” will provide the market background that will likely set up the market for its next decline.  No hurry from here. The most recent post worked over the Bitcoin market, which is a leading risk market and should be telling before the peak.  More on that later.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

error: Content is protected !!