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November 30, 2020

Volatility Reports US Dollar and FX 11/30/2020

US Dollar

Intermarket relationships are ephemeral, valid for the short to intermediate-term at best. The imputed market wisdom is when gold goes up US dollar declines and while the greenback advances the precious metals go down. But since late September both markets are in a decline; and both into a decline of a major COT time window according to our MarketMap change of trend dates. With today being a key date, November 30.

Gold Bear ETF (GLL)

Today’s sell-off in the buck is testing the Long-Term panic low July 31 that was tested successfully through September 1. Today the lows are taken out with bearish sentiment running at an extreme high, again.

The newer Intermarket speculation is the bearish dollar is good for the stock market. The stock market made its climatic low in late March while the USD made a counter-trend high in the same time window.

But it was not until recently that social media is flooded with the supposed rationale behind the relationship. That a weaker US Dollar is bullish for risk assets like large-caps – multi-nationals, and the emerging markets, selective commodities implied inflationary impact and bitcoin as the replacement currency for international trade.

The tout for the US equities is “A lot of Dollar-sensitive areas of the market have already broken out ahead of a breakdown in the Dollar. So, if we do see the Dollar resolve lower here, it could potentially fuel those breakouts even higher.” The bearish side of the dollar trade is as crowded as it has ever been over the last ten years. Each time the net short position reaches these extreme levels – especially after a prolonged period of these extremes and probing the lows results in a significant advance.

The social media promoters are calling for 81 in the index, I don’t see it. I will stay with the Intermarket relationship between the buck and the stock market, thus expecting a recovery in the dollar off this November 30 COT and a peak in the stock averages.

The featured charts here from the left to the right show the long term panic low by the dollar index. Combining that with the extreme bearish sentiment, investors in the dollar have a bullish set up long term.  The short-term TEM reached rule #3, a signal that notes the current downtrend is old and labored, and while persistent due for a change. What is impressive thus far today, if it can hold or progress further is the breakdown and failure to get carried over. Instead, the market recovered above S-T new resistance and the low side of I-T new resistance at 91.80. More upside, a dramatic short squeeze would ad confidence to the bullish outlook.

Contrary Thinker does not see the Fed adopting a more dovish policy compared to the ECB, BOJ, or even BOE. It’s about conserving wealth and buying power.

Bullish on the USDJPY for a run to 108-110 over the intermediate-term. 

Goldman, Citi See Dollar Sliding In 2021, Plunging As Much As 20%

Click here to view original web page at Goldman, Citi See Dollar Sliding In 2021, Plunging As Much As 20%

“Wall Street’s latest top CONSENSUS (my all-cap emphasis)  trade for 2021 has quickly emerged as a dollar short. After Deutsche Bank flip-flopped on its view for the dollar, first closing out its long-running dollar short then reversing itself just days later and renewing its USD short, other banks have joined the bandwagon expecting a major drop in the world’s reserve currency in the coming year.”

“In a Friday note from Goldman’s chief FX strategist Zach Pandal, he predicts that “depreciation in the broad Dollar can continue in 2021” and writes that his USD cross forecasts translate into a 6% decline in the broad trade-weighted Dollar index over the next 12 months, and a “sustained but orderly” 15% real depreciation from its 2020 peak to the end of 2024.”

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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

 

 

November 30, 2020

11/30/20 Volatility Report Recap

The new decade, the new White House, the old White House undermining the incoming, an influx of inexperienced investors plus measures of market fragility equals major changes

9/3/2020, the markets are flashing “DANGER,” and no one is paying attention, NO ONE.

“What else is interesting is the three standard deviation move by the Nasdaq – lead by the FANG stocks – making it the most overbought in 11 years on the futures, and 15 years on the composite.  Such an event suggests at least a reversion to the mean.”

The low on September 24 was in line with MarketMap’s calendar of COT dates for lows running from the 13th through the 24th. Contrary Thinker expected the downtrend to blow through that time cycle low, it did not. Rather the market rallied into MarketMap’s change of trend time window for a high pivot.

10/15/20 It was pointed out that “The rally is ending in the COT dates” expected from 10/13 to 10/19. October 12 was the high pivot. 

With the continued strong background that a major peak was in place 9/2/2020, the expectation was for an acceleration of the bear market after the failure to make a new high on the 12th of October.  going into the next cluster of pivot dates running from October 23 to October 30, the outlook was for an acceleration point, a trend. Instead, the trading range remained.

In the face of a number of non-confirmations, too academic and numerous to list here, the Dow has made a new all-time high (ATH), in the COT window running from the 12th to the 18th.  Without anymore than a two-day dip the Dow has recovered to new highs going into its next time window when a low was to be expected, running from 11/21 to 11/30.

11/27

11/30 11/30  11/29 11/27 11/28 to 11/30 11/23 11/27 11/21 to 11/25

11/22 to 11/29

It is redundant for Volatility Report to point out that when bullish signals fail, they are harshly dealt with by the market. Hence if this new upcycle does not take hold, an inversion would be highly bearish.

The first crack in the risk asset markets is the gold market decline leading the way. Contrary Thinker also pointed out that Bitcoin because it too is a risk market would be a leading sign of a reversal in the stock equity markets. Our projections for BTC was a massive double top, which should be in place. More on that below.

Short Term TEM is on a new rule #2. without my bearish bias, a trend either way for short term traders should be the accent. TEM is a direction, neutral model. However, given the actuarial restraints on the market among other considerations, sell signals by S&R triggers or volatility bands should be honored.

Our long term outlook has not changed in the face of all the hyperbole generated by the new nominal highs above the 9/2/20 pivot. Risk is 35% for the first leg of the bear.

We know our clients and that information is confidential. If you are not a Visitor in our “Volatility Reports” Group on LinkedIn, you do not qualify for this extra 10% discount offer.

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 client’s 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

 

 

November 18, 2020

Volatility Reports 11/18/2020 Stock Indices

Lots of bullish bravado in the social sphere

When the markets ran stops on Monday 11/9/ all the Short-Term charts hit an extreme in volatility modeling, a rule#1. This suggests that the market will not make much progress from that point. Rather it will move into a trading range or a pivotal reversal in the other direction.

The pattern for the small caps – the Russell – is 1-1-1, a panic buying extreme on all three-time frames.  Hence

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November 16, 2020

Volatility Reports Bonds 11/16/2020

Bonds Long Term Bearish Trend Picking up Speed

Secular trends don’t turn on a dime, but they started at the end of 2017, the year of the lowest volatility in the market’s history. Since that date, even in the face of the need for increased sector rotation to outright market timing and long volatility investments, the sentiment repeats the same has to be a bullish narrative that began with QE1. But in the next forty years, we will witness a major shift that began in 1980 and is ending now. This does not mean everything is bearish, it means that strategies and timing, and time horizons will need to change.

The trend back to normal will be

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November 10, 2020

Volatility Reports 11/10/2020

The Long Term Readings of the Panic Buying at the Top in August has not been resolved. That peak has produced a wide trading range leaving the bulls rabid and the bears frustrated.

The monthly highs posted from August to date produced a 7 1/2% trading range.  TEM’s rule #1 is accurate 99% of the time producing a change of trend (COT).

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November 7, 2020

Volatility Reports 11/9/2020

Last week’s rally cleared the decks, producing online forecasts of another 50% advance for OTC

Last week’s rally cleared out CT’s hedge ETFs (short) across the board. The S-T cycles made a low around Holloween and the I-T trends crossed over a bullish combination.  For whatever reason the media is spinning, the post-election rally crushed the volatility index, at least in the short term, and holding the higher March/April 2020 levels. But what it did not do is take out the ATH posted on 9/2/20 and the secondary high posted on 10/12/20 held thus keeping the bearish outlook in place, in the face of the bulls reaching for new highs on the weekly bar.

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November 6, 2020

Volatility Brief

Here is a long term buy rule that streamed across my Twitter feed last night.

When the $SPX punches in 4 straight gains of at least 1%, it is a signal of a major low. According to the content provider, this has happened only three (3) prior times since 1938 on 10/11/1982: on 10/14/1974 and 6/1/1970. He says, “All three occurred soon after major stock market LOWS.”

What is missing in this pattern – this rare setup – it has only happened after a bear market, each occurrence is preceding a decline exceeding 28%. Whereas the current low only marked a mild correction, thus far, of 8.5%. It’s just not the percent decline that lacked context for the “risk-on” signal by content providers. Rather the three lows used for this rule generated panic extreme readings on TEM our volatility model, including the panic index. Comparing that to the recent low that did not hit a washout extreme.

Contrary Thinker views the 10/30/20 low as a high-risk low, where we prefer washouts lows that provide low-risk entry. The big difference in these types of low is the panic extremes are clear via the models where the emotional background for the majority of traders is “gut-wrenching” making it difficult for the majority to buy, to go “risk on.” This market is still the bull market in fear; and vulnerable.

The market has an engrained myopic view mixed in with a long term bullish bias, not seeing the forest from the trees.

The Bottom Line

If you’d like to know more and you are a financial professional visit our LinkedIn Group “Volatility Reports.” 

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November 3, 2020

Volatility Reports Bonds 11/3/2020

Bonds Long Term Bearish

The long term top has finished its period of distribution with a secondary peak at (2) in EWT terms. The I-T tidal forces are pulling prices lower – forcing rates higher – for most of the higher grade bonds.

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October 28, 2020

10/5/20 Major Market’s Recap for LI

How soon they forget Contrary Thinker’s headlines.
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.

Yet a full month later, the boogie-man-month of September is done and dusted, hence an all-clear for the bull market. Contrary Thinker sees the next range day lower that exceeds 4% without an intervening new high etching in stone that the market is in a long term bear market.  The Summaries below support that expectation and the Chart Gallery to follow.

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As a general observation of all the primary markets, they all peaked on panic buying in August – based on the TE Model. Such action, as previously observed, is easy to stop and will be flipped at least back to the point where the highly emotional buying began. However, given the age of the uptrends, the flip, the reversal should take prices very much below that point.

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October 26, 2020

10/26/20 Volatility Reports

The bear market is expected to confirm this week via long bar decline days

World Stock Averages both U.S. and European markets experienced a down week. The Asian markets were mixed with the Hang Seng and Shanghai Composite making secondary highs, pivoting to make new two-week lows in the same period, a bearish configuration. 

The ATH posted on 9/2/20 and the secondary high posted on 10/12/20 held thus keeping the bearish outlook in place. In the report on the 19th, I pointed to the grey column on the right of the Change of Trend (COT) calendar because it highlighted the time frames when an acceleration of the trend is prone and long bar days become more likely. The expectation is to see 4% lower range days or greater in the Dow/S&P and 6% down range-days or greater in the Nasdaq is probable.

The majority of market content providers in the Tweeterphere for the last three weeks touted an advance to decline surge of some formulation, when in fact there was none, full stop and there was no massive confirmation of new highs by the major averages. Funny, from the peak that Contrary Thinker predicted in late January 2018 the Dow made new highs but the Dow Transports did not, an old fashion Dow Theory sell signals. Today the bulls can’t focus on anything else but – even with it being three years later – the Dow Transports making new highs. The problem is the Dow Industrials have not confirmed, which is another old fashion Dow Theory sell signal.

The price-based background is being dominated by the Long Term panic buying that occurred at the peak in all of the markets from bonds to gold to stocks. After a TE rule #1 – a panic event – is followed by a choppy market. It is a “V” or inverted “V” change of trend (COT) bottom or top 99% of the time ( see Four Rules).  

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