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October 22, 2020

JP Morgan Warns Trump Can Win

Art Merrill when I interviewed him for the MTA thought that I filled a vacuum left by legends like Bolton and Gould. At the time I only had a cursory knowledge of them and today I know Arthur was a very kind man.
But as a quiet achiever – today’s Contrary Thinker – I don’t miss much. It started in 1982 based on Joe Granville’s methods I nailed the low while Joe missed it. He reminded bearish, was just not using his own work. I ticked the major top in July 1987 protected my clients and got back in during the last quarter of that year while the household name whose method was used remained dogmatically bearish, go figure.

Today!

My methods are Short Volatility ETF’s, the tide has turned. A fresh sell short signal happened with a good record projecting a down market for the next six to eight weeks. Yes, short-short volatility! If you don’t understand, it’s not too late.

Here is what no one else is seeing. Long stocks based on “implied volatility,” mathematical formulas that value all put and call option into an index, and a futures market trading it. This CBOE index and the Volatility index futures became an ETF investment vehicle that is perpetually short the futures.

Because the Volatility Index has a downward bias – the stock market is almost always going up- therefore it is a synthetic price index of the S&P or the Dow, etc.

Well, I have called the trading range since the peak of January 28, 2018, the “bull market in fear.” It is not a slur on the Perma-Bulls doing their job. Rather, this short VIX ETF has not confirmed the peaks since early 2018, thus reflecting higher prices in perceived volatility or the fear index as it is called.

When the SVXY  ETF is viewed through our Tidal Wave system the strategy is now on a new I-T sell signal (see chart). This system, when correct, is correct in a big way.  How that a sell signal is in place, a move to the recent low and below the low side of S-T support at 36.13 should get carry over targeting to the first level of the I-T support zone at 30.31. That is a risk over the next six to eight weeks of 16%. An equal move by the Dow would be a target of 23,562.00

What is most important here is why a breakdown should pick up a following, because of the background dynamics.  I did not show the weekly bar of SVXY but its TEM – our volatility model of the market dynamics- is signally an extremely tense background where frustrations will follow the direction that clearly shows its a pro-directional movement.

Another reason why from the January 2018 peak the great bull market ended and the bull market in fear began is the recent (first quarter of 2020) breakout by perceived volatility above its eight-year base. Following the breakout, the based was tested and the higher level of “fear” held, which is easy to see in Contrary Thinker’s featured chart. Furthermore, the smooth CMB index and the smooth RSI are both trending higher on our Anxiety index, suggesting that a reassertion of the first quarter spike of the market’s anxiety is imminent.

Bottom line, I-T bearish stocks worldwide, including Asia, I-T bearish bonds all ratings, bearish on gold/silver, bearish on crude oil, Bullish on the majority of commodities outside of carbon fuels, and bullish on the US dollar.  Lastly, Contrary Thinker called the peak in the bitcoin and called its break and collapse to $4,000; and I earmarked it as a leader of risk assets leading the stock market lower. That relationship has changed, it is still a risk asset and will follow the equity markets lower. More on its expected FOMO peak shortly.

Sometime in the first quarter of 2021 will be a time to gather RS leading stocks and ETFs for a rally into April/Map.  For complete details, if not a Contrary Thinker member, get your order in early for MarketMap 2021 Annual Scenario Planner, discount will end, and must be part of our LinkedIn group.

LinkedIn  Group Vistors, we appreciate your taking the time to have a review of our work, I feel we should have impressed you positively over the last two to three months. 

If you are not a Visitor at the “Volatility Reports” Group on LinkedIn, you do not qualify for this offer.

JPMorgan’s Kolanovic Has Another Warning For Those Expecting A Crushing Biden Victory

Click here to view original web page at JPMorgan’s Kolanovic Has Another Warning For Those Expecting A Crushing Biden Victory

Last week, we published an article detailing a warning from JPMorgan’s top quant Marko Kolanvoci to all those expecting a landslide Biden win (and by extension Blue Sweep) in which he showed the recent changes in voter registration data and their possible implication for state outcomes. In a nutshell, the JPM strategist found that there had been a sizable increase in Republican voter registrations in key battleground states compared to only modest increases in Democrat registrations…JP Morgan Warns Trump Can Win

The time is now. You know me, Contrary Thinket its Volatility Report, its MarketMaps-2020 and Algo Systems. All through the professional group network of LinkedIn.

LinkedIn  Group Vistors, we appreciate your taking the time to have a review of our work, I feel we should have impressed yours positively over the last two to three months. 
Take advantage of these prices available only to our network, become a Contrary Thinker today before your access runs out.

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

October 22, 2020

Crude Oil Tracing out a Bearish Wedge

9/14/20 “the intermediate-Term outlook remained bearish on the oil.

Today ditto. The wedge pattern shown on the 90-minute bar implies a thrust coming out of that formation, very typical. After a number of false starts we witnessed, this decline has the structure of an impulse wave, which suggests it is in the direction of the larger trend.  I will leave trade plans to the trader, we have an Algo to use. however, it should be clear that a minor move above 40.34 would run a few stops. If that failed to pick up a long following jumping on the failure with short sales make sense. More below…

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October 15, 2020

Volatility Report 10/15/20

ContraryThinker’s Volatility Report from 9/29 pointed out that “the next down-range day exceeding 4% would etch in stone a long term bear market if one happened without an intervening A/D surge, which has not occurred based on L-T traditional measures.

Since the high for the year posted on 9/2/20 is the pivot point our focus is on when to expect an acceleration of the bear market decline for all the majority indices.

Contrary Thinker’s “MarketMap2020 Issue #17” dated 9/29/20 reiterated the above that 

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October 9, 2020

Volatility Report 10/9/2020

Laggard  Catchup Rally Preceds the next COT For the date clusters check the last issue of MarketMap-2020™

The short volatility futures ETF broke out yesterday, which is a S-T bullish event. Please note how TEM on the daily bar was registering a TE#2, preceding the break and supporting carry over.  The bar chart also shows a horizontal triangle, hence the breakout is a finality, not the beginning of a longer-term new bull trend.

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October 8, 2020

Volatility Report 10/8/2020

Twittersphere Market Forecasters Continue with Unbalanced Point of View

The continued siting of 80% up volume days since the 9/23/20 low does not show up on the S&P averages, not the indicator or the system. As they say, “garbage in garbage out.”

There is more. The unbalanced pronouncement that the S&P Advance /Decline summation index made a new high is misleading to the public when seen in a vacuum as being bullish. The problem is the S&P average did not make a new high. If it does not, as is the rule of failure, has it, they are dealt with harshly. So, a reversal without the new high will lead to a high rate of change decline.

Let me tie in here that panic decline days can hit any time now, and such long bar days should challenge and exceed 5% on the Dow. Doing so confirms the continuation of a bear market that began 9/2/20.

Furthermore, on the A/D line, the Dow, the Nasdaq, and the broad market – the NYSE-  did not make new highs back on 9/2/20, while the Nasdaq has been out of gear since the 1999/2000 top.  Everyone knows the big rally in the Nasdaq is lead by the FANG shares plus two handfuls of company stocks.  Not a healthy bull market for some time and broadly publicized.

One content provider that knows the Fibonacci series in percent terms is projecting a 43% reward potential from here.

Based on 140 years of history to base actuarial projections, this “secular bull market” is old. Ok, yes, we all do live longer today- better living through chemistry for sure, and for sure, the Fed has “pumped up” the market, and before that, the Corporate tax cuts “pumped up” share prices.  But as mentioned in these pages, that did nothing to narrow the wealth gap. A situation that leaves the Fed chief bagging the White House for fiscal stimulus, which now becomes a political problem, not good leaving open the possibility of “social unrest” among other potential catalysts. But no matter the event that gets the blame for the bear, the long term risk into 2021-22 is 80%, and the risk this year is my long started 36% or Dow 17,000 +/- 1,000.

What is unknown to the vast majority is the panic buying in the majority of the Fang stocks leading to a peak. The same irrational buying measured by TEM for the Nasdaq comp and the cash S&P.  This is one reason these tools are a closely guarded code and method; and will not be entered for any award, like the annual MTA technicians of the year award.

To prove my point, TEM signals a change of trends (COTs) with a higher than 95% accuracy.  The last three major tops by the Dow, 2000, 2007, and 2020’s double top were all signaled by poor, aka irrational buying. Such buying is what smart money – investors sitting on big long term profits in a large number of olf shares – wants to be imbued in the late comer’s mentality, so they have the liquidity to sell into, full stop.

There are signs of a return to normal, with interest rates going up, leading the stock market lower as it competes for yield. The next three month charts show the 30-year government bonds futures peaking May 9 on panic buying following six months of the trading range and only recently breaking lower. All of which I predicted.  Gold, like the long Government bonds, went through a multi-month period of FOMO buying.

The working assumption is emotional buying is easy to flip as opposed to purchases based on sound reasons. Hence the long bonds are weak into the 152 price level where panic buying began. Gold peaked a month before the Dow on August 6 and is vulnerable to 1500/oz, where emotional buyers first entered frantically pushing prices higher.

Get with it!  Contrary Thinker can do.

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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

 

 

October 5, 2020

Back Stories 10/05/2020

Zoom-Zoom-Zoom

Markets Rally On Optimism Trump May Be Discharged As Soon As Today

In addition to optimism over a covid vaccine, optimism about the economic recovery, and optimism about a fiscal stimulus, we can now add another category of “optimism” cited by traders to justify overnight futures ramps (at least for the next few days): optimism Trump will be discharged from Howard Reed hospital any day now, perhaps as soon as today, and then stage a full recovery. Sure enough, on Monday US index future bounced after doctors said Trump could be discharged from Howard Reed imminently, while sentiment was also lifted amid tentative signs of progress on a new fiscal stimulus.

Late on Sunday Trump released a series of videos in an effort to reassure the public that he is recovering (following by a frenzied tweetstorm on Monday morning), although his condition remains unclear and outside experts warn that his case may be severe. Trump also surprised supporters outside Walter Reed with an impromptu drive through, even as it earned him a fresh round of anger by liberal commentators.

Contrary Thinking Starts Here

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

 

 

October 1, 2020

Volatility Report 10/1/2020

Market’s Bullish Reaction to the Debate was just as Thuggish

On the 24th Volatility, Reports concluded that the change of trend date for lows would see an acceleration of the decline. Instead, the market has continued its rally into this time window of the 1st or 2nd of October. The report also pointed out that the last time this happened was the peak of the market on September 2 – see the table in that issue – which was an inversion, which almost always leads to an acceleration of the larger trend.

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September 29, 2020

MarketMap2020 Issue #17

The collection of the Twitter posts from Friday and Monday rank sentiment at an extreme bullish level with  72% bulls, 23% equivocal, and  5% bearish, suggesting the buy dip mentality remains for  Smart Monday profit-taking liquidity.

I labeled the equivocation segment based on the content provider simply posting a chart without drawing a concise conclusion while one was intimated, all of them bullish, leaving this contrary thinking indicator at 95% bulls.

Coming into this time window, both MarketMap and Volaltity Reports has put advisors, managers, and traders on alert, that any rally unless it was a momentum surge would stall and the bear market will reassert itself. The rally over the last two trading days were not A/D surges.

In fact, while the old school may be looking at arbitrary definitions of bull, bear, and corrections, what Contrary Thinkers can gain confidence from is the occurrence of any long bar day decline that exceeds the widest one day range since the peak September 2, 2020.

For the cash S&P, a long bar decline greater than 4.4% or 148 points will confirm a long term bear market, for the Nasdaq Comp a range day decline larger than 6% or greater than 670 points from the day high to low, would be long-term bearish.

The current time frame

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September 24, 2020

Volatility Report 9/24/2020

What the bulls would love to call a correction is on the cusp of confirming its nature as a bear market

This has nothing to do with the arbitrary definition of a correction being anything less than 20%, and normally 10% give or take. It has to do with the lack of panic near the top of the bull, which after a certain number of days from the all-time high gives great confidence to the bears.  If between now and the opening on Monday the market has not had a panic with all of its earmarks and without a buying momentum surge, by historical standards the market has slipped into a long term bear that will last on average 18 months and cash in 36% in profits on average.

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September 23, 2020

Fed impotence shifts power to politicians, can you afford the risk?

Contrary Thinker’s strategy is clear, its the process between short and long volatility

S&P 500 implied relative volatility is at new highs in the face of a 45% bull market by the underlying index. The level of VIX has been increasing as a bull market in fear is making new highs with the S&P new highs. The last time this technical event occurred was in the late 1999- early 2000 high pivot. So Contrary Thinker (CT) is clear the horizontal axis is the S&P price level, and the vertical axis is the VIX price level.

There is more volatility in the background with the presidential election coming up on November 3, 2020.  Historically, election-day changeability implies a swing higher or lower of 3% S&P and 3 1/2% Nasdaq.” Sources have these historical swings on a higher range of “change” expecting 2 ½ times the recorded amount on election day +/- a day.

If that is not enough, there is more that leaves the informed capital managers and advisors uneasy. While many continue to believe everything is back to normal from the economy to politics, the elite see a major disconnect between economic fundamentals and the stock markets. Hence, they are uncertain and searching for protection.

Why many market participants fail is by not understanding their own biases – like being fully invested all the time or believing asset allocation – some form of diversification – will provide Alpha.

Contrary Thinker at the end of 2017 – the lowest volatility year on record – began anticipating a transition to a far more volatile regime. At the end of 2017, I published my concerns and called (Market-Map-2018 1/18/18) the first quarter mini-crash in 2018 as a Regime change.  From that point forward, the market’s been a foghorn saying here it is, and yet, “short volatility” remains the idea to achieve Alpha, when faced with facts.

At that time, a regime of higher volatility appeared inevitable after 20 years of Neo-Liberal economics into 2000, and another 20 years of monetary interventions evolving into “preemptive monetary policy all of which left “The System” to be a ward of the State.

While the legends like Druckenmiller and Soros underestimated how the Fed can lift financial asset prices, they along with other independent capital managers and advisors also see the Feds impotence in its ability to stimulate the real economy. An inability that has unfolded over the last 20 years.

This is not a political point of view. It is part of a database of facts that everyone aka risk analyst/managers needs to work from. A fact like the wealth gap, to note a more noticeable result of the Fed failing.  It is this growing impotence that widened the chasm between asset prices and the real economy, simultaneously amplifying the wealth/income inequality and financial instability—the “disconnect” as it is being called in the social media.

The Fed understands this, Powell is increasingly calling on politicians to support monetary easing with increased deficit spending, aka monetary/fiscal coordination.

This Federal Reserve’s incapacity, as describe, transfers power from the central bankers to politicians. How does that shift impact your risk analysts? In context, how does that influence your risk management in a “contentious” presidential election year? Where streaming social media has the presidential race between a Communist and a Fascist.

Getting back to normal entails an independent central bank instead of playing the role of monetizing government debt.  But getting back to normal is painful, higher interest rates, higher commodity prices, higher wages, and there will be greater volatility on that side of the risk curve.

The flip side on the curve, with fiscal deficit spending determining the pace of economic growth, imports greater volatility into the system. Why? Because it is in the hands of politicians who, as their prime mover, may only have their seat of power considered and their “dreams of grand legacies.”

To be clear about tail risk, a change of parties on November 3, which inherits trillions of debts where small-dollar interest rate changes have little incremental real impact on economic growth. Thus, a move back to a normal focus on the economy vs “share-holder-capitalism – will lead the economy into recession and a dominos effect of defaults by States and significant businesses.

On the other side, where the core of power remains little change, the government’s fiscal and monetary policy coordination is applied to obscure – monetize- the problem and eventually deflate the dollar and in an attempt to inflate paper assets and bury the financial problem. Risk cuts both ways.

Contrary Thinking Starts Here

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

 

 

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