July 6, 2021
Demand for the USD from all corners of the world is expected to increase with economic opportunities created by Biden’s “Build it Back Better” plans.
Contrary Thinker is bullish on the buck since its double bottom in 2014. Along the way, I have pointed out that the Euro was a farce based on numerous sovereign nations forming a union because their proximity would not overcome their differences in culture and language and leadership. The central bank for the EU has its own QE issues to deal with and a lack of economic recovery hangover because of the austerity measures they took after the WFC. To date, they are still trying to catch up.
But that is the speculation behinds the bearish Euro bullish Dollar outlook. What is more important is what the market is saying.
The features three window screen grab shown here moves from left to right, long term monthly bar to intermediate-term weekly bar to short term daily bar. The red shaded area is the sell-off into August of last year, reaching a panic extreme. When TEM hits Rule#1 like that, it calls for a flat, choppy period to follow. The proverbial dead cat bounce after a panic sell-off. When TEM hits rule#1, 90% of the time or better, expect a low to be in place, and the market builds a new base.
Like a panic top, it is a change of trend, and the emotional pain that short positions are in will give them the impetus to flip out of their positions. The emotional selling started at 94. Thus the market will move to this area now without much problem. Why now?
My volatility model – TEM – for both the weekly and daily bar have cycled to new extremes that suggest a trending move will pick up a following on the next breakout or MA crossover. The latter has happened on the weekly bar, and my AlphaTracking MA gave a standalone buy signal three weeks ago.
However, what is more, important is the S-T daily bar is on a fresh and leading TE#2, setting up the spring for a breakout. I have included the data window in the chart so traders can see the breakout levels. A move above 92.80 is bullish, and as stated above, a move to 94 should be easy.
While the relationship between Gold and the USD has typically and very publically been one of negative correlation, it is not a necessity. Furthermore, a strong dollar does not put the bash on commodity-based inflation. Regarding the latter, the demand for raw materials priced in dollars is not the same as monetary-based inflation, which all the gold bugs and inflationists can talk about.
Bottom line and current working positions and suggestions.
June 15, 2021
“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope, or as a . 400 baseball hitter. But now I would like to come back as the bond market” James Carville
In the previous group post and blog post, I pointed out how interest rate cycles are regular and reliable. I pointed out as well that the fear that rates are moving higher had not abated since the initial run higher and that implied fear data reveals a coiling up of the data denoting frustration and confusion by the market regarding the viability of inflation.
Our model suggested a rapid and sudden movement in this data, and while I pointed out that “Volatility modeling is direction neutral, it tells the investor/trader, in this case, to trade the break, to trade the trend following signals. As noted above, TY rates have given a bullish signal on the rates.”
In our LinkedIn Group, I said ” TY is in a cluster of resistance as mentioned previously in this space. The 132.68 price if broken is a reversal trigger until the last Friday of June. Contrary Thinker’s bias is bearish for reasons outlined before and suggests TYO or shorting the nearby futures.
The market after implied volatility spiked lower ending its counter-trend of complacency, the government bonds sold off and the ten-year notes broke below 132.20, the low side of I-T (monthly) resistance, a failure sell signal.
In the Chart Gallery below the first chart shows clearly the drain of liquidity according to the Fed, and that drain is from the reopening of the REAL economy, inflation caused by none monetary reasons, like supply chain problems and drought.
The next three charts in the Gallery are about commodity-based inflation, which the majority believe what the Fed has said is “temporary.” Contrary Thinker is bullish on commodities from the March 2020 low.
CT’s chart of the 30-year T-bonds shows a massive failure. The 4 1/2 year cycle that has been posting up timely cycle lows has failed to do so with the last sequence of bottoms expected in early 2020 that produced a one-week wonder followed by a bear market. This left-hand translated cycle points to the next low series of S-T lows at the end of July, mid-October, and early December of this year.
The market has moved below its long-term moving averages and the pair of MAs have made a death cross, calling for more downtrend. Long Term support sones in from 134 to 147^19.
Suggested trade TMVDirexion Daily 20+ Year Treasury Bear 3x Shares. Buy TMV at 71 ob, stop 66 with a profit target of 120, the low side of L-T resistance. I-T Volatility model is a fresh TE#2 supporting a forceful trend.
Stop, listen and learn. Don’t let time get by you.
The “time factor” provided in MarketMap™ will be critical to keeping you and your clients on the front foot. The New Era of Market Timing is Here. Get the full picture with this 45 day trial with CT’s eBook of cycles.
Chart Gallery Reflecting Pressure for Higher interest Rates. Bond Buyers will Demand it.
Great and Many Thanks,
Jack F. Cahn, CMT
Contrary Thinker since 1989,
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
June 10, 2021
Major Change of Trend (COT) Time Window June 11 +/-2 days
COT’s are price and time-based events that apply to all markets; hence investors and traders should expect “hyper-correlation.” The outside world event may be dramatic and out of the blue, what the media calls Technical.
May 28, 2021
The FX log jam is breaking.
Part of my checklist for an ultimate peak in the risk markets was for the ultimate risk market to peak and fall on its face. The bitcoin did so, and it did so based on our outlook 4/16/21. Nice call Jack, even though I say so myself. The decline thus far in the early stages of a new bear market, sell rallies long term, if a day trader is careful buying dips now as the panic low is about worked off may continue to work before the trading range comes to an end. But more on that in the next BTC commentary.
May 12, 2021
Worth Repeating: “Price Based Method, Risk/Opportunity Forecast, Strategy, and Plan or Algo System Engaged with Timing”
If you did not read the post from 5/7/21, I suggest that you do, and I will not repeat it here. Instead, focus on the leadership of the bear markets. https://contrarythinker.com/volatility-reports-5-7-21/
The Dow and the S&P are the stalwarts of the old yet great bull market and showed cracks yesterday right on cue with MarketMap’s COT date expected on the 11th +/- a day. CT will wait for at least a few hours before we jump on the short side regarding the old guard.
May 7, 2021
Price Based Method, Risk/Opportunity Forecast, Strategy, and Plan or Algo System Engaged with Timing
It is this last bit that the majority do not get. Rather it’s all about the forecast. The methods and systems often repeat enough that it can not be, by chance, some random event. It’s a simple understanding – like life insurance or a casualty insurance underwriter – to expect losses. The actuaries expect some people to die young. Trader Vic Sporandio teaches the idea of “actuarial thinking” in his approach.
Regarding the market, when we have an “ideal” set up over the long term, the big gains will more than outweigh the small losses. That’s why P.T.Jones and Stan Druckenmiller have outstanding returns. They wait for their perfect – ideal – set up that provides a 25 to 1 opportunity to risk where they can be wrong ten times in a row and still nail it in number 11. Add on top of that Turtle Contract/Share sizing, and you have Alpha.
Too many, if not 90% of investors, managers, and traders hear or read the rationale behind a market or the story behind a stock, all of which are to buy, bullish, for the assets to go up. It’s always happening now because the industry is programmed that way. If not by the sales hyperbole, it’s by the transactional nature of the industry. It’s all about the sizzle, not the steak.
Whereas being able to read the market language provides the analyst and his advisory group of clients and capital managers the steak.
With that in mind, here is the scenario based on a combination of MartetMap 2021 Time Factors and risk assessment with Volalaity Reports dynamics timing.
The Russell 2000 sets up as the low-risk entry because it is on the right-hand side of the ATH or 52-week high pivot. That allows a near buy stop placement. Also, the Volatility Model is telling a story that the RTY is ready for a waterfall trend, a high rate of change directional trend.
The close Thursday at 2238.50 puts the market above these triggers clustered around 2325-2329. Obviously, a day trader would have his bands on the short bars. Here it is on the daily bar for an S-T trade.
The following chart of Russell’s implied volatility reveals a few items that are meaning full. One is the seven-year base and breakout of volatility in February and March of 2020.
The recent 2021 suppression of its volatility testing the seven-year base and holding. Contrary Thinker can also see the potential Bull Trap with RVX ready for an S-T short squeeze. To be clear, Contrary Thinker does not expect a crash from the high, and there may be a mini panic low in late May. the above
The Time Factor
May 3, 2021
Too many laugh when they read ” Sell in May and Walk Away.”
April 30, 2021
Trade the Break
Short Term the stock indices set up for a run, for a day or more. TEM on the three indices shown here provides the context for a forceful trend in the direction of the next break or trend following signal. To be clear, failures to break or to hold support should pick up selling as well.
The charts give an idea of where breaks, failures/reversals, and breakdowns would be triggered. The S-T tidal system is long, as indicated by the blue arrow. As pointed out inverted cycles are normally rapid affairs. So a breakdown here would be a long bar on the day, if not today then early next week.
The next chart highlights Short Volatility Futures funds. They have just finished off a period of panic short selling. The VX inverse ETF – SVXY – goes up as the price of VX declines.
April 28, 2021
Bears are trembling with fear and falling like flies. Bear ETFs are making new lows while their bullish counter ETFs are still 5 to 10% off their ATHs.
From our Contrarian vantage point, that is a good thing and supported by the rest of the world either not confirming the highs set by the S&P or finishing off their advances from the March 2020 low in Long Term (L-T) panic buying as highlighted in my first featured chart.
The chart helps the longer-term trader put the market into a completed cycle perspective. What started at a panic selling low from October 2008 to May 2009 to a panic buying high from January 2021 to date. The World Index, not including the USA, also by various ETW counts, has completed a cycle as well.
This top chart portrays it as an irregular topping process, which implies two things. One, the secular bull market is still intact once the correction is over. But – and you knew there was a but coming – the next leg down is a (C) wave, which is the same form of decline as the first quarter 2020 decline. Moreover, it is of a larger proportion with risk from the 2021 resistance zone shown from 504 to 578 to the support zone for 2021 that runs from 207 to 278 or 62%—a fib-ratio to boot.
The next featured chart shows an alternate pattern, an expanding triangle, which puts the market’s March low in a 4th wave position and makes the advance from the March 2020 terminal, the end of the secular bull from 1974, or the 90-year cycle low of the 1930s.
The post triangle rally was a neat 1.618 of the triangle’s width, putting it right on target today.
Lastly, the Technical Event Matrix (volatility modeling) provides the same clues that a panic – irrational – buying period is putting a major top in place. CT’s volatility of implied volatility shows that the background is at an extreme level of complacency, measured by %BB-VIX (left-hand window).
Not good if you are on a pub crawl with your trading buddies and caught up in the trend is your friend mentality.
The vertical lines highlighted when the last extremes were reached at both tops and bottoms and that the same setup is happening in the current time frame.
Regarding the “Time Factor,” MarketMap-2021 Issue #9 will be out by the end of the week. In the meantime, refer to the map shown below for members only.
April 27, 2021
JG Wentworth Tells it like it is: “It’s My Money & I Need It Now.”
In Jerry Maguire’s words, “Show me the money.”
Immediate gratifications never go out of style. Everyone is a day trader, a scalper, even if they have a long-term investment time horizon.