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November 5, 2020

MarketMap2021 Issue #1 the Long Cycle

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November 3, 2020

Trump Says a Biden Win Will Crash the Stock Market. Let’s Hope So.

Not considering the thin market manipulations before the markets open to pick up a following of optimism to support the incumbent, the markets are waiting and by all internal pictures, it’s on edge.

Trump Says a Biden Win Will Crash the Stock Market. Let’s Hope So.

Evan Vucci/AP Photo

“In my neighborhood in Scranton, not a whole hell of a lot of people owned stock,’ Biden noted at last week’s CNN town hall.

Donald Trump has been falling back on a standby talking point that is more revealing that he probably knows. At last week’s ABC town hall, and repeatedly for months, he has said that a Joe Biden victory in November will cause the stock market to crash. Ordinarily, this is attached to a reference to Biden’s plan to tax the wealthy, though not always.

For someone with pretensions to being the guardian of the forgotten man and woman, appealing to them on the basis of the stock portfolios they don’t own seems misguided. The top 1 percent have half the stocks, and the top 10 percent have 84 percent of all stocks, and that percentage is rising. “In my neighborhood in Scranton, not a whole hell of a lot of people owned stock,” Biden was able to say at last week’s CNN town hall, and it was an easy way to take up the mantle of populism.

But if we scrutinize the question a little more, and ask whether a Biden victory would cause stocks to fall, we actually get at what Trump’s statement is really about: an implied threat from the capital class to make no changes to the status quo.

More from David Dayen

Generally speaking, predictions about the presidency and stock market policy are quite silly. Paul Krugman infamously predicted that markets would tank after Donald Trump won the presidency in 2016. Presidential policy can be useful for the economy, but the stock market has nothing to do with that. The market is just a means for enrichment for a thin class of investors, who are betting on expectations for future corporate profits.

Now, Biden is calling for changes to tax policy in ways that will at least create a short-term sell-off in stocks. He wants to treat capital gains and dividends as ordinary income for households above $1 million, sharply increasing the tax rate. He also would eliminate the so-called step-up in basis for capital gains, which wipes away massive increases in income for the heirs of people like David Koch when they die. Presumably, these changes, once enacted, would take effect on a certain date, and in that interim period people would sell stocks to take advantage of the lower tax rate on their capital gains, and buy them back after they’re up and running. So if Biden’s tax plan is enacted, there will be at least a mini-crash.

Biden also wants to increase the corporate tax rate from 21 percent to 28 percent, about halfway back to where it was before the Trump tax cuts. You see the pattern of who is actually affected by these changes: wealthy Americans and corporations. Like it or not, Biden’s team has vowed not to raise taxes on anyone making under $400,000 a year. Undoing the Trump tax cuts’ disproportionate benefit for the upper class and corporations actually offers a way to raise $3.8 trillion over the next decade by doing only that.

In the long run, of course, decent economic and especially public-health management in the coronavirus crisis would be the best possible outcome for the economy and the stock market. But I don’t think the investor class is thinking much about the economy, or anything other than keeping their personal party going.

Currently, the Federal Reserve is propping up asset values in stocks and other markets through a mass corporate bailout program. This has pulled the capital markets even further away from the actual economy, becoming a hermetically sealed package unto itself, a world where no coronavirus or economic struggle exists. The implication of Trump’s threat that a Biden win will crash the stock market is that any puncture of that hermetically sealed package will cause righteous anger on the part of investors.

Check, for example, the activity in options markets, where traders are hedging their bets in case of a mass sell-off in November. This has veered sharply from a month ago, as the realization of Biden’s mostly favorable electoral position has solidified. Corporations are being asked to take on more cheap debt now, in advance of the election, on the assumption of, well, a crash.

That expectation of volatility could just be due to the potential for a truly hazardous post-election period. But importantly, it’s coming from the same people who would stand to lose under Biden’s tax policy. Traders and investors would be paying the higher taxes on their activities, as would investment banks that take in high fees from the explosion of corporate bond sales. They all are effectively signaling that they will throw a tantrum in order to influence policies that would affect them. And they are actively preparing themselves with hedges to soften the blow of short-term losses that would proceed from carrying out what in some contexts you would call a capital strike.

Traders and investors, as well as investment banks, are effectively signaling that they will throw a tantrum in order to influence policies that would affect them.

You might say that stocks must go down in order to create a more equitable society, but I would pitch it this way: The economy is over-financialized, with executive performance too tied to stock performance, with corporate outcomes too reliant on financial engineering, with companies too focused on manipulating stock prices and rewarding investors rather than on creating products people want. That financialization has been built up through policy accommodations to capital. And any attempt to break that channel will trigger a furious pushback, up to and including economic sabotage.

When Trump says that Biden will crash the stock market, he’s saying that Biden will end the policy of allowing investors to use financial machinations to get rich in the Wall Street casino, and that he will ensure labor takes more of the profits. Trump might have more faith in that possibility than I do! But he’s unwittingly outlining a change that is necessary for a country that allows everyone to prosper.

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Click here to view the original web page at Trump Says a Biden Win Will Crash the Stock Market. Let’s Hope So.

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

 

 

November 2, 2020

MarketMap2020 Issue #18

 

November 3, 2020

I know that if you have been with me for some time, I expect a significant swing high or bottom. I look for the opposite of the news media. At major highs, expect good news. A significant big swing low, the report will be dire.

This past week’s headlines were excellent: The US economy grew at a record pace in the third quarter, increasing at a 33 1/2% annual rate recovering about 2/3 of the ground lost earlier in the year due to the economic collapse from the pandemic shut down.

Moreover, most media headlines remain focused on Corona virus-related and how a double-dip recession is in the cards. That seems to be the backstory for the decline from September 2. Still, Contrary Thinker does not believe it will be blamed for the dramatic deterioration expected coming after today’s minor one day rally.

Regarding bad news, Contrary Thinker does not believe there is going to be negative news for the economy that will lower the market. Things are recovering.

Instead, the “big top” that began February 12, 2020, is the expectation of a constitutional crisis and political conflict not seen since 1860. That was our lead story on January 23, 2018, when we warned our people of the pending correction.

Today while the news media covers this potential of a disputed election, the Trump administration is threatening. Yet, the market pundits are not considering such drama impacting the markets.

Also, there is no white knight in the wings. The Federal Reserve Board has outright said that they want inflation to increase; that is a financial result, not an effect on intangible shares. The point is the Feds focused on the economy real economy, not the stock market; hence they are not going to come in to rescue the stock market during a sell-off again; their focus is on their real economy. Furthermore, not during the election season, which may drag on into January 20, 2021.

The exact reason Powell stops a return to normal is starting a new round of QE was the Trump factor, which is dead or at best dying.

Our cycle work is the same or remarkably like the setup that we had back in late March of 2020 when the market capitulated on March 23. Granted, the peak on February 12 projected its cycle for the year, which the Fed busted. But that left the work by the market left unfinished. It also begins a new Event-Based Cycle based on the Tidal high peaking with the Dow and S&P September 3, 20202.

That event-based cycle amount others calls for a downtrend into the end of the year. From November 9 into November 14, 15th show up as the more extended bar period we expected last week, including panic low. However, the POST panic low is not expected until the end of the year, at the soonest.

The same way the period from 10/23 through 10/30 saw a sustainable decline period, the next similar period runs from 11/8 through 11/14 with a panic low on 11/13 plus or minus a day. Last week Contrary Thinker expected a long bar day of greater than 4% to confirm the bear market. While it is not as likely this week, if there is a declining range day of 4% or more, it still kicks off the series of HROC decline.

I have reprinted a part of the MarketMap from March 27, 2020, to cement Contrary Thinker’s scenario going into the first quarter of 2021; and the risk of 36% plus from current recovery levels.

Decennial Theory (MarketMap-2020 Issue#6)

Issue #1 of Market Map 2020 points out the recovery of the first year of a new decade that contains the start of most year markets. Furthermore, from the year 1860, recessions have had their start all with an outside event trigger. In 1860 it was the civil war.

Year

DJIA High DJIA Low % Decline The interval from High to low Months

1890

5/17/1890 12/8/1890 -22.6 205

6.8

1900

9/5/1899 9/24/1900 -31.8 385 12.8
1910 11/19/1909 9/25/1911 -27.4 675

22.5

1920

11/3/1919 8/24/1921 -46.6 660 22.0

1930

9/3/1929 7/8/1932 -89.1 1039

34.6

1940 11/7/1940 4/28/1942 -32.5 537

17.9

1970

12/3/1968 5/26/1970 -35.9 539 18.0
1990 7/16/1990 10/11/1990 -21.2 87

2.9

2000

1/14/2000 9/21/2001 -19.9 616

20.5

2020
2020
2/12/2020
9/2/2020
Avg = 7/23/2021
Avg = 3/29/2022
Avg = -36%
527
17.6
Average w/o outliers 517

17.2

 

The above table shows the damage done in these years. I have averaged the number of profits taken – percent decline – and averaged the time spent in the bear mode throwing out the shortest and the longest.  These numbers are very much in line with all bear markets over the last 120 years.

 

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

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 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.

Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as subscribers before their free look 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 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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