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April 30, 2021

Volatility Reports 4/30/21

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.

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April 28, 2021

Volatility Reports 4/28/21 World Index net the USA

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.

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April 27, 2021

MarketMap-2021 Issue#9 Gold/USD

JG Wentworth Tells it like it is: “It’s My Money & I Need It Now.”

or

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. 

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