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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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October 19, 2020

Volatility Report 10/19/20

As an observer of the markets and the economy, I know there are no absolutes, but every good idea has its time. Back 40 years ago neo-liberal economic theory was right for its time and was accompanied by a rising tide of socio-cultural optimism. Today that era has come to an end and it can now be truly called “voodoo economics” and will be corrected over the next 40 years.
What goes hand and hand with that  Macro change is the market in the time window to revisit and finish correcting the problems and issues left unresolved in the first quarter downturn. Remember the “shortest bear market in history?”

When the market made its low on March 23,

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October 5, 2020

10/5/20 Major Market’s Recap

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.

—-

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.

US Stock Indices

Our focus over the last few weeks is on when to expect an acceleration of the bear market decline that posted its ATH on 9/2/20 for the majority indices. But, the Dow’s high was posted back on February 12 with the low pivot March 23 rally “failing: to make new highs. Keyword FAILURE

“MarketMap2020 Issue #17” dated 9/29/20 said, “Coming into this time window, both MarketMap and Volatility 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.” I went on to point out that “The rally over the last two trading days were not A/D surges,” and that is the case per this update.

Bonds

After a prolonged period of distribution, the 30-year government bonds are following the lower-quality bonds lower with a break below trend lines. S-T support at 175 8/ should not provide much help, the next stop in October is the 17412 to 172 28/ zone for I-T support. The long-term target remains from 144 – to 152, which takes the market below the end of the Elliott Wave (4), a bearish sign.

The I-T Tidal wave system is short from five weeks ago, and its trend-following filter is trending lower. The S-T version of that is trend lower now as well.

TEM is the most critical element going into the week of October 4, with both I-T and S-T calling for a high rate of change decline. This has been in play as a leading signal for the last four weeks. At the end of last week, S-T has cycled back to a new TE#2 for the third time. This market is ready to break.

USD
The buck made an L-T size panic size low at the end of August-early September. That was, at the same time, the risk markets were making their panic highs. From that point, the market-tested lows building a base before its recent breakout run. The Tidal Wave cycle made a low last week, and its trend filtered strategy turned higher, causing an outright buy, which Contrary Thinker supports.

The base was tested early last week and held, followed by a rebound, a bullish occurrence. TEM is in no man’s land. In other words, it does not supply any new information. Hence the s-T uptrend is expected to sustain without much in terms of dynamics. The most previous high of 95.60 should act as resistance.
Contrary Thinker is long term bullish.

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.

Euro Dollar

It is the mirror image of the buck. Since its major bull market peak in 2008, the downtrend is a new secular bear market. From its peak in early 2018, the decline is being corrected by a minor recovery in the face of the majority of Yanks that favor the Euro and somehow connect that to gold. But that is a sideshow.

The euro’s I-T Tidal systems are still long from 1.1290; however, the leading indicators, CT’s smooth RSI and Smooth CMB index, have both posted warning signals. The SMA is rolling over as well but has not crossed over.
Underlying implied volatility is flat, not showing much, and CT’s model also sees dull action in the near term. Range trading from 1.17 to 1.18 is expected in the near term.

Crude Oil

It is easy to say that the carbon energy complex, like crude oil, looks super bearish, and there is nothing wrong about taking advantage of what is easy. The start with the implied VX for Crude oil made a stunning breakout on Friday, a sign of the fear and anxiety that is gripping this market.

That break was above CT’s smooth upper Bollinger Band, and what is key here is that the set up that preceded the breakout was a Technical Event #2. When this happens, the probability is high that there will be follow-through in the direction of the break: a bearish sign, a strong bearish signal.

CT’s intermediate-term %BB-VIX is coming off an extreme no fear condition and is breaking higher, another bearish sign from “implied volatility.”

Crude is in the last throw of a bear market that will test “zero” again and place a final panic low. I will add that the price of crude and other forms of carbon-based energy will never recover again. In other words, no new cyclical bull market of any considerable gain as the focus will continue its shift to the “Green New Deal.”

Political parallelism, ninety years ago, two 45 year cycles, five nine-year cycles,  brought about the Presidential election of 1932. On November 4, 1932, in the middle of Republican President Herbert Hoover’s term, he lost in a landslide shortly after the start of the Great Depression, and the Republican Party suffered substantial losses.

The Fourth Party System is the term used in political science and history for the period in American political history from about 1896 to 1932 that was dominated by the Republican Party,

Wealth-X: World’s Billionaire Population Jumps 8.5% to 2,825

Click here to view the original web page at Wealth-X: World’s Billionaire Population Jumps 8.5% to 2,825

The global billionaire population and their combined wealth both increased strongly, reversing the previous year’s decline, according to a Wealth-X report released Tuesday.

The number of billionaires known to exist around the globe reached 2,825 last year, 8.5%, or 221 increase from 2018. Their combined wealth rose 10.3% year-over-year to a total of US$9.4 trillion, according to Billionaire Census 2020, Barron’s reported, citing research by Wealth-X.

 

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Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

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