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June 29, 2020

Volatility Reports Hedge Strategies Pending

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June 12, 2020

Volatility Reports 6/12/20 Hedge Systems Status On

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June 11, 2020

Volatility Reports 6/12/20

Looking back at the mini climatic low compared to the sell-off Thursday

Headline from contrary Thinker May 27, 2020 “late bear rally into panic buying and we pointed out that the “World Market’s recovery looks old and feeble,” based on our volatility models leading indication a Technical Event #3. That was eight trading days before the nominal price high and pivot.

In turn on Thursday the 11th the lower gap open left an island of buyers from June 6 through June 10, who will not be happy campers waiting to break even. All Contrary Thinker subscribers are aware of the time frames outlined to a peak in June. Whether it is a primary peak and the market only produces a failed rally or it makes a new recovery high before the onset of the next bear market leg is academic. From an investment, trading, and capital preservation point of view, the sell-off yesterday did not make a Short-Term (S-T) low.

That brings me to the main point of this issue, how to pinpoint high probability lows.  What I call “low risk.”

From right to left, you can see the three main indicators set up the low. The daily bar as early as February 19 made a mini panic S-T low. TEM reached a TE#1 and the panic index reached an extreme above 70.  That panic was the kickoff of the larger decline and provided a respite for a few days.

However, the weekly bar was not in gear with that low.  It is easy to see the same three indicators provide an extremely low signal in the last two weeks of March. TEM hit a TE#1 (%C below 40 and HV above 60) and the Panic index was above 70.  The monthly bar for March confirmed the low with its own TE#1 and a Panic reading at 70.

At that point you can go back to the daily bar and see the Panic index move back above 70 and a new TE#4, suggesting a change of trend condition from attending to range expansion.

When you look at Thursdays sell-off, there is no sign of a S-T low. The market peaks in low volatility TE#3 and has not provided a fresh event and the panic index is below 70. There is more decline to come.

A sidebar here, I have many long term clients that are very good trading and know these inside methods.  I missed this big tradable low. For two reasons, one is a tested low is ideal along with the above and that did not happen. Two I was 101% focused on the hedge program which did very well netting over 100k on 900k from February 24 to March 16. Once disengaged I was looking to do it again, which was partially put on for a few days with mixed results but no drawdown.

That decline, which we expected along with the amount of risk – expecting a 50% decline – hit fast, it was extraordinary, not leaving even the best hedger time to catch his breath. Part of my vision for Contrary Thinker was upscale communications, your input is something I listen to, keep me on my toes, I will appreciate your feedback.

One of the hedge fund masters I admire and work to simulate is Standley Druckenmiller. He missed the “V” shaped bottom as well. BOA moved their targets for the S&P higher after admitting on CNBC they missed the low.  Well, that may put me in good company but I would rather be right and I would rather provide the best advisory to my membership.  

Here is a short curated article on the Zero Hedge site about Stanley.

Lastly, heads up, hedges are going back on Friday or Monday. More on that and strategies in a private memo to full members only. New TradeStation workspaces that I use for the hedge program are going up before the open today. 

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

June 9, 2020

50-Day Stock Market Rally May Be Just The Beginning of the End

History Suggests Record 50-Day Stock Market Rally May Be Just The Beginning

Popular On Air Advisor says, “History Suggests Record 50-Day Stock Market Rally May Be Just The Beginning The S&P 500 has gained a record 39.6% since it hit its 2020 low back on March 23. Not only has that rally erased much of the year’s COVID-19-related losses, it’s also the best 50-day stretch in the history of the market. After such a strong rally, traders are understandably getting uneasy the market is overbought and due for a pullback. However, from a purely historical perspective, the strongest 50-day periods have generally led to even more gains over the year that follows.”

The analyst concluded that, ” since the S&P 500 was constructed in 1957 that the index has gained at least 20% over a 50-day period. In all seven instances, the index gained at least another 5.2% in the year that followed.”

But he does not do two things, one is go back to cover all the history of the stock market so there is some evidence of back fitting and two he does not say how the market may get there, which is tandemount to the capital managers p&l.

History tells a different story, for one so-called “V” recovery is not a historical record. There are many similar sharp – “V” shaped – and brief recoveries that lived inside of bear markets – like 2000-20003 and 1930-40, lastly making new nominal highs does not make it a new bull market by definition and mostly by its context.

 

2000- 2003

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. 800-618-3820 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 5, 2020

MarketMap 2020 Issue #11

“There were so many people who thought we had to retest the bottom,” said Cramer.

The best salesman on Wall Street went on to say, “Billionaire hedge fund investor David Tepper told CNBC in May the stock market is one of the most overpriced he’s ever seen, only behind 1999. Hedge fund manager Stanley Druckenmiller said in May “the risk-reward for equity is maybe as bad as I’ve seen it in my career.”

He was ranting by the end of his morning segment after the Dow was surging 700 points based on the unexpected unemployment numbers that those who waited for a test of the low will be forced to buy now, and there was little or no risk of Convid comeback and the economy should be reopened.

Sounds like Crammer wants his audience to chase the equity curve.

Obviously with the Fed in Trump’s pocket along with the ten big banks following Steven Mnuchin’s lead, only time will tell if the market regime changed as CT predicted back in January 2018 or if the market herd has gained risk immunity.

Well, every cartel cracks sooner or later.  At the end of 2017 I pointed out that the government had painted itself into a corner by using up all the tricks of the trade from QE to tax cuts at a time when it was not needed. Rather it would be needed to provide a soft landing when the next recession hit.

After looking at a Trillion dollars of debt on that basis, the trigger happy Fed and Treasury have dug the hole even deeper, to the extent that the risk is now hyper-correlation from either end of the normal volatility curve.  As we all know, the market does not like instability.

So, here are two historical charts, which puts today’s market in perspective, I think.  The chart on the right is the expanding triangle that formed after the post-WW-II 17-year long bull market consolidated. It began at 1000 on the Dow in 1966 and ended in October – December 1974 (when I joined Stix &Co).  It took another eight years from that low before the next secular bull broke out from the base.

The chart on the left is today’s market reflecting the same pattern and putting it at the beginning of a new bull market that after a rally to test the old highs will fall back into a trading range for the next seven years +/- a few years either way.

However, given that today’s market is likely inside the base building and has not experienced a bear market yet with its economic repercussion it is not likely in avoiding more declines greater than 20%.  The next comparison chart shows features the same expanding triangle of 1976, peaking at 1000 and leading to a bear market exceeding 25%. Note that the rally from the end of the triangle at point (E),[4] was truncated, it failed to make new highs. Given our outlook for a peak in June, this idea should keep hedgers and investors on the front foot.

Today and early next week the tidal systems flip from down to up, hence the down cycle was inverted aka it failed. Today you can see the effects of the cycle turning back up. The window for a peak begins to open June 13, which is a Saturday.  It runs from that date, let us include the 12th into June 22, a Monday.

Contrary Thinker will be looking for its volatility model in that time window for a “no-fear” background that is exploitable and it will be looking for its OB/OS model to be giving out of gear ( as opposed to negative divergences) for a sell signal. Lastly, for strategy engagement, the market will need to be on the right-hand side of a high pivot.

The Short Term TEM on the four primary indices will be posted in the LI Space shortly, for the background.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

June 3, 2020

MarketMap 2020 Issue #10

Hope Permeates the Headlines with the
Felling of Back to Normal Conditions

Contrary Thinker has a number of new members and I welcome you on board, please feel unencumbered to ask questions or provide feedback in the private LinkedIn Group. I will send you a user doc on the Volatility Model shortly.

With that in mind, we are not in the business for the transaction and as an advisory, we do not consider opportunity risk, because a loss is hard to makeup – its simple math. Our point of view is the waiting is for low risk – ideal setups – that provide 4 to 1 or better risk-reward.  We did that this year with the collapse in late February into March 23, trading only long volatility systems and aggressive short-selling systems on the indices and crude oil.

Since the low its back into a holding pattern. We prefer the high volatility periods because they are less risky and the setups are direction neutral in some cases.  To make a point by extreme example, volatility can run at either end of the curve, hyper deflation, or hyperinflation.

with that in mind, forecast are just that, scenarios to keep capital managers on the front foot and prepared for what is coming – sooner or later. The forecast also provides risk outlook and market conditions outlook. For example, since 1/23/2018 we have been long term risk-averse and see each rally to new highs as an opportunity to at least raise cash.

Again, and this is not bragging as Contrary Thinker did it, we called the peak in late September 2018 and the most recent peak on February 12 and 19.  As it is a well-known fact throughout the investment community that a top is Harding to isolate than a bottom if you are looking for the master at calling peaks, you are in the right place. I am not talking about nominal highs for bragging rights, rather the low-risk setups to the right-hand side of the nominal peak to get my people positions to take advantage of the decline, to cash in their hard-earned profits.

Contrary Thinker has the guts to point out the low-risk lows, as you will read below; but from a long term point of view, the low on March 23, was not a low-risk low, even though it was a good long side trading opportunity.

Market Map is part of the comprehensive system we use, to pin down dates for changes in trend, and build scenarios. The first featured chart is published several times over the last year to 18 months. It shows one of my cycles calling for a peak late in 2019 and a spill from Mid-February 2020.  The cycle projected the low to happen in April-May. but it happened early,

No harm no foul as the aggressive long volatility systems were disengaged to avoid any whip-saw. action, which is the Achilles heel of our systems.  The long-only VX futures system made 60% over the few weeks, max DD was less than 1%.

18 1/2 year Tidal Cycle

 

Based on the early low and counting forward the next high in the US stock averages is expected in June -August, a time window I will refind here.

Event-Based Cycles

ECBs are tied into historical peaks that had the same seasonal and tidal configurations as the current one under consideration. Both the 1934 and 1966 had similar peaks leading to bear markets after pullbacks in April. Both scenarios have their next high pivot in mid-June followed by steep declines in July and September.

 

Going back 140 years – not showing pre-1920 that are similar- here are three additional late winter peaks but in March with the same tidal configuration.  All three show a tendency to peak in mid to late May to Mid June and collapse into July and September, like the above chats that peaked in February.

 

The suggestion is that a peak – be it at new highs or under them is not important – is expected between now and mid-August, and this is not a new secular bull market.

Unparalleled Market Events

It is without argument that the 1987 crash had no reason behind it that anyone could prove. The spill was unprecedented in terms of percent decline and the time it took. the collapse in 2020 is also a stock market event that was sudden – a known unknown – and the price damage and the amount of time it took was historical.

However, when you look back at all of the “out of the blue” selloffs the ones with “W” lows, where the low was tested preceded more bull market. A base was built as you can see in 1987.

However, when you look at the 2000 – 2003 bear market the 9/11 panic on the re-open was a “V” shaped low. That low did not lead to a new bull market. In fact, the low was tested and broken until a “W” low was established in 2003.  You can also is that the counter-trend recovery peaked 3 1/2 to 5 1/2 months later, a scenario that fits the above narrative.

While the chart is not shown, the 1929 panic was followed by 4 1/2 months of recovery, similar to the pattern outlined above and it too was a historical event.

Contrary Thinker via its “Volalaity Report” will provide the market background that will likely set up the market for its next decline.  No hurry from here. The most recent post worked over the Bitcoin market, which is a leading risk market and should be telling before the peak.  More on that later.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

May 27, 2020

Volatility Reports 05/27/20 late bear rally into panic buying

World Market’s recovery looks old and feeble, TE#3.

The Euro Zone rally on Monday and Tuesday put this market into a resistance zone – aka at an extreme. While at the same time TEM sees the buying that put it there as poor or panic buying, TE#1. In other words the rally is not based on a rational basis and is not expected to hold.  Reversal below its new support zones as shown in the data windows on the left would clear the signal from any noise by the media.

The German averages as measured by the MSC iShares is in the same set up as the EuroZone. In a cluster of resistance on panic buying.  A context that should lead to a reversal in the short term.

 

 

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

May 15, 2020

Volatility Reports 05/15/20

If the 62% retracement is familiar to the majority, they are ignoring it.  The comparisons to 2000 and 2008 are just the most recent when looking at today’s market.  The history of the .618 retracement is well known back to 1929 and before. It also fits the market phases model seen below the first featured chart.
————-

The 62% bear market rally is the so-called “Return to Normal” phase of all market cycles, seen here overlayed with the speculative bull market in gold back in the late 1970s early 80s.

The “Greatest Bull Market” shows the same type of pattern as it cut through the behavioral phases that all markets go through.  Today we are in the denial phase, the “I can’t believe it” period.  That can be applied to the market, the economy, and the pandemic and other known unknows that will be impacting the market, like the geopolitical events and the election.

Our tidal model is providing sell signals in the current time window that are nearly identical to the configuration of the peak of February 12 (19th for the Nasdaq), with an inverted cycle and the same tidal forces. Next to October, May is the second most active month for panics. The time window running from May 22- May 30 should experience the same type of long bar days seen from March 9 through the 16th

If the secondary peak is in place as expected the decline will unfold like the chart on the left which is the primary top on 2/12/20. Hence, the price level at “2” should not be exceeded and another near term decline for <i> should make new near term lows before the meaningful period of the decline digs-in.

Contrary Thinker has already pointed out that Bitcoin is a risk asset, not a hedge.  We have pointed out that after near-zero pricing to 10s of thousands of dollars bubble and bust, it takes years of base building before anything bullish re-emerges. From the massive spikes we saw in the late ’70s in gold and crude, all of my clients wanted to buy them after the markets crashed and it took decades to recover.

The same will hold true for the Cryptocurrencies boom’s fairy dust will take a while to rub off. The featured chart here provides three short term sell signals, one based on our OB/OS model, one based on the tidal forces flipping to down – see the track record on the left-hand side and the red high-lighted area points to the markets failure to hold its new support area.

The Bitcoin has been leading the stock market lower.

Another market that should concern risk markets is junk bonds.  The narrow trading range has set the market up for a dynamic trend. Our Volatility model has been coiling up in a Technical Event #2 for a week plus. These #2 events are leading signals of a one-way trend.  A drop below 77.58 should set it on its way. A move above 80.40 would be a break for the bulls.

For reasons CT has pointed out previously, our bias is bearish and the break should be lower and should lead stocks lower.

 

Visitors at the “Volatility Reports” Group in LinkedIn, need to opt-in as a subscriber before their free look runs out. 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

April 21, 2020

Volatility Reports 4.21.20 Risk Off / Hedge On

If they’re not making any money in the Twittersphere, they are sure having fun

Here is a prime example of a common attitude among investors: 

The fact is that over 140 years or better of market history it is either in a base-building trading range for 15 to 20 years or in a secular bull market for 15 to 20 years. The only difference is you have to learn to trade when you don’t have a bull market. Market timing is required.

Connecting the Spring Outlook Report expecting a deflationary spike, the stock market fits in with that scenario.

I like to compare the day session chart with the Globex hours only graph. I expect to see cross confirmation, like success or failure at the same time, the OB-OS model giving signals at the same time. The volatility modeling being in gear comparing the two sessions. In general, I assume the NY day session is local money and the other offshore funds.

 

Both sessions show a 62% retracement of the first leg down of a significant bear market. They both reveal a sell signal by the OB-OS method used by Contrary Thinker.  The charts show a failure on Monday the 20th of April, which is a failure to breakout. The reversal is a sell signal. Now any move below the S-T support zone that starts at 23,065-22,995 on the high side with a clear break below 22,450-22,690 should provide bears confidence.  The majority of bulls ruled out a test of the March low, CT expects the low to be broken.

The volatility model is not ideal for our hedging systems, which like the straight-line high rate of change trends.  The direction does not hurt the short only systems, its the false starts that hurt, the whip-saws. The S-T model shows an uptrend that is laboring, old, and in need of a change.  This condition can sustain; it called a low volatility trend like the market experienced in 2017.  However, as I accented in the last Market Map 2020, the market has now rallied into a change of trend window. This week the cycles flipping from an uptrend to downtrend.

When you add up the above and the bulls seeing the change coming yet asserting an inversion without a basis and the deflationary spike hitting the commodity markets, it remains “Risk Off” and “Hedges On.”

A man without a vision of the future always returns to his past experiences. Use outside historical and independent research.

 

 

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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.

— Contrary Thinker does not refund policy; all sales are the finale.

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

NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY PORTION OF ITS PRODUCTS

March 20, 2020

We are not chart whisperers

Contrary Thinker’s the Debrief

March 20, 2020

“To know where you are going, you have to know where you have been”

“The idea of record-breaking will continue in the headlines in 2018. It is only common sense to know this.  In each bull/bear cycle since 1974, there have been record-breaking price events. Each bull market has been bigger, better, and greater than previously. Each new period contained record-breaking events from the number of consecutive higher close days to the most significant one-day advance in history.”  I sent on to say,

“The same has held for the bear market cycles… both fiscal and monetary policy has painted America’s economy into a corner, a corner that has no alternatives that are positive to bail out the market and the economy when the next down cycle occurs.”

Many investors, traders, and managers focus on the outside world, the exogenous shocks, the known unknowns like Convid19. It was on Homeland Security’s radar at the end of 2019.

Like previous virus emergencies, the market’s reaction was based NOT on the morbidity of the virus, instead the market’s action is based on the condition of the market when it hit.

If you look at the two worse in terms of S&P damage, SARS hit at the end of a three-year bear market, to accent the low and scare buyers away. Zika hit during the most significant correction of the “Great Bull Market” to put an exclamation mark on the end of the correction.

However, Convid-19 is different, not so much in its morbidity, that is not the judgment we can make. Rather, what we can say is that after the tax cuts in 2017 and the QE monetary policy over the last 3 to 4 years, there is nothing left in the trick bag of the authorities to soften the landing of the market – and the market drives the economy.

So, after the Dow Jones falling 35%, what are the various sets of opportunities and problems; and if you feel ill-prepared, it is not too late to get caught up. Read on

Contrary Thinker wants your business, to “cover your six,” make sure your clients get your best and the time they deserve.

“As you can see in our change of trend (COT) table, the market is in a cluster of time windows likely to lead to a high pivot price, confirmed by a sizable decline %5 plus – established by our big swing (multi-month) systems sell (taking profits) and sell short signals before the end of the month.”

Contrary Thinker stays hedged until our measures of volatility exited panic mode, the nominal price low has nothing to do with profitability.

Volatility Report
September 24, 2018

Contrary Thinkers is not a chart whisperer; we have mathematical tools that confirm what the bar charts are saying. They precede the market’s bar charts.

In the above 9.24.18 VR, I said, “The scenario was for the failed new high in late August-early September, but as the January COT date was early by ten days. Now it looks like the peak will come at the end of the calendar month leading to a sell-off into mid-November.”

I went on to say that along the way; traders should expect long bar day decline, declines that measure near the expected return a buy and hold investor can achieve in one year. To keep our group on the front foot, our models project dates for the long bar declines. I said, “Dates for the expected long bar decline are 12-Oct, 17-Oct, and 22-Oct.” the long bar day hit October 10, of 3.6% from open to close.

Volatility Report
December 3, 2018

Without boring you with all the reasons for this conclusion, our group was ahead of the curve: “Bottom line is if the market cannot break out early this week, get above I-T resistance, there will be a crash going into Xmas.”

What was surprising is how the bravado mentality became so entrenched in 2019, “buy the dip” was the war cry. Today, nearing the end of March 2020, it still is.

Yet, what has a so-called perma-bull gained by holding since the end of 2017, over the last two years? Without the use of market timing at pivotal highs, all they have now is temporary social media bragging when they were at the new highs? Hence their investment method is based on pride and the unprofessional badgering and taunting of advisors that were advising bear market timing.

Today all they can do is hold their client’s hands as they see their 401k or other long-term investments give away their profits to the tune of 36%.

Volatility Report  February 10, 2020,

it was pointed out that “Multiple non-confirmations to go along with extremely high levels of optimism by 100% of sentiment readings provide a peaking background.”

All of the major stock indices made climatic tops on panic buying. So  given the 50% risk and the brazen attitude of the bulls, it was clear it is not going to be a pretty ending.”

Which brings us to the chart on the right and the Volatility Report dated February 19, 2020. Where, among other market-based reasons, one can see that volatility was about to go into panic mode. A situation that hit home in 2011 and 2008.

Our bottom line was the following: Risk is off, like cash and algo strategies to hedge (profit) from decline is the status on. Over the weekend, Contrary Opinion published.

 

 Hedges on short only CL, EX, NQ and RTY plus long-only VX. CT’s volatility model of CBOE’s volatility index gave a buy signal the week beginning Sunday the 23rd.

We don’t need to show you the profitability of our strategies, because the simple act of just raising some cash – taking some profits – would have been a great benefit to the investor/manager.

Contrary Thinker has been waiting for this debacle since late 2017, it was not wishful thinking. Rather it was based on research that covers over 120 years of the market history and new aged volatility modeling that provided risk warnings.

The good news is over the next ten years is Contrary Thinker can now shift its focus from the avoidance of risk side and from profiting from bear market corrections and larger declines to the buying opportunities side as well. To be clear, the timing of market dynamics at highs and lows will be more important than managers and investors have experienced since the late 1960s into the early 1980s.
We are not gloating here

 

Contrary Thinker, its private group of programmers, traders, and fundamental analyst friends have been working to protect our members, show them ways to prosper during the downturn and working to provide transparency to potential new subscribers so they can gain the confidence to let us do the same work for them.

 

I guarantee my work based on your happiness.

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader 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.

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NO WARRANTY / NO REFUND. Contrary Thinker   MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY  PORTION OF ITS PRODUCTS.

 

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