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September 14, 2020

Market’s Difficulty Discounting Political Events

Market’s Difficulty Discounting Political Events

Why do so many people get caught up in the frenzy of a bull market? They define their reality first and see the market through that filter. Seeing the market’s reality has no predisposed definitions. To give a definition to the market one needs to put it into a numbers-based, price-based,  contextual model first. Only then can it have meaning. That way we are all dealing with the same facts. But that is tough to do with so much “off the cuff” content vulgarizing the social media.

Now that that same premise into today’s pollical area. The media loves to speculate about who is best for the markets, the Dems or the GOP, and what candidate in an election year is best for the market.

 

But today its more than that, the argument is that capitalism does best in a democracy, and it is our political system that is on the ballot this November. This brings me to the radical fact that my party of Reagan has been taken over by a fear-mongering authoritarian feeding off the paranoid thinking of a fragment of the population in a second attempt of manipulating the antiquated Electoral College system to his favor, or worse.

It does not matter who is elected in the fall, the market is setting up for a back to the normal bear market with interest rates leading the way, as they get back to normal. It does not matter who wins because there will be a crisis, a constitutional crisis going into the election and after. Why? because the election is rigged according to the White House and the Dems are concerned about the misinformation being propagated by offshore enemies of the USA. The election will not end quietly.

So, if your job is dependent on the bull market, I understand, and you should be concerned that not telling your clients to cash up, take profits, or hedge, is on you; and it’s not going to end nicely.

A segment of Market Map 2018 dated January 18, 2018

Don’t Forget About the Steve Bannon Indictment

Click here to view original web page at Don’t Forget About the Steve Bannon Indictment

The sheer number of Donald Trump’s cronies indicted, convicted, or still under investigation partially explains why this summer’s fraud and money laundering indictment of Stephen K. Bannon, Trump’s 2016 campaign manager and White House Chief Strategist, didn’t get the attention it deserved. Bannon is, of course, only the latest member of Trump’s inner circle to face criminal charges – a group that includes Paul Manafort who Bannon replaced at the campaign; Manafort’s Deputy, Rick Gates; National Security Advisor Michael Flynn; Trump’s personal lawyer Michael Cohen; Roger Stone, the Republican trickster.

Trump Is Corrupting the Entire Federal Government to Help His Reelection

Click here to view original web page at Trump Is Corrupting the Entire Federal Government to Help His Reelection

As we approach the November election, it has become clear that what we will see and hear from Donald Trump will become increasingly deranged. That was demonstrated during the first installment of his interview with Laura Ingraham when he peddled a known conspiracy theory.

The President claims people in the dark shadows who control the streets are really controlling Biden. He goes on to talk about a plane full of people wearing black uniforms but then says he can’t reveal anymore because it’s under investigation pic.twitter.com/AAk5GX0eWu

 

Senate Panel Releases Final Report On Russian Interference In 2016, Says Manafort Posed “Grave Counterintelligence Threat”

Click here to view original web page at Senate Panel Releases Final Report On Russian Interference In 2016, Says Manafort Posed “Grave Counterintelligence Threat”

The Senate Intelligence Committee has released a 966 page final report on Russian election interference in the 2016 presidential election, and outlines “Counterintelligence Threats and Vulnerabilities” during the race.

The panel interviewed over 200 witnesses and reviewed over 1 million pages of documents, according to The Hillfinding that while Russia made efforts to interfere in the election through disinformation and cyber campaigns, there was insufficient evidence that the Trump campaign ‘colluded’ with the Kremlin, as we were promised was the case by Rep. Adam Schiff (D-CA) and the MSM over the course of several years.

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

 

 

September 8, 2020

Crude Oil Tracing out a Bearish Wedge

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September 4, 2020

MarketMap 2020 Issue #15

“It’s like déjà vu all over again.”

“Bears need love too”

It is worth repeating part of my comment regarding the reversal from the highs on 9/2/20 that “Doing the math, counting forward ten days was yesterday the 2nd. With a potential high pivot threatening, the bulls will attack long volatility futures that are breaking out as they go back to the mean reversion selling of the volatility complex. Hence the key for bears is the ability to hold the break.

I also said in this LinkedIn group space that “Markets do not crash from a major peak.” In other words, a long bar day declines of 4 or 5% off a high is more typical of a bull market shake-out vs the beginning of a new bear trend.”

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September 2, 2020

Volatility Reports 09/02/20 Stock Market

“Best first day of September for the S&P +.75% since 2010.”

“The S&P 500 was up 7% last month. Here’s what it did the next month the past 15 times it was up at least 7%: You might notice a pattern. 5.0% 5.9% (3.1%) 0.5% 0.8% 5.7% 5.1% 9.4% 5.3% 3.4% 3.7% (0.5%) 0.1% 3.0% 4.5% for an Avg 3.2%” 

Does the above type of handicapping work? I doubt it.
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Sentiment among financial professionals propagated in the public sphere is predominantly bullish, as the above headlines. I have compiled over four weeks the content from the Twitter space provided by a sponsored compendium of TradingView. To date, 99% of all stock market posts are bullish in the face of the bulls proclaiming the market is climbing a “wall of worry,” Gives me a mind cramp.

Well, actions speak louder, as seen in the next two charts. Goldman’s chart of short interest is the lowest going back over 15 years, reflecting an aversion to the “short and hold” strategy. On that note, this is a glaring mistake in the imagination of bulls, that they sell short and hold, in the same way, they buy and hold. Profitable bears are good at market timing; its evident that over the very long term, markets go up.

But the point here is the retail trader at Goldman is a friend to short, which from a Contrary Thinker point of view is bearish.

 

To go hand in hand with the above sentiment measure is the “options speculation index, aka a put/call ratio is exceptionally bearish. It has not seen this amount of speculative history since the dot.com bubble burst two decades ago. That length of time is about right for letting people forget who was there and enough time to bring in a new crop of entry-level investors. This is one of the key leading indicators of a significant peak just not according to me but part of the list of seven major top factors by Ray Dalio.

My featured chart seen here is the cash S&P, showing the proper EWT wave count. A bar chart structure that explains the “V” shaped low and high rate of change advance, which fits the action post triangle. This advance has been making headlines as being the fastest recovery.

For example, a big firm pro thinks the market was parallel to the low in 2009; he says, “Check this out: As of last week, 83% of #stocks in the #SPX were above their 50-day moving average. That isn’t a bad number, and it’s one that has been fairly consistent in recent weeks. The level of participation is consistent with the 2009 recovery roadmap.”

Contrary Thinker does not see the low at point [4] being the same as 2009, in that this is not the beginning of a new secular bull market.

What the chart does show are one of our “in house” indicators that is accurate as a leading warning signal of a significant perk “coming soon” As we made clear in the last Volatility Reports” on the stock indices, the market is working on borrowed time, pun intended.

It goes without saying that no systems, no overreaching investing/trading model is perfect. However, the Technical Event Matrix rarely gives panic signals – TE#1 – on the monthly bar.  This was pointed out the last issue. I wanted to reinforce that the advance in August in the Dow, S&P,  and Nasdaq was panic buying, otherwise referred to as irrational.  As pointed out also is a panic high is nine times out of ten if not better, is climatic; and will lead to a reversal.  The small-cap did not play along. 

What else is interesting is the three standard deviation move by the Nasdaq – lead by the FANG stocks – making it the most overbought in 11 years on the futures, and 15 years on the composite.  Such an event suggests at least a reversion to the mean.

MarketMap – 2020 with the current set up time windows for change, in publication, shortly.

Back Story

According To Nomura The “Largest Pain Trade In The World” Will Hit In September

Click here to view the original web page at According To Nomura The “Largest Pain Trade In The World” Will Hit In September

If one looks at sto(n)ks, it appears that nothing can dent their relentless ascent as virtually everyone is now convinced that central banks will never again allow even a modest correction and so even the slightest dip is bought with reckless abandon… or rather a handful of stonks are bought now that the S&P500 is the S&P5.

Volatility Reports 09/02/20 Stock Market

Yet while everyone is just as certain that yields will only sink lower, McElligott counters that precisely because of that, a spike in yields would be “the largest pain-trade in the world”, one which sends shockwaves across both equities (Value vs Growth) rotation and Commodities (send gold tumbling). As the Nomura quant explains, a spike in yields would trigger counter-moves across the asset spectrum:

  1. Gold’s recently “grabby” vertical move as everybody owns it now (real yields higher would mean gold lower), with any potential bond selloff also likely to:
  2. trigger a reversal in crowded legacy US Eq “Growth” factor over “Value” positioning as well (particularly into any bear-steepening, which sees “Value” benefit to the pain of “Momentum”)So if not August, then when? Well, as the Nomura quant answers, “the key window then for a UST bond selloff becomes September (and Q4 thereafter)” because that’s when traders and bankers come back from vacation, and the result is a flood of new bond issuance which is “likely to tilt the supply/demand dynamic finally in favor of tactical “bears” when traders return following the Labor Day holiday.”“IG issuance this month is running at 30% of June’s pace, and August is traditionally a slow month for issuance given vacations, so I wouldn’t be surprised to see corporate issuance ramp back-up in a meaningful way come September. This issuance in conjunction with the ongoing steady deluge of government supply could prove to be the catalyst for a revisit to the upper-band of the recent yield range.”

 

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

August 29, 2020

Volatility Reports 08/31/20 Stock Market

Fed’s Bullard says the recession is over but rates will ‘stay low for a long time’

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Short volatility investors, fully invested asset allocation bulls, would find this news from the Fed over the weekend comforting. Bullard also believes reports on the economy will be “one of the best quarters ever for economic growth in the U.S.” The market’s optimism is in gear with his thinking.

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August 25, 2020

Volatility Reports Stock Market 08/25/20

The foresight from the 2016 election, the crashes (2) in 2018 (aka volatility regime change) have implications for today’s market, the election in November 2020 and the 2021 markets

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Literally every advisor/content provider being shared and re-broadcasted in the various forms of media are focus on reporting the new highs, the continuation of the uptrend, and the record-breaking market experience from March 23, low.  This background sentiment has been clear for the last 4 weeks.

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August 19, 2020

Volatility Report USD August 20, 2020

Expected Currency Wars. Here are the whys and what for with some ideas on how to play it.

It’s an old story that everybody with even the smallest amount of experience knows that the monetary policy helps inflate an asset bubble, rather than constrain one. Have a look at the history back in the 1920s and again in 2008. Today central banks around the world are reluctant to fight inflation when growth investments provide great returns.

The problem is that such periods are typically interpreted to be productivity booms, which they are not. Rather they only provide a positive feedback loop for investors to leverage up and buy more investment assets.

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August 16, 2020

Volatility Reports 08/17/20 Bond Market

Debt ratios had been looking bad before the pandemic, and today it’s worse. Inflation, which has been a nonstarter for decades may be on the verge of a comeback in a world awash with fiat currencies.

So the credit markets are starting to appear spooked. Volatility Reports sees a number of cracks in the bonds across all ratings. Here is a more complete picture.
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August 13, 2020

MarketMap 2020 Issue #14

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August 11, 2020

Crude Oil Tracing out a Bearish Wedge

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