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CT Journals
Volatility
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). Looking at the climactic peak by the bond market gives a textbook example, as it made its whirlwind peak and throw in the span of two weeks of March and has been drifting sideways to lower since. The point is until the I-T or S-T volatility model produces a signal for better trend dynamics and the market obliges the signal the slow drift in the stock market may be its only feature.
To that point, the intermediate-term background based on TEM is the same across the five main markets, all of which called for a breakdown ( or breakout) will get carry over, that is there will be a dynamic trend.
Along with the I-T TEM supporting MarektMap’s COT calendar where the period from last Friday through the end of this week supports long bar days and forceful trends the S-T TE Model has %C spiking with historical volatility at extreme lows. That combination is the TE#2 that precedes forceful trend when there is a breakout or a trend following signal. So what do the bears need today (this week) to get that downtrend moving?
I inserted the smooth Bollinger bands to provide traders with a level that when broken should provide follow-through. Along with the bands is TMT’s S-T support zone that will be fixed at that level for the week. The 3,390 level is key on the nearby S&P, the 11,376 price area for the Nasdaq 100 futures, the mini Russell futures would breakdown at 1,598. Contrary Thinker has a short position on the Nikkei where a break below 23,305 would add confidence to the position.
The final featured chart is the Anxiety Index (AI) on the right used for its trend following signals. Since the peak in late August / early September, the S&P and others are in a trading range; and the AI has provided whip-saw buy/sell signals. Again typical of the action after an L-T TE#1 where our current market happened on the long-term charts, as mentioned above. In any event, the chart on the right – the AI – is on a new sell signal, where it may be a tough off signal that implies a high rate of change move to follow. On the left, the daily cash S&P is on a triple trend-following sell signal, the SMA, the smooth CMB, and the smooth RSI.
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The bears will be targeting the July lows, more on targets after the break.
Regarding the Back Story is providing ideas to keep an eye on to see how they hold up in the expected decline
Here Are The Four Election Scenarios For Markets, And How To Trade Them, which is for info only, not my suggestions. Lastly, the majority of the media and the majority of the analysis I hear and read expect a contested election. Contrary Thinker doubts that consensus thinking!
While the latest Fund Manager Survey from BofA revealed that a vast majority of investors are concerned about a contested election, and the resulting volatility this may entail especially if (when) the Supreme Court is called in to decide the next president no matter the ultimate outcome, investors are curious how to trade – and hedge – the various possible outcomes, so much so that BofA’s Jared Woodard writes that the impact of various election scenarios is the “top question investors are posing.
So, in the latest note from BofA’s Research Investment Committee, Woodard and team proceed to give an answer, highlighting that the most important consequence of the US election “will be the amount and composition of fiscal stimulus” and noting that since Congress controls the budget and the House majority is likely to stay Democratic, the Senate outcome is the most important one to watch. The 4 key scenarios are laid out in the chart below, whose investment implications BofA dissects next:
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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 said that I filled the vacuum left by the legends, from Bolton to Lindsey and Gould. He was too kind.
But this quiet achiever does not miss much in the markets. Nailed the low in 1982 based on Joe Granville’s work while he missed it, he was just not doing his own work. I got the major top 1987 and got back in during the last quarter of that year while ETI lost its discipline.
Short Volatility ETF’s tide has turned. New Sell signal with good track record projecting a down market for the next six to eight weeks.
Here is what no one else is seeing. Long stocks based on “implied volatility,” mathematical formulas that value all put and call option valuations 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 because 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? That is what is the background dynamics. I did not show the weekly bar of SVXY but its TEM – our volatility model – 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 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.
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.
Take advantage of these prices available only to our network, become a Contrary Thinker today before your access runs out.
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…
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…
The data window contains daily data on the left of the next chart provides the high and low bands – for both S-T zones and CT’s smoothed Bollinger bands – to use as entry triggers. Why play the break, because it is just not the horizontal triangle above that supports a breakout getting a following for the day if not longer. Both the daily bar and weekly bar have TEM signaling the crude market is tense, frustrated, and ready to move one direction with only minor pullbacks. The chart on the right has the I-t support zone – the light blue dashed lines – pegging the high side of support at 36.38 and the low end of 33.76, a reasonable target zone in the next few days.
Another set of indicators I use in Volaltiy reports is the %BB-VX on the implied crude volatility index. You can see the last three times the indicator reached extreme lows setting up a top because the option traders saw little risk in being long, a solid contrary indicator. To the right is the hard data itself that is coiling up in a triangle signaling a thrust out of the base. Here a straight line moves higher by OVX is a panic move of selling. OVX is ending a trend, this sideways trend highlight by TEM’s rule #3. It simply says the trends is old dull and due for a change. It says nothing about dynamics, all of that is seen from other methods as outlined above.
What one can do is to use the breakout levels by OVX to engage on the short side of the futures, via your own trade plan or the aggressive scalper, our strategy designing groups provide just for this purpose.
Yesterday’s decline made $1,600 for the systems, net, net. You can see by the weekly numbers that tell you its P&L prospers most from the straight-line moves, like the week ending Friday the 25th. I will engage this system today for the wave three declines, at least, the next one to three days.
If you are a discretionary trader you should be able to see the plan off the next chart, with the smooth B-bands, regular will work, and Turtle parlay would be to add a contract after each day trade margin profit and trail a percent of that amount as your trailing profit stop.
Long Term avoid Crude and related, it is a dead industry, the new generation will be the “Green New Deal” and Nat Gas may be the bridge fuel. While all of my competitors use Relative straight analysts incorrectly. contrary Thinker will keep membership appreciate on the cream that rises to the top.
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
Copyright 1989-2019
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.
— 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
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, it was not a finished move, for a host of reasons. Nor was the outside cause of the bear market addressed directly and scientifically. The so-called and hyped “V” recovery was not grounded in good reasons and the advance – as we have noted – ended on panic buying. This panic buying is just not a word I pulled from a hat, it is based on our measures of volatility that across the leading averages and segments all went into panic buying mode as they reached their tops, and they did so in our MarketMap’s change of trend time window as seen in the table below and in previous issues of MarketMap.
The low from a technical point of view did not register on multiple panic scales as a long term washout, compared to a much more typical and meaningful low like October-November 2008, providing clear signs of panic followed by testing of the lows into March. Not so in March 2020.
Along with the theme of the last four years, the five-week bear was seen as “unprecedented” and the media called it “the shortest bear market in history,” which is not a fact. All of the hype regarding the “V” recovery suggests that it was a correction in a secular bull market and the only factor that made it a bear in the eyes of the media was the arbitrary definition of a 20% decline. But for a clear vision this is where history comes into play.
Contrary Thinker’s MarketMap use of longer-term cycle focusing on the 90-year cycle (45×2 and 9×5) places the market of the 2020’s unfolding today in a similar span of the 1930s. Have a look at the “Great Trader’s Markets” in our table below. What the media calls volatility today or market distortions never to be experienced again post WWII, is misleading plus to fit the theme of the last four years, is misinfomation to fit a point of view. But here are the facts and nothing in “human nature” has changed in the last 100 years.
|
Ultimate Big Swing Era |
|||
|
Bear Highs |
Bear Lows | Percent Chg. | No. of Mos |
|
17-Apr-30 |
16-Dec-30 | -46.40% |
8.10 |
|
24-Feb-31 |
2-Jun-31 | -37.40% |
3.27 |
|
3-Jul-31 |
5-Oct-31 | -44.30% | 3.13 |
|
9-Nov-31 |
5-Jan-32 | -39.10% |
1.90 |
|
8-Mar-32 |
8-Jul-32 |
-53.60% |
4.07 |
|
8-Aug-32 |
27-Feb-33 | -38.30% | 6.77 |
| 27-Jul-33 | 19-Oct-33 | -22.30% |
2.80 |
|
Bull Low |
Bear High | Percent Chg. | No. of Mos |
| Nov 13 1929 | 17-Apr-30 | 48.00% |
5.17 |
|
16-Dec-30 |
24-Feb-31 | 23.40% | 2.33 |
| 2-Jun-31 | 3-Jul-31 | 27.80% |
1.03 |
|
5-Oct-31 |
9-Nov-31 | 35.00% | 1.17 |
| 5-Jan-32 | 8-Mar-32 | 25.60% |
2.10 |
|
8-Jul-32 |
8-Aug-32 | 94.00% | 1.91 |
|
27-Feb-33 |
27-Jul-33 | 116.40% |
4.70 |
| 19-Oct-33 | 5-Feb-34 | 31.24% |
3.63 |
| 23-Sep-34** | 10-Mar-37 | 127.34% |
31.93 |
Picking up from March 23, the mini-panic low, the major market averages experienced one of the shortest bull markets in history, a 52% gain in seven months. From the high posted January 23, 2018, to date the Dow has seen two major corrections getting close to bear market’s my definition and one major bear market, each with a greater proportion. But today there is unfinished business, leaving the next administration, the work of bringing “things” back to normal, which will be rough on the “buy the two-day dip” crowd but presenting opportunities in other areas.
Change of Trend (COT) Table
It goes without saying that highs and lows alternate and with a little reverse engineering it is clear our method has found a simple two-week cycle. All of which I can say without giving away the farm. The ATH posted on the 9/2/20 and the secondary high posted on the 10/12/20 came on cue and are key levels that should not be broken this week if the bearish outlook is to remain. Moreover, the grey column on the right highlights time frames that allow for trends to accelerate and long bar days to unfold, that period of dynamic and forceful trend kicks in next week.
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.
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