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July 20, 2021

Volatility Report Fang Index

The Fang’s days are over, traders see low-risk high-reward short selling here.

Almost a year ago I pointed out that Tesla was: “From a risk management point of view, the type of L-T buying for the last eight months is FOMO, panic buying, see the left window of the monthly chart, as easy to flip as the gold markets flip recently.

Contrary Thinker will be looking at the S-T charts for a sell signal. The I-T to L-T risk is 600, where it began its panic buying.”

Today the Fang+ index is looking at a double top that happens to be at predicted COT dates. The 2/19/221 dates were astrological and set a theme of corrections for the year and the COT on the 14th was a Solar-Lunar COT, an Astrological COT date, and the exact date of the secondary peak of the Nasdaq dot com peak in 2000, which is also in gear with the 45-year cycle (22 1/2 year).Visitor’s Lowest Price Offer

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July 13, 2021

Volatility Reports 7/13/21

A long-time mutual fund type said Monday there is no “bell ringer” of excessive optimism by the markets that would give a “risk-off” signal.

That in and of itself is a bell ringer because it’s not the train you see that will kill you, it’s the one you don’t see.

I’ve written in these pages that the panic pandemic sell-off was not a black swam. It was a known unknown because it was news in the public domain in 2019 hence the 19 in Covid19 yet the market in its blithering way advanced into February 19, 2020. Just like the run-up by Enron in 2000, where the news was out regarding its accounting practices, yet it climbed to all-time highs on August 23, 2000. Here again, a known unknown, what I think of as dump risk assessment.

I am sure that many will think I am simply projecting. However, a “known unknown” is the risk a person or organization is aware of but is unaware of the size and effect of the issue. As I have pointed out along with several United States Senators my advisory told my people to raise cash, gave “off risk” advice in the early part of 2021.

“Hmm, potential pandemic, what risk?”  Yet the media and the administration downplayed it for a time.

For example, my Father founded a raincoat company in the 40s “Aligator Raincoat Company,” as in the overcoat that William Faulk adorns in the Columbo TV series of the 60s, and never took off. For my Dad a rainy day was a good day, for him, drought was a risk, a known unknown regarding when, where, and how long, and so on. A known unknown risk.

Today there is a clear risk to the markets and not the ones that we all hear streaming in social media. Since the Trump election, I am more aware of the Geo-Political problems that face the markets. From the internal issues in the USA to the international issues that exist with Russian hacking to China’s competition.

Previously the following chart has been used to point out that the pros, the smart money see tail risk – which is hyper-deflation or hyper-inflation. That must see a catalyst that would cause such an extreme, as drought causing hyperinflation. The chart data on the right is making all-time historical highs along with the data from the CBOE, both suggest protecting your risk investments.

Meanwhile, the advisors to the public, many of them compete with my publications are extremely bullish. Above levels seen before the 87 crash, the dot-com peak and the 08 WFC, and others.

Investors chasing yield in junk bonds have reached an extreme of greedy action. A sign of irrational buying that is associated with major turning points. The chart used here from CNN reflects that fact. 

On top of extreme sentiment supporting the bearish expectation of a topping process is the internals of the market have providing”off risk” signals.

The 52 weak highs MA10 peaked with the initial high by the Dow & Co back in May as this featured chart clearly shows. As well as the last two peaks preceding tradable top s of the major averages.

Our “Churn and Burn” index provided Contrary Thinkers with an “off risk” warning back in March of this year and as the title implies the market has churned under the annual highs of the Dow, highlighted by the blue dots on the chart. From the most recent breakdown by the index in May and three days ago, the market has been laboring.

MarketMap High Lighting Change

When cycles have discovered that track the market’s oscillations when the data is outside the market and outside any related news you would hear or read on Fox Business or CNBC.

The following chart is based on the geo-cosmic cycle, which is part of the January Fractal membership have access at the beginning of each year.  Here however I wanted to demonstrate how it stands along provides a “ball park time window when the market is expected to make a change of trend (COT).

Below are two cross-check charts starting with the 2009 low, and the 13-year cycles. The problem with many is they may be looking for 100% bottom picking and top picking ability. Where it a matter of evidence that supports the COT from different methods; and July 12-14 is a good example. A time window associated with extreme optimism as pointed out above along with other facts.

In any event, it’s fairly easy to see how the Geo-Cosmic oscillator’s turn dates line up near the COT dates of the Dow. Imparticuallry is the high pivot in late 2015 on the Geo-cosmic date of 7/4/2015, six years from our real-time window today. Plus it was followed by a meaningful trading market where our scalping systems and long VX system were put in their environment.

 Please note the same coincidence in changes in the direction of the market near the Geo-Cosmic peak and throe dates. What is more striking is the 3/9/20 low, the November 9/20 low, and the high dated 5/13/21 that happened when the Dow and offshore major indices made ATHs. p.s. There is no such thing as a “coincident.” 

Trade-Ideas

Buy FAZ at $27.75 or better  PT = $38.5 SL = $25.5 
Contrary Thinker sees a good chance of the high-risk players getting clipped here. The Bull ETF we want to play the bear side of invests at least 80% of its net assets in financial instruments, such as swap agreements, securities of the index, and ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index. Other leading high beta indices have rolled over and are trending lower. FAZ is the bear trade with 35% S-T potential and 7% risk.  FAZ is 3X Shares seek daily investment results,  300% of the inverse (or opposite), of the performance of the Russell 1000® Financial Services Index.

Direction Neutral Thinking

A concept that for many is difficult and some may see as racially based on old habits. But the market’s background, its condition is not its direction, it is how the market is trading, is it flat and sloppy, is it choppy and range-bound, is it expanding its range or is it pro-directional trending; and has that condition reached an extreme and ready for a change to something else?  It’s a powerful concept once you “get it” and it provides better risk and opportunity assessments, as well.

Back in mid-June, I reported the expectation for lower prices into the end of July, and “thus far, the action has been bearish; the Cash S&P has traced out a clear five waves down with a clearly defined 4th wave triangle, which is now forming resistance (highlighted in blue.)”

The chart on the left presented TEM signaling a rule#2 predicting a strong trend after the next trend-following or breakout trigger. Well, CT’s bias was not placated. Instead, the S&P broke out and ran to new ATHs.

I think this will provide a better understanding of the Volatility modeling I do. In that vein, the daily TEM is on a new extreme rule #3, painting the S&P’s trend as being old, feeble, persistent but due for a change.

Chance favors the Collective Mind
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Plus all of our trade ideas.

Copyright 1989-2021
Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 8006183820 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its client’s 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.

July 6, 2021

Volatility Reports 7/7/21 US Dollar

Demand for the USD from all corners of the world is expected to increase with economic opportunities created by Biden’s “Build it Back Better” plans.

Contrary Thinker is bullish on the buck since its double bottom in 2014. Along the way, I have pointed out that the Euro was a farce based on numerous sovereign nations forming a union because their proximity would not overcome their differences in culture and language and leadership. The central bank for the EU has its own QE issues to deal with and a lack of economic recovery hangover because of the austerity measures they took after the WFC. To date, they are still trying to catch up.

But that is the speculation behinds the bearish Euro bullish Dollar outlook. What is more important is what the market is saying.

The features three window screen grab shown here moves from left to right, long term monthly bar to intermediate-term weekly bar to short term daily bar.  The red shaded area is the sell-off into August of last year, reaching a panic extreme. When TEM hits Rule#1 like that, it calls for a flat, choppy period to follow. The proverbial dead cat bounce after a panic sell-off. When TEM hits rule#1, 90% of the time or better, expect a low to be in place, and the market builds a new base.

Like a panic top, it is a change of trend, and the emotional pain that short positions are in will give them the impetus to flip out of their positions. The emotional selling started at 94. Thus the market will move to this area now without much problem. Why now?

My volatility model – TEM – for both the weekly and daily bar have cycled to new extremes that suggest a trending move will pick up a following on the next breakout or MA crossover. The latter has happened on the weekly bar, and my AlphaTracking MA gave a standalone buy signal three weeks ago.

However, what is more, important is the S-T daily bar is on a fresh and leading TE#2, setting up the spring for a breakout. I have included the data window in the chart so traders can see the breakout levels. A move above 92.80 is bullish, and as stated above, a move to 94 should be easy.

While the relationship between Gold and the USD has typically and very publically been one of negative correlation, it is not a necessity. Furthermore, a strong dollar does not put the bash on commodity-based inflation. Regarding the latter, the demand for raw materials priced in dollars is not the same as monetary-based inflation, which all the gold bugs and inflationists can talk about.

Bottom line and current working positions and suggestions.

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July 5, 2021

MarketMap2021 Issue #12

Brutal Reality Check Expected

If you believe in Technical Analysis, your working assumption has to be that form (the market) precedes substance (media rationalization or the extra market news). No, the market is NOT a discounting mechanism. News event – hundreds are being presented daily via social news feeds to community blogs from Zero Hedge to Seeking Alpha. Contrary to Thinker’s looks at price context and the time factor, everything else is a “Back Story,” the sizzle, not the steak.

Today social media pundits and providers of market data are in utter amazement. They have never seen their event-based analogies break so many records. The headlines are streaming ” never have we seen…”  For example, no dips quarterly, monthly, weekly, and daily exceeding all previous extremes among every observer that provides content in the social domain, but they remain optimistic. For the economic and media event-based bears, their story is the “same old same old,” with accessive debt being the primary issue and a crashing dollar and a gold rush. The bulls pointing to a reflation after the pandemic shut down will grow the market out of any problem.  The news background has not changed much over the last four years.

Overvaluation, no fiscal or monetary tools to assist in a soft landing when the next downturn happens to the competition coming from China.

The debate seems to be over inflation. Is it a problem or not, is the relation trade-off, or will it get out of hand? The messages are confusing to investors.  Here is an example:

Inflation May Have Peaked, Killing The Reflation Trade

“The reflation trade may have just died a horrible death on June 10. The CPI reading came in at 5% year-over-year, ahead of estimates for 4.7%. But despite the hotter than expected reading, bond yields continued to slide. Despite months of hotter than expected inflationary data points, bond yields have been moving lower, and breakeven inflation expectations are now plunging as well.”

Smart money is talking with their pocketbooks with a concern about either tail risk, both deflation, and hyperinflation—more on that below.

In the  LinkedIn group space, I pointed out last week how the market tipped its hand from the beginning of 2021 as irrational in the same way that it made its peak in late January 2018 and late February 2020.

I understand that many Technicians base their work on the premise that all market activity – is irrational (aka fear and greed), excluding the lone Technician. However, I have found that many technical analysts are heard, thinkers. As a rule, they are social animals. Be that as it may, my Technical Event Model (TEM) provides a clear insight into the buying and selling motivation: TEM tells me if market action is rational or emotional and when it reaches an extreme. With the irrational signals being rare on the long-term bars, they are more important when they do happen, at both tops and bottoms.

As stated from the beginning of the year, near 30,000 Dow, the buying became irrational and, on that basis, will be easy to flip as it is grounded in fear of missing out, aka greed. Hence these buyers will be guided by their account balances as they drawdown instead of a rational technical reason to be an owner.

From the start of the year – see the eBook “Time Factor” I have outlined the big cycles that have crammed themselves into this period 2021-2022, and the point they are cresting as this publication is being written over the 4th of July holiday weekend. With the background, the context of the market primed for a reversal of trend in the first six months of 2021 is now all about the critical Time Factor. The 245-248 years of the beginning of this glorious country, which by the way, is a critical returning cycle as well.

One of the primary large cycles is the 90/45 year cycle, which I will not rehash here. But there is no coincidence that when the numbers 1 through 9 are added, as in Pythagorean theory, they add up to 45 or that the 360 degrees in a circle are eight 45 degrees.

The current time window is the same as 1931-1932 and 1975-76, one period of deflation and the other of stagflation, the former left-hand tail risk, and the later right-hand tail risk.

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June 15, 2021

Volatility Reports Bonds 6/15/2021

“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope, or as a . 400 baseball hitter. But now I would like to come back as the bond market” James Carville

In the previous group post and blog post, I pointed out how interest rate cycles are regular and reliable. I pointed out as well that the fear that rates are moving higher had not abated since the initial run higher and that implied fear data reveals a coiling up of the data denoting frustration and confusion by the market regarding the viability of inflation.

Our model suggested a rapid and sudden movement in this data, and while I pointed out that “Volatility modeling is direction neutral, it tells the investor/trader, in this case, to trade the break, to trade the trend following signals. As noted above, TY rates have given a bullish signal on the rates.”

In our LinkedIn Group, I said ” TY is in a cluster of resistance as mentioned previously in this space. The 132.68 price if broken is a reversal trigger until the last Friday of June. Contrary Thinker’s bias is bearish for reasons outlined before and suggests TYO or shorting the nearby futures.

The market after implied volatility spiked lower ending its counter-trend of complacency, the government bonds sold off and the ten-year notes broke below 132.20, the low side of I-T (monthly) resistance, a failure sell signal.

In the Chart Gallery below the first chart shows clearly the drain of liquidity according to the Fed, and that drain is from the reopening of the REAL economy, inflation caused by none monetary reasons, like supply chain problems and drought.

The next three charts in the Gallery are about commodity-based inflation, which the majority believe what the Fed has said is “temporary.” Contrary Thinker is bullish on commodities from the March 2020 low.

CT’s chart of the 30-year T-bonds shows a massive failure. The 4 1/2 year cycle that has been posting up timely cycle lows has failed to do so with the last sequence of bottoms expected in early 2020 that produced a one-week wonder followed by a bear market. This left-hand translated cycle points to the next low series of S-T lows at the end of July, mid-October, and early December of this year.

The market has moved below its long-term moving averages and the pair of MAs have made a death cross, calling for more downtrend.  Long Term support sones in from 134 to 147^19.

Trade Idea

Suggested trade TMVDirexion Daily 20+ Year Treasury Bear 3x Shares. Buy TMV at 71 ob, stop 66 with a profit target of 120, the low side of L-T resistance. I-T Volatility model is a fresh TE#2 supporting a forceful trend.

Stop, listen and learn. Don’t let time get by you.

The “time factor” provided in MarketMap™ will be critical to keeping you and your clients on the front foot. The New Era of Market Timing is Here. Get the full picture with this 45 day trial with CT’s eBook of cycles.  

Chart Gallery Reflecting Pressure for Higher interest Rates. Bond Buyers will Demand it.

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

June 10, 2021

Volatility Reports 6/10/21

Major Change of Trend (COT) Time Window June 11 +/-2 days

COT’s are price and time-based events that apply to all markets; hence investors and traders should expect “hyper-correlation.” The outside world event may be dramatic and out of the blue, what the media calls Technical.

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June 1, 2021

MarketMap2021 Issue #10 w/Chart Gallery

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June 1, 2021

Volatility Reports Crude Oil

Walking away from a winning streak is rough.

One good thing for every Contrary Thinker is that I am read and respond to comments and feedback from my traders and team.

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May 28, 2021

Volatility Reports 5/28/21 USD

The FX log jam is breaking.

Part of my checklist for an ultimate peak in the risk markets was for the ultimate risk market to peak and fall on its face. The bitcoin did so, and it did so based on our outlook 4/16/21. Nice call Jack, even though I say so myself. The decline thus far in the early stages of a new bear market, sell rallies long term,  if a day trader is careful buying dips now as the panic low is about worked off may continue to work before the trading range comes to an end. But more on that in the next BTC commentary.

Read More

May 12, 2021

Volatility Reports 5/12/21

If you did not read the post from 5/7/21, I suggest that you do, and I will not repeat it here. Instead, focus on the leadership of the bear markets. https://contrarythinker.com/volatility-reports-5-7-21/

The Dow and the S&P are the stalwarts of the old yet great bull market and showed cracks yesterday right on cue with MarketMap’s COT date expected on the 11th +/- a day.  CT will wait for at least a few hours before we jump on the short side regarding the old guard.

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