• Background Image

    CT Journals

    Volatility

January 4, 2022

Volatility Reports 1/4/22

Just as financial repression of rates is unnatural, so is the suppression of risk in free markets. The logical outcome of a riskless market is a market that collapses in on itself because the nature of reward hinges on some amount of risk.

Socialized markets have all the perceived risks wrung out of them. It’s what I call risk repression. In this regard, I suggest reading anything by Christopher Cole, CFA, and his idea of the bull market in fear, and trading tail risk.

The New School of Technical Analysis does not use as a primary tool of oversold/overbought Stochastics. Rather what Contrary Thinking members use the oscillator of implied volatility.  Members are familiar with this chart with the bull market spiking fear when there was nothing to be afraid of when the decline was modest. So modest the massive host of bulls see that fact as the wind at their backs for more of the same in 2022.

My second chart pick to assist capital managers, advisors and traders understand where they are in the big picture of things, is how the current sent of peaks fits the 2 1/4 year cycle portrayed in MarketMap-2022 Scenario planner. With the ATH before two major corrections in 2018, the series of highs in bullish sentiment from the peek 11/22/2019 and now 2 years later the series of differences from the high in bullish bravado on 8/6/21.

There are multiple inferences here. Actually starting with the late 2015 correction, and again the February 2018 sell-off, and the fourth quarter 2018 correction while all timed by Contrary Thinker, they were all ignored. Me and the team used to get “can does ” in previous decades. But with the advent of America First, not so much.

It was all about the long term with the sell-off being part of the secular bull market. Even in early 2020, and yes my group is just as good if not better than Senator Richard Burr’s broker who told him to sell.

As a sidebar, I am a square shooter, no one date has doubted my words, and many have seen the “sell” advice in publications. But no matter, buy the dips, and barrow to the max on the next sell-off of 30%.

Looking back from this vantage point of 2022, event the bear from 2000 into 2016, look mild to many. The thought that a market that travels over ten years with five bear markets could never happen here, again.

Lastly, the SKEW index remains at historical highs, signally that large capital fears tail risk. On the left deflation and on the right inflation. TEM on the SKEW index supports a breakout, which is the realization of one of the risks. 

Back Story

Dip-Buyers Beware: “The Reflexive Short Vol Trade Has Left The Building”

Click here to view the original web page at Dip-Buyers Beware: “The Reflexive Short Vol Trade Has Left The Building”

Something’s different this time.

For the first time since the collapse in March 2020, the S&P 500 has failed to rebound back to new highs after testing its key uptrend technical levels…”

Contrary Thinking Begins Here
MarketMap Issues #1 and #2 are ready for immediate download.  $99.00, 45 days with no subscription required, and discounted membership during the trial
Quarterly Membership $495.00
Six Month Membership $849.00
Annual Membership $1495.00
PayPal - The safer, easier way to pay online!

Great and Many Thanks,

Jack F. Cahn, CMT

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 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

December 21, 2021

Volatility Reports 12.21.21

The Short Volatility Play has Run its Course

Contrary to Thinking is more than having a good “bad” attitude, it’s about knowing when to have an opposing point of view and when to run with the herd. It also has much to do with looking at reliable indicators that no one else is looking at. CT likes to analyze the SVXY, an EFT providing daily leveraged exposure to short-term VIX futures. It is designed to capture the volatility of the S&P 500, in a commodity pool wrapper. As a geared product with daily resets, UVXY is designed as a short-term trading tool and not a long-term investment vehicle.

A chart of this fund is used as a proxy for the S&P. The weekly bar, left-hand window you can see the first leg of decline finding support in our I-T support zone; and after a rebound is now testing trigger prices that if broken suggests the market is moving lower. The 53 to 54 price area is both a Gann price and a Smooth Bollinger price level. That level is also coincidental with the high side of CT’s I-T (December) support zone. Given the number of various ways to formulate these triggers, the inference is, that if they are broken follow-through should be expected.

But what gives that a superior weighting is our Technical Event Model on the weekly bar providing a TE#4. A setup that is telling traders the market is in breakout (down) mode. It is breakout ready.

The middle chart of the daily bar has two systems working on it. One is the simple tidal high and low picking system, which is short as indicated by the down red arrow. The historical results of the model are inserted below, which supports the sell signal as being valid. The other system is the triple cross that has two out of the three trend-following indicators on sell signals (light blue down arrows.) and the adaptive MA on the bar chart nearing a “death cross” to complete the sell trifecta.

One additional note here on method – for you system geeks – CT combines the triple cross as a setup for the tidal high and lows to be the triggers for entry.

The daily bar on the right is all about the Technical Event Model. I have shown to my people how major tops have been made in Bonds, Gold, and Dow on panic buying that had sustained for months into the final peak; and how the story the market was telling revealed risk to where the panic buying began.

A good example of this can be seen in the right-hand chart but with panic selling into the “V” low.  The mini-panic of six days is highlighted by the red vertical dashed lines. Rule #1 here calls for a choppy affair until the panic is worked off, which can be seen by the market’s recovery to where the panic selling began. that recover into the 16th recycled TEM to a new context supporting “change” and trend-ability, that is what we have witnessed thus far. That “trend-ability” remains until a new TEM extreme is reached.

Bottom line is that headlines are yanking on the market’s chains with Covid19 excuses, from really good to really bad. Overnight I read headlines that the Pac-Rim recovery was due to the market seeing through this uptick in the virus. I don’t think the headlines matter and that any attempt at recovery today will be met by more selling.

Back Story

At this time of year, lists are published with suspected outside world factors that could upset the market’s apple cart. Below are two of them, which CT would only see them realized at or near a table low. It remains our premise that a geo-political event will be the market’s undoing. More on that in MarketMap-2022 Issue #2.

How Do Russians Feel About a War With Ukraine?

Click here to view the original web page at How Do Russians Feel About a War With Ukraine?

Militarization stopped being a way to mobilize Russians in support of the government in 2018. Russians—in particular young people—don’t want war.

” War is the business of young people and conscripts. But 66 percent of Russians aged between 18 and 24 have a positive or very positive attitude toward Ukraine. That’s despite a backdrop of unceasing vitriol directed toward Ukraine on state television, and the persistent, oft-repeated idea that it is external attacks that require Russia to take defensive measures.

To put it simply, before launching an offensive, it’s worth thinking about who will fight in that offensive and how willingly, and to what extent an active conflict will prompt people to rally around Putin. The evidence suggests that even in the best-case scenario, the mobilization effect will be nonexistent.

Biden’s Full Plate: Ukraine, Taiwan, Tehran 

Authored by Pat Buchanan,

Russian military pressure on Ukraine, however, is but one of several crises where America finds itself at the center.

Biden this week ordered a diplomatic boycott of the Winter Olympics in China. U.S. athletes may participate in the games, but no U.S. government official will attend in a formal capacity.

The Winter Olympics will take place on the 50th anniversary of President Richard Nixon’s historic trip, where the U.S., in the Shanghai Communique, acceded to the contention of Chairman Mao Zedong’s People’s Republic that Taiwan “is a part of China.”

Yet U.S. inaction if China attacked, invaded or forced the submission of Taiwan to Beijing would shake the credibility of U.S. treaty commitments to Japan, South Korea, the Philippines and Australia.

Still another crisis may be brewing with Iran.

The answer seems a simple one. While the Iranians have the knowledge, capacity and experience to build a bomb, they have, like Japan, Brazil and South Korea, elected to forgo the option, as the risks inherent in an Iranian bomb are greater than any probable rewards.

Truly, Biden has a full plate of foreign policy crises.

His guiding principle in dealing with Russia, China and Iran should be a simple one: Consistent with securing the vital national interests of the USA, keep us out of what Winston Churchill called “unnecessary wars.”

For such is invariably the death of great powers.

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2022

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 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.

–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

December 12, 2021

Volatility Reports 12.13.21

Trading Fact of life #22:  an optimist is more successful at trading.

They make opportunities out of difficulties. Pessimists will pay attention only to information that fits their point of view. They will see nothing else. Optimists will look for opportunities no matter which way the wind is blowing, long or short.

Keep MarketMap-2022 in mind and reference to the new two-year cycle, it will come into play over the coming eight years maybe longer. Be that as it may, one of my “fear” oscillators has proven insightful when the regime changed to a more volatile market starting with the mini-crash in early 2018. You can go back to late 2015 for a similar setup but what is key here is the extreme “no fear” of risk seen at the peaks and slowly diverging into the primary decline.

Like all “divergence” signals, it all comes down to which one is the final one that tips the market over the ledge. The featured chart shows the similarity of the patterns and the recovery of the “bravado” into last Friday’s close. Given that the market has rallied onto a change of trend time window, that points down into the 19th +/- 2 days, the next phase of decline is expected.

Here is another view of a similar idea, showing the effectiveness of the fear index divergence leading to a meaningful decline by the averages. In fact, one can see how “smart” money has been trading a bull market in fear since the peak in late January 2018, with CT’s VX fear indicator diverging for four years. What is more important here is the divergence from the June/July to date, providing a clear, “off risk” signal.

At this point, the main focus is on the timing of and the implementation of a sound bear strategy, and the daily bars are providing TE#4 signals as discussed below.

All of the daily bars on the major and offshore stock averages are on new TE#4. A setup that prepares the traders to expect and trade volatility breakouts, which is another way of saying range expansion. Traders should expect range days where the open is near the high and the close is near the low and supports are triggered. In inverse is true if resistance is taken out.

Based on that part of CT’s volatility model outlined above, the expectation is for the breaks to come lower, for the lower side of breakout bands and support levels to be taken out.

From a sentiment point of view, the rankings done by a handful of different services and organizations provide a widely disparate mixed bag. Unlike the VX data cited above, providing a much clearer picture of market psychology. The stream of information providers has strayed off the bullish path in many cases and are referencing some of the commodity markets, a rare event, reflecting doubt I reckon, on their insights into the stock markets.

I had to feature the SPT daily bar here as the exception to the other daily bars because the SPY reveals its panic low – the first vertical red dashed line, followed by a one-day rally, which is typical after a “V” panic low. However, that one day rally cycled TEM to a new extreme TE#4 – yellow dash vertical line – a pre-condition that called for a range expansion.

Please note the effectiveness of the TE#4 being followed by two long bar day declines, a textbook example of what TEM provides for the trader. There is a lot to see on this chart, but the focus is the way TEM cycled back to a panic low on 12/3/21, producing the “V” low as it is known for. There is more to say about 12/3-that I will come back to in a minute, but to finish this thought the market’s advance on Friday, which a few of the content providers on Twitter area calling a new buy signal on the 5-day A/D oscillator, is negated by the “emotional” panic buying that put it there. TE#1 has a 90% chance or higher of being a reversal, in this case, an inverted “V.”

Now here is a fact, the low on 12/3/21 happened on a solar/lunar eclipse. I know these kinds of factors have no cause-and-effect proof and are only of interest to a few. Be that as it may, it’s a fact that it by accident happened at the low. That’s not to say that all solar or lunar eclipses catch highs and low turning points or to give them a probability rating, but the fact is there and by the way, the peak on the peak on 11/19/21 was a lunar eclipse, but I digress.

What is rare about the solar eclipse at the recent low happening for the astrology crowd with a southern lunar node. Here is a straightforward explanation of the meaning of the lunar nodes from an astrological point of view.

The north node is “your true north or your North Star.” In this case, it would be the market’s constructive behavior that it should follow, like a destiny, if you will. But the eclipse happened conjunct the south node. It represents ineffective actions, qualities that should be left behind if the market is going to fulfill its destiny. The inference would be the action of the market was not in line with its “destiny.”

Bottom line, a high is expected in the very near term. If not early this week, then on the 20th of December.  Contrary Thinker will be looking for clues from the previous leadership and elsewhere to provide motivation for new trade ideas including but not limited to leveraged ETFs, high beta single-leg Puts, and Calls on FAANG stocks, segments, and the averages including the offshore markets.

Information about getting trade ideas on your smartphone for only $10/month. 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2022

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 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.

–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

December 5, 2021

Volatility Reports 12.6.21

The alchemy of trading volatility (VX) is not magic for the fool. You must be the sorcerer and not his apprentice

The key for my traders this week is that the trend has changed direction. But along with that change is a change in the way the market makes it from point A to point B. The BTFD after a two-day slump is gonzo, and sharp and sudden moves are here to stay, AKA volatility.
You need to login to view the rest of the content. Please . Not a Member? Join Us
November 27, 2021

MarketMap 2022 Annual Scenario Planner

The most obvious synchronicities of historical events happen at the
beginning of the cycle.
Times when change becomes unavoidable

The first topic I want to highlight here is that the history of the stock market in the states does not start with 1950, which is all I read from the “information” providers regarding their statistics. As if the baby boom was going to last forever, which peaked in 1968. Or, the 100 years of market history that preceded the post WW2 boom was somehow transcended after the 1949 low by a superior emotional intellect.

You need to login to view the rest of the content. Please . Not a Member? Join Us
November 15, 2021

Volatility Reports 11.15.21 Video Outlook

Contrary Thinker is more than a Contrarian.

Our group created a volatility model that predicts change and the quality of buying and selling. We also founded the New School of Technical Analysis, 100% price based where media provides a back story, after the fact.

 

Traders like Jesse Livermore spoke about his first principle that making big money is by sitting and waiting, not trading. They are waiting until all the factors are in favor of his trading strategy before making the trade.

The modern-day hedge funds control risk by not taking a risk, but once everything is 100% correct based on their comprehensive system or trade plan checklist, they enter the markets and, in the words of Druckenmiller, “go for the jugular, they leverage up throughout the series to maximize profits. This is exactly what the Turtle Traders do with their trend-following systems.

Six Month  Membership only $49/mo
$295.00 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2022

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 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.

–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

November 9, 2021

Volatility Reports 11/9/21

What do we know? What are the facts that are undeniable?

We know that since the Reagan revolution 45 years ago the power regime changed. With that, the fiscal policy of the United States changed. With the 1980 election came a very long-term break from Rooseveltian “New Deal” fiscal policy. By the election of 2020, the major change was clear from the “New Deal”  to the new “Gilded Ages” pro-business laissez-faire now called neoliberal, aka new liberal. What also changed from 1980 to date is the configuration of the house/senate and the president’s parties. Gridlock has been the configuration of governmental power in the majority over the last 40 years.

You need to login to view the rest of the content. Please . Not a Member? Join Us
November 7, 2021

Volatility Reports 11.8.21

They all like to refer to Robert J Farrell and quote his ten rules

But few if any worked for him and the majority pay his rules lip service quoting them in social media marketing as information only.

You need to login to view the rest of the content. Please . Not a Member? Join Us
November 4, 2021

Contrary Thinker 11/4/21

I may get frustrated but I am not hallucinating. That the results of all the “lies” from several cable news networks to fringe groups with large internet followings purporting blood-sucking pedophilia circles attributed to the elite undermines the best political system we have for capitalism.

The above reflects Cycle peaks are clustered in this time frame, from the peak on Nov. 18 for the Dow into today the 16th and fill out Monday the 20th. They all relate to their own 2 to 2 1/2 year cycle, which creates a variance of a small degree. One cycle is 2.2353 years, for example. To pick out a few notable peaks caused by the 2-year cycle, a similar cluster hit in April of 2000, another July of 2007, and again in August of 2008, also mid-January 2018.

A similar configuration of cycles converged at the March 2009 low +/- 1 month.

while nothing here is perfect, there are four major cycles hitting how +/- a few days that are known for their influence to change the direction of the markets.

You need to login to view the rest of the content. Please . Not a Member? Join Us
November 2, 2021

Volatility Reports 11/2/2021

It’s not the train you hear that will kill you

In my early days, the talk use to be that a good market analysis got off wall street to get away from the pressures of the industry so he/she could form an objective point of view. Well from Gainsville to Sedona many of taken that advice. If distance matters, well living half the time in the land of Oz, the down under, should put me in a superlative environment. Well yea, ok maybe.

But a nearby journo Mark Saunokonoko, a print, online journalist, and feature writer published by the Australian 9News Network “Ten scenarios that could rock the world in 2022.” Where Mark did a good job isolating none market events, outside world events, that could have a dramatic impact on the 13-year-old “Great Bull Market”  Here is his list, my thoughts, and a few others you may have to put your ear to the ground to know something is coming.

He has grouped the ten possible threats this way: ”

You need to login to view the rest of the content. Please . Not a Member? Join Us
error: Content is protected !!