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    CT Journal

    Volatility

November 12, 2018

US Dollar Eyeing Key Breakout Level

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November 2, 2018

Yenning for an Opportunity

Japanese Yen FX

If you liked the 90’s the yen may be a flashback to the bull run in the last 90’s. The rules are, to follow a  buying surge because they almost always pick up a following.

The last four times %BB-Oscillator broke above .72 there was a multi-month advance. When %BB moves above .72 it is a momentum surge caused by the market’s realization of some bullish underlying fact that kicks off the trend. In this first chart, the length of the trend after the signals presented long-term opportunities for bull trading.

The context this buy signal occurred in supports a forceful trend. The Technical Event Matrix is registering twos for all three-time horizons. Technical Events Rule #2  precedes trending moves in most cases and provide a bias to trend following types of systems.

There are some other triggers to go along with the %BB-Osc signal. The triangle pattern – while it may not be a valid triangle in EWT terms – has the historical volatility background that supports it. In other words, a move above the descending trend line would be a breakout.

Furthermore, if the yen can get above the high end of the 20-year base, there is a point and figure count or measured move that targets 180.00 The base and triangle both project 160 to 180 for the USDJPY, a buying power for the yen not seen since 1995.

Along with the application of trend following systems to the yen, here are some bullish ETFs for considerations.

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  My indicators and strategies can be withdrawn for private use without notice, at any time.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 to 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.

October 31, 2018

Volatility Report October 31, 2018

S&P ENERGY SECTOR

Looking at XLE and $IXE are presenting trading opportunities seen as low risk, let me explain.
This S&P Sector provides exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries.

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October 29, 2018

Contrary Thinker Market Review

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October 22, 2018

Fanng stocks losing their bite

It is becoming more doubtful the bell weather Fanng stocks will reverse a series of sell signals from the high pivots in September. Failures to hold new intermediate term (IT) support along with a break below classic neckline formations add to the bearish outlook. The red arrows hight light these breakdowns. Both Amazon and  Google broke below I-T support and continue to trade under that level, a bearish indication.

GOOG is sitting on long-term (L-T) support (old L-T resistance) where the inability of this market to get back above this level would further the bearish outlook.

One of our favorite shorts is Netflix.  Of interest in the above daily bar chart is the 100 point risk the stock has until it reaches the high side of our L-T support zone.

 
Once the neckline breaks the head and shoulders top targets a decline of 100 points or better. Further, our measures of rational vs. emotional buying peg all of the buying from 190 into its historical pivot as panic or FOMO motivated. As such, it will flip easily once the decline puts pressure on these traders.

These diverse methods provide price targets clustering, which adds confidence. Now, its a matter of market dynamics to provide insights into when a forceful move can be expected.

Netflix’s background or set up on a long-term basis is similar to the Dow/S&P peak in late January when it peaked on panic buying followed by a mini-crash on panic selling. With Netflix, the panic buying into June provided a pivotal high with a decline that did not lead to panic selling, at least not yet and there has been no new long-term TE. From an I-T point of view, the dynamics only mostly support a forceful trend this week and S-T the market has not worked off its panic selling.

Puts

NOVEMBER 2018 (EXPIRATION: 11/30)

Strike Last Net Bid Ask Vol Int
NFLX1830W337.5-E  16.20 +0.74 20.45 21.50 1 59
             

My initial trading experience used only high delta puts and calls. These are deep – I mean deep – in the money options. Today it is difficult to avoid time premium, without giving up lots of liquidity – as inferred by the volume/open interest.  The weekly November 337 ½ put is 5 ½ points in the money and with six weeks to work has 16.00 premium. I would look deeper and keep an eye open for any OI.

However, the potential is there with a conservative target of 264 leaving the puts 60 points in the money.  The bid/offer spread is a full point; some option brokers are better than others.

It’s easy to get started, and the only thing that will keep you from quitting is your success. 

Premium Publications Merging Strategies into Forecast. The newest and most reliable risk, asset and strategy management advisory in the industry. No matter your size or investment policy, the volatility report will put you at an advantage. These are individual and student rates.

ContraryThinking Starts Here

Great and Many Thanks,

Jack F. Cahn, CMT
A Contrary Thinker Trader Since 1989,
Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA.  800-618-3820

— Thinking Man’s Trader 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.

–Thinking Man’s Trader 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 to your financial situation. Only risk capital should be used when trading futures or options.

NO WARRANTY / NO REFUND.TMT 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.

October 19, 2018

MarketMap™ 2018 Change of Trend Dates

Bull market peaks that occur in December or January produce a seasonal pattern that repeats itself…Based on this seasonal pattern, if we see a top here in the middle of January, it will be followed by a series of Annual size One Day declines culminating on August 8 and October 19 with panic days caused by national security threats. pg3, issue #1

Today, the breakout by implied volatility on the Russell will continue, after this pause, the market – along with the others, has at least a deep test of the most recent low instore. In this L-T chart, you can see how the market followed through lower after the initial surge by %BB-VIX.

The other factor here was the feel of the panic low when it happened on October 11. It did not have the same unabashed smell of fear at the bottom. That comes from experience, but from an empirical point of view, the media was not screaming blood in the streets as they did in February and like all another critical low. Instead, it had that unassuming no one is paying attention first leg down of a bear market.

The TEM – as “Volatility Reports” pointed out – did reach a panic low reding. Our investors and traders can take such an event to the bank on a short-term basis it will lead to a choppy market until the next TE, same way as saying the background permits a change of trend.

Great and Many Thanks,

Jack F. Cahn, CMT
A Contrary Thinker Trader Since 1989,
Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-618-3820

— Thinking Man’s Trader 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.

–Thinking Man’s Trader 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 to your financial situation. Only risk capital should be used when trading futures or options.

NO WARRANTY / NO REFUND.TMT 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.

 

 

 

 

October 10, 2018

Trump and his tribe’s last line of defense is breaking

To be a public servant and NOT think the fourth estate will look at one critically, is more than naive it is dump thuggery. To be so unconcerned that no one would find out who one is and still run for the most powerful position in the land is worse than arrogant. It is more than a total lack of self-consideration and that of the family it is foremost an utter disregard for the country and the people one’s supposed to represent.

From where I sit in sunny Australia, the outcome of this conceit will be more than a “national nightmare,” like we had in ’74 with Nixon.

No matter what the cynics say, when one runs for public office – it is not the deep state that will realign him into a law-abiding citizen even if that entails one going to jail.

Rather, it is the rule of law- a nation of laws – that will put the one on the straight and narrow and it will be the fourth estate that brings it to the light of day.  And no matter how much that one may think his money will buy a legal team with entitlements to due process, there is not enough wealth to rally such an array of diverse legal experts. Ironically it certainly would take the entire Department of Justice for that.

How one deals with stress is the key here, and the more successful someone is, the more challenges he or she will have, so when something goes wrong, well like they say, “the bigger they are, the harder they fall.”

What Trump must deal with is formidable, it will ruin him financially.

Robert Mueller’s Russia Investigation, Manafort cooperating -Federal

Obstructing Justice firing James Comey regarding Flynn

Trump lawyer Cohen pleads guilty Campaign finance law, hush-money paid to Stormy Daniels, et.al

Russian money laundering Weisselberg CFO and Cohen cooperating So. District/New York

Violating the Emoluments Clause of the U.S. Constitution – Federal lawsuit

Income Tax Evasion- Federal and multiple states

Estate Tax Fraud, starting with the 400 million pilfered from father’s estate to build the appearance of a self-made real estate empire

Trump charitable foundation New York civil and criminal actions for self-dealing by the Trump Family

Sexual harassment allegations.

History and cycles provide the repetitive form of this recurring disaster. The above should be no surprise watching the 8.85-year cycle to consider Enron’s bust worth about $70 billion during this same cycle in 2000 (9 x2).

Even though the estimated worth of Trump is only 3 billion to 10 billion – depending on who one believes –  in comparison to Enron, his financial undoing has far-reaching tentacles including his family’s assets and far-reaching implications with the institutional connections of the family. Add to that his position in the office of the president of the United States, the threat of his financial ruin will have its repercussions.

“What the market has now is the sense that Trump is a fraud and he is financially under threat; but what they have not yet realized is he will not go quietly, he will bring down everything in harm’s way when he goes.”

Richard: When the fall is all there is, it matters.” ― James Goldman, The Lion in Winter

The best technical minds are Contrary Thinkers, starts here

 

October 1, 2018

Volatility Reports October 1, 2018

Market Context

Incalculable Sentiment Ignores the Bears

In my many years plus of experience I have never seen the market top on bad news. It is not in its nature. Sure, there may be hints of an underlying problem like in ‘07 sub-prime, but nothing in the headlines of mass media.  Rather, at peaks, the good news is an exaggeration.

All tops have the same background and process, from 1987, 1989, 2000, 2007, and 2018, each earmarked by inner greed and a conviction that easy money will never stop.

What was an ambitious market has now become a fear of missing out environment covered up by arrogance and bravado? Popularity is more important than empirical evidence.  All signs of the kind of ingrained buying a current generation of smart money need to cash into.

So broad is the public’s participation that even NYC taxi cab drivers are bull market day traders and making easy money like ‘87. In 2018 it has shifted from cab drivers to twitter traders. Add on top of that the fact that everyone in the social blogosphere is an expert market analyst vulgarizing the trained analyst and a just another sign of overconfidence.

It is in this phase, that capital managers need to see the highest level of financial risk, everyone is happy, euphoric.

The biggest debate is about when the bear market will begin, which is always – 99% of the time – put off “until next year,” to provide the appearance of a balanced argument. Being a bear or pointing to the bearish facts draws jokes and alienation.

Quants need fine data to generate signals for the above. So they count IPOs and the like. Yet, a simple periodic random sampling of the financial media should make it self-evident. A few of us have programs that count positive and negative tweets to spot optimistic extremes of a major peak.  But it’s not required.

We can also look at hedge funds, as the professionals will be correct sooner or later.” Have a look at the high level of hedging since 2015 low that have preceded at least minor market corrections and most notably the February 2018 spill.

At major peaks, the market’s exaggerate good news and ignore the bad news. Today October 1, 2018, NAFTA is back as a trilateral agreement. The news as of this writing is driving the markets to toward new historical highs.

It is not so much the public’s ignorance of bad news rather they don’t have a clue regarding news events potential meaning or rationalization.

Many pros did not have a clue that on August 9, 2007, BNP Paribas’ announcement that it was ceasing activity in three hedge funds that specialized in US mortgage debt was a clue of the seizure in the banking system on the horizon.

Volatility

A perpetual state of low volatility since August

The energy that drives the markets comes from conflict, the battle between buyer and sellers. CT gauges this tension with its measures of volatility and how the market typically reacts to four different extremes.

The Nasdaq (NQ) back in April hit a high level of %C and a high level of Historical Volatility at the same time leading a period of expanding ranges. That move is a trend that lacks brute force but advances based on the expansion of the high to low range for that period. In April there is a good example with the horizontal triangle contracted to an apex coincidental to the TEM indicators cycling out of their high extremes.

In August the NQ reached a new set of extremes, now the market had fallen back into its 2017 pattern of low volatility. I highlighted the weekly chart on the left the extreme readings into the current time frame. Expectations come with this low volatility backdrop to change trend dynamics from dull to forceful trend and from up to down.

Furthermore. It is this extreme low reading by TEM modeling that is associated with low %BB-VIX readings, like the CBOE data reflected today, that says there is a low perceived risk in the market.

From a contrary and experiential point of view, these two leading models -TEM with the %BB-VIX – lead to dramatic declines in the majority.

Inverse VIX

One of the big money makers for the man-on-the-street in 2017 was the inverse VIX ETF. It doubled from its previous high in 2015 whereas the S&P only gained half as much.  These inverse VIX funds peaked and crashed in January/February 2018. Unlike the averages, they track they have not confirmed the new highs.

CT had a spread indicator of the short-term/medium term inverse VIX funds in January that did not confirm the new highs by the stock averages. It was part of our evidence supporting our appeal for the peak in January.

The charts above give the same comparison– short term on the left. They are not in gear relative to the averages they follow; they are in weak wedging formations and TEM is at an extreme TE #2, a situation that calls for a high rate of change trend.  All of which is bearish and calls for a spill in these investment vehicles. Such a spill cannot occur unless VIX spikes higher.

Bottom line is the risk to reward here in both time and price is avoidance behavior, move to the maximum about of cash allowed by your investment policy.

More to follow shortly

  1. MarketMap continual refinement of change of trend dates
  2. Offshore equity markets – Hong Kong and 21 countries ETF
  3. Sector leadership condition
  4. Failing sectors, the overall market is only as strong as its weakest sectors
  5. Twenty-year appraisal and long-term risk assessment
July 30, 2018

Volatility Report 7.30.18 Energy Sector

The energy sector is setting up for a big move

If there is a downdraft in the stock indices as expected, do not be surprised if all risk assets go down at the same time. It is what the pros call hyper-correlation. However,

Read More

May 30, 2018

Strategy Selector (V-tools)

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