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November 21, 2022

Volatility Reports November 21, 2022

VIX data does not suggest the daily wide swings in the stock market. Over the last 30 days, S&P 500’s minimum gain on an up day is 2% (rounded).

What the data reflects is more precise than the widely used put/call ratio. Today that statistic is just not a bear/bull ratio because there can be calls on leveraged bear (short) ETFs. Even if they have made changes in the ratio calculation, it is thought to reflect the mentality of risk-averse risk-takers compared to futures traders, as such it is the little guy that is assumed to be dumb money.

Well, the data used in Contrary Thinker’s fear and greed oscillator is more than the current perception of risk in the stock market today, looking out at various lengths. We also use the UVXY and others, which is a portfolio of S-T volatility futures. UVXY is ProShares Ultra VIX Short Term Futures ETF, long volatility futures. For a hedge fund, the cost of carrying a hedge is the value of that portfolio decreasing.

From an Alpha-achieving point of view, it is the process of moving to long volatility, that achieves Alpha, not the longer term carrying the position. The index has a slow-down trending bias because the stock market is known to be bullish most of the time. However, the index spikes to higher levels. Today the low 20% range suggests these investors see little risk of a volatility breakout. So, on the other hand an uptrend in the index is more like a spike leading the stock market. Back when Covid19 made the mainstream media the index spike to over .85.

With that in mind, a bear market always has

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November 14, 2022

MarketMap™ November 14, 2022

“The US Securities and Exchange Commission and the Justice Department now investigating, remains of FTX “

Bill Clinton’s Treasury Secretary Larry Summers making Enron comparisons
Back Story Contagion from the Crypto

THE WOLF STREET REPORT: Where’s the Contagion from the Crypto Implosion?

 

Here is a sample of the headlines.

The fix is in, there is only one Intermarket relationship that matters to the bulls and that is the USD against the world equity markets. While all eyes are on the dollar staying below its breakdown point, other relationships are being overlooked by the majority. For example, the inversion of long-term rates with the shorter-term.

Their study of the dollar relations is cited at best, looking back at 2017 as their model that says “when the bastion of safety is down” its risk on for stocks. Their research is front-end loaded. They forget the dollar bear in 2008 along with the world financial crisis or the dollar bull during the neo-liberal Clinton stock bull market.

Inter-market relationships, come and go. But this one has set up an influx of a liquidity pool for the smart money and big money to sell into.

So the news is good, inflation is under control, the Feds are going to pivot, and the dollar is “risk on.”  Now it is all clear, the game is the bulls to lose. They have all the analogies backing them up. They even pulled out the old Philly A’s trick, because if the Phillies had won the world series it would be a bearish omen, dead set. But they did not mention that an original NFL team, the LA Rams, won the Super Bowl as crème de la crème of bullish analogs. I guess they remembered the G-men beat the Pats in 2008, a nasty exception.

So what can go wrong?  “All you need to know. $UUP $DXY $USD” if you listen to the public stream?

“…One of the biggest developments this week was the breakdown in the US Dollar. The US Dollar Index dropped 4% this week, marking the worst week since 2009… that broke the uptrend line that has been in place for the majority of 2022. The strength in the US Dollar has been putting pressure on stocks and risk assets all year, so this is exactly what the bulls have been waiting for. “

Here is CT’s chart of the US dollar index showing the ruler trend line everyone is excited about its break. However, the long-term and intermediate-term trends are up; and the best the bulls can hope for in the “USD indicator vacuum” is a high-level trading range from 104 to 114.

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November 9, 2022

Volatility Reports November 9, 2022

“Time changes everything except something human which is always surprised by change”

Since the correlation has caused a big stir in the financial networks, everyone sees the 1-to-1 relationship between the USD and the ten-year notes as having a negative relationship with all risky investments. After one fella about creamed in his pants with the excitement regarding the discovery and the desire to go back to 2017 the question remains “what are they going to do and how are they going to know when it changes?

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October 31, 2022

Volatility Reports October 31, 2022

All the talk is about the profit season from now until the end of May, before summer vacation. Hence the cliche is to sell stocks in May and buy them back in October.

My system development firm Thinking Man’s Trader (TMT) programmed that idea and tested it and since the 1920s on the Dow, it works. The drawdowns are larger than most want to endure, but in general, it works.

Be that as it may, here is a small sampling of the content regarding this seasonal factor.

“The next six months have been higher 18 of the past 18 times during a midterm year. Yes, things have been tough this year so far, but be open to better times. What happened in the rearview mirror doesn’t mean it’ll happen again.”  From a broker that appears on CNBC.

“Of the 11 S&P 500 Sectors. 8 are now above their June lows. ” From a CPA?

“This is the 4th time in 2022 that $SPX rallied 7% or more in only 9 sessions. How are we feeling about this one? 4th time the charm?”  A CMT.

$SPY $IWM +8% this month”  from a CFA chasing the equity curve. 

We’re at a point in the calendar where $SPX returns tend to have a clear upward bias, but that bias is further enhanced when sentiment is overly bearish. One of the risks is that offsides positioning develops into FOMO as the year draws to a close.”  A Research Firm

The sentiment remains bullish and bearish on bonds and not much talk about commodities.

Well chatting with a number of bulls in the public space they all believe that the market has experienced a bear market, which is over. While my expectation is the bear is not over but thus far, it has not been confirmed. Like everything that makes TMA rough for the many, by the price and time comes that the bear is confirmed, it will be too late for the perma-bulls.

I put it this way, “From the ATH the decline has only been a correction, not a bear market. There is more to a bear than a 21% decline with the average time from high to low. The nature of a bear is very clear and undeniable, and what has unfolded thus far is not a bear market, maybe the bull’s egos are a little touchy. They are certainly defensive worrying about their jobs. But so far, not a bear market, it is a ‘bull market in fear.'”

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October 24, 2022

MarketMap™ 2022- Scenario Planner Issue#22

The social media mob is really perky after last week’s performance.

With the majority of commentaries that cross my desk, it’s clear most are moving away from doubt and have bought into the annual seasonal kick-off of a bull market that makes an average of 17% in mid-term election years, from the October low.

Comments range from off-the-seat-of-the-pants use of DMAs, “Highest close for the S&P 500 in two weeks, and just above the 30-day moving average.” Well at least he is unique, I hope he is not back-fitting.

“Positive RSI Divergence on WEEKLY SPX Chart = Bullish – This positive divergence has historically preceded meaningful $SPX reversals”

The problem is his scope is only from 2009 and RSI does not work that way. A deep oversold is a confirmation of a bear and because of its extreme oversold, each subsequent new low is expected to diverge. Hence making that concept (bullish divergence) useless and the most common weakness cited by experienced professionals.

Another bullish twist comes from a good source of market data and information. However, information should not get confused with knowledge and wisdom; and I am afraid to say their analysis.

The Stock Traders Almanac annual book (2023 version is on the market, $100 +/-) is a handy reference tool.  The owner publishes bits in the social sphere like the table inserted below.  The publisher points out that of all the months of the year, October stands alone, since WW2 as the seasonal bear market ender. In other words, that time window starts more bull markets compared to any other month. Can’t argue with that.

But what you find in almost everything you read regarding market data and market analysis is the unwavering bullish tone. Here is what I mean,

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October 13, 2022

MarketMap™ 2022- Scenario Planner Issue#21

Nature of a bear market

“…good news is ignored, and bad news is exaggerated.”

After a top is in place there is indifference reflected by the public and media.  Buy dips are programmed into behavior. However, with the smart money, the early adopter uses the mass of new entrants for liquidity to sell into.  As the decline starts to pick up steam, the late majority average down their cost by buying more. The good news stops getting positive follow-through in higher prices because demand is overcome by supply. Good news leads to prices going lower and bad news accelerates the downtrend.

The structure of the bear is complete with its own forms and patterns, like one-day wonder advances: sharp and short-lived reversals that live for one to three days.

Fake news begins to propagate making headlines. Add to that all of the misdeeds, scandals and reckless speculation, and corrupt biz practices of the past upcycle come to light.

The overall mood of the unreflective

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October 3, 2022

Volatility Reports October 3, 2022

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September 29, 2022

Volatility Reports September 29, 2022

Sizzle or Fizzle?

I never thought a headline phased as a question was a good way to introduce a news article or a research brief. A question reflects doubt, and I think readers want answers, not more questions. Be that as it is this morning, our pals at the “Seeking  Alpha” mailer is headed up with that query, which I assume reflects the doubt permeating the gaggle of content-providing market observers.

Tie that in with other mainstays of the personalities on financial networks which have either given into bearish notions with observations that “late cycle” economic events are happening that preclude the beginning of a new bull market, or the manic sales type permeating the podcast airways and popping up on Fox business who has gone nuts over the revelation that he has found a relationship between Cryptocurrencies – the stock market and the US dollar. “if the USD would break below 103 it be like 2017.” If not it’s the bear city.

Well ok then, that ties into the notion of a breakdown finally after nine months of correction is the fact that the perma-bulls are giving in. Both on social media and cable channels and it’s time to run with the herd.

Well, let’s start with what we know, we know that a bear market while larger than corrections, still corrects something.

The people at Charles Swabb put it this way, “It’s called a correction because historically the drop often “corrects” and returns prices to their longer-term trend. Is It the Start of a Bear Market?

Well according to the compliant sell side phrase “Nobody can predict with any degree of certainty whether a correction will reverse or turn into a bear market.” 

On the contrary, there is a risk in the market from here of 10,000 Dow points and it is correcting the FOMO buying that pushed prices into their ATHs at the end of 2021. 

The featured chart here is annotated for anyone in the public domain to review. Members already have seen the additional details on how the Dow will get there when it will get there, and the why of the risk assessment.

With a high degree of certainty in Mid-May 2011 Contrary thinker told its people “off risk.” and this has not changed since that date. You will not hear anyone disputing this fact.

We suggested to our people to sell into rallies and hedge their accounts.

Contrary Thinker was provided the opportunity of a private channel on the Smartphone app “Trade Exchange” and we took it.  Our market opinions and positions are our own and do not reflect the opinion of any of the principles of  Trade Exchange, while we hope that they have made millions from the ideas

(click to enlarge)

With that said, from the ATH that we called in the NASDAQ on 11/19/21 our middle-risk big swing ETF bull and the bear trading products to date performance is on the left on the screen grab here.

 

 

 

For investors, hedge fund managers who want to reduce their cost of carrying the hedges, deep-in-the-money options traders, and aggressive traders who swing trade the futures here is how our trade ideas have done on a 100k account from November 2021 

In the past 11 months, Contrary Thinker’s trade ideas on 100k made it into over $1 million USD today.

(click to enlarge)

 

Trade Ideas? We do things the old fashion way. Contrary thinker provides support and market analysis to form the basis of the trades and get that to our informed membership and LinkedIn private group members.

You are dealing with a team led by a veteran with over 30 years of experience and suggest that if you are not experienced and have a low threshold for account balance changes, you look elsewhere.  If you can take a loss, all you have to do is get the app, pay me $10/month, and after that a nominal incentive fee only on winners greater than a preset threshold. I have to win for you to make money.

On Shore USA, yes? Use this URL https://tradeexchange.app.link/jack_cahn

Offshore go to your local app store and get the free Trade Exchange App, after installing it on your handheld, use the URL from your handheld device. https://tradeexchange.app.link/jack_cahn

Let me know when you are on board, so I can get you into the group.

Work up your own trade plan based on some of the best and most complete research in the industry. 

Quarterly Membership $249.00 Six-Month Membership $425.00 Annual Membership $749.00

Country Thinking is about letting go of traditional ways of thinking, the commonplace that no longer serves you well in investing and trading. Building from the truth, from first principles the robust into anti-fragile. Thanks in advance for your consideration, I look ahead to working with you for the duration.

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.

–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

–Futures results are not linear they can be better or worse While confident, CT does not and can not by law make any assurances.

September 28, 2022

Volatility Reports September 28, 2022

Context Gives Significance to Price and Time

The long-term background remains in an expanding monthly range condition,. Hence a breakdown to new lows would suggest a

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September 15, 2022

MarketMap™ September 15, 2022 #19

When you have the enemy on the run, in retreat, you must pursue them relentlessly.

Volatility means big swings up and down. The news media has picked up that word as its euphemism for a market decline. However, it is volatility that is the trader’s live blood as opposed to the lack thereof for the bull-only long-term investors that simply buy and hold.

If you have looked at enough daily bar charts with the 200-day simple moving average you will see that when prices are above it, the changeability of the market is low, it’s steady as she goes. However, once the market drops below the 200 day that is where all the action is for traders.

This featured chart provides a textbook example of what two very different long-term opportunities look like.  The stats that are always quoted are from the 1950s,stating: “the S&P 500 has fallen >4% in a long bar 55 times.  49 of those times happened beneath the 200-day MA.  As you can see, before 1950 the same truth applied, as 90% plus of all long bar days happen beneath the 200-day.

This Macro change in the context of the market dictates if one invests or trades (both long and short). If you are so indelibly programmed to think only in terms of investing, the next ten to twenty years will be a depression for you.

MarketMap’s primary cycle chart suggests the next meaningful low,

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