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August 23, 2021

Volatility Reports 8/23/21

At the end of the first week of August, the expectation was, “The change of trend windows hit on the 8th and are pointing lower for four to 6 weeks.”

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August 12, 2021

Volatility Reports 8/12/21

To play the break or fade the break?

Put another way, is the most recent breakout the final break?

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August 2, 2021

New Way to Measure Risk

Playing defense is key to Alpha, in other words, risk management.

It’s simple math if your investment or portfolio experiences a drawdown of 33% for it to get back to even the investment needs an 50% advance, full stop. So why take a risk for an average or a  below-average opportunity?

Way too many professionals and self traders use the trailing P&L as an indicator for on/off risk. In reality, the market does not care about the size of your account that determines the size of your stop loss. Much of this “post hoc” logic puts the advisor/manager/trader behind the eight-ball because being stopped out does not tell you if the position was wrong, it just tells you the account was not big enough or the amount of emotional stress was too large being forced to sell. Worse yet, holding on into a low where the media – be it network or social – has a clear rationalization of why the market is in dire straights and dumping shares just in time for the bottom.

The featured charts in this issue show how risk is seen today, August 2, 2022, and my experience calling peaks since 1987 is my downside expectation has been understated. The timing is right on but the target is surpassed, which is fine as Contrary Thinker has tools to manage that and see the panic bottom.

However, today my methods have advanced since 1987 – and I am proud to say I still work with some of the same professionals. Back in the late 80’s Fibonacci retracements and EWT wave relationships were used. Today it is the volatility model I have developed – TEM- speaks loudly about the emotions or rationale behind the market.

Procuring shares for no underlying reason except the motivation of great profits is not a solid foundation. All of the US indices in the five chart windows shown here peaked on “poor buying,” as the old-timers call it. Today it’s called FOMO or irrational buying.

For that reason, it’s a fact that if bought on an emotional basis, it will be sold on the same. Hence when the shares go underwater for the “emotional buyer” and hit the trader’s pain threshold, they will dump the shares and stop listening to the perma-bull tunes promoted in the media.

On the charts, the “Red” shaded areas show where panic buying began and where it ends. CT measures risk to the price level where the panic buying started. The percent risk projected is annotated on the charts. I also highlight in blue the annual support zone for this year as the max level thus far. This max risk level is based on ratio projections from last year’s high/low action, which are visually clear zones for reversals or breaks.

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July 26, 2021

Volatility Reports 7/26/21

Signs of geopolitical change – no more gridlock; and social unrest bubbling up worldwide has investors and traders on edge.

In the face of pushing through congress the “build it back better” infrastructure program on a bipartisan basis, and the best real -middle-out – economic growth not seen since the late 60’s both political opposition and social unrest look convoluted.

Can the social unrest be based on “give me liberty or give me death?” What happens when tail risk arrives and this period of prosperity ends? Will all these protesters change their names and get vaccinated?

I’ve been called a fear-monger by some in social media. But the above are facts and valid questions. Along with the query that if the Fed has used all its tools to assure the next recession is a soft landing, will massive fiscal spending overkill the financial markets?

Venus conjunct Mars (August 24, 1987)

The big picture of the Dow & Co is in a near-vertical uptrend into a Geo-cosmic time period that correlates with major secular turns.
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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.

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June 18, 2021

Volatility Reports 6/18/21

If you are not paying attention to Volatility Reports, you might be SKEWED.

SKEW is similar to the VIX index, but instead of measuring implied volatility based on a normal distribution, it measures an implied risk of future returns, realizing outlier behavior. The index model defines an outlier as two or more standard deviations below the mean, characterizing a black swan event or market crash. The index value typically reflects the trading activity of portfolio managers hedging tail risk with options to protect portfolios from a large, sudden decline in the market. A SKEW value of 100 indicates the options market perceives a low risk of outlier returns; values increasing above 100 reflect an increased risk perception for future outlier event(s).

The featured chart shows that the SKEW data viewed through the %BB-Oscillator is at historical highs. A reading that the big boys with their ear to the ground hear the train coming. They expect an event and a large and or prolonged negative reaction to the event. It may be a black swan; it may be something so overlooked that no one believed it pushed the market over the trend following the cliff.

According to the MarketMap-2021 cycles, that change is changing the trend from sideways to down, and a final peak in the NASDAQ 100.

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June 14, 2021

MarketMap Issue#11

Jackson’s War on the Banks, the Panic of 1837 how it relates with today

The Panic of 1837 was a financial crisis in the United States that touched off a major depression, which lasted until the mid-1840s. Profits, prices, and wages went down; unemployment went up, and pessimism abounded.

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April 15, 2020

Three Waves of Panic Two More Expected

MarketMap Issue #8 2020

Two More Waves of Panic Expected

You see in social media permeating the public domain the fractal overlays of 1929 with the most recent panic sell-off.  The problem with this parallelism it is not anchored to anything at all except the similarity visually when resized and overlaid with each other.

ContraryThinker uses a method discovered in 2000 that I have advanced called the Event-Based Cycle (ECB)  that produces a similar peak to low intervals, it projects related date windows for tops and bottoms based on how the highs are anchored with each other mathematically. The charts below provide what is expected to be the scenario of the market going into late summer; along with an alternate scenario main difference of the low this year hitting later than the others.

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March 18, 2020

Hedge the Notes and Bonds

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March 10, 2020

Hot Money Euro Dollar

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