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November 6, 2018

MarketMap 2018 4th Quarter

CONTRARY THINKING

What is typical of a major market top is how most professionals in the industry speak about normalizing the corrections.

Contrary thinking looks for one of two circumstances to correlate with such major turning points.

The one is when data or events remain the same but the marketplace’s interpretation of the events changes. The other is when the data/events change yet the way the market is interpreting the events remains the same. The one is a shift in mood, and the other is a denial of change both imply a regime change regarding the market; and possibly the economy.

These interactions give subtle clues of change that allows the contrary thinker to act before others, before the majority.

So today while the facts have remained the same, the interpretation has turned to the above-referenced normalization process, which is par for the course after the first signs of the new bear markets.
This normalization process sounds like this industry-wide: “Wall Street has seen 56 pullbacks (retreats of 5-9.99%) in the past 73 years; the S&P index dipped 6.9% in this last one.”

And they will add that, “…the benchmark fully rebounded from these pullbacks within two months.”

They are also eager to point out that since the March 2009 low there have been 5 or 6 setbacks of 10% +/- while the S&P is still up 335% even after the October decline. But here is the catch, there working assumption is they can not time the markets. Furthermore, the inference is that if they can’t no one can.

That’s because as one “wealth manager” puts it based on the current bull market history: “…waiting out the shocks may be highly worthwhile. The alternative is trying to time the market. That can be a fool’s errand. To succeed at market timing, investors must be right twice, which is a tall order.”

Why would it be a “tall order?” It only makes sense on what he says next: “Instead of selling in response to paper losses, perhaps they should respond to the fear of missing out on great gains during recovery and hang on through the choppiness.”

Wow! Instead of looking at price-based timing models to avoid the risk and to find opportunity, he is reacting to the profit and loss trail, which is post hoc, reactive and emotional based. Hence this wealth management is not based on any “discipline” I recognize. It is based on the profitable of the portfolio. This explanation is what brokers normally say about their client’s failure because its based on fear of loss and FOMO.

Another sign of an important top is in place along with the above apathetic attitude is the modest appearance they are giving to the risk. The rare bearish voices have only modest expectations for the decline.

Lastly, the majority of financial news pundits are kicking the can down the road with 2019 being the consensus.

With that said, done and dusted, our focus is on risk management point based on an objective model not a rationalization or cherry-picked array of Technical Analysis. It is the independent use of price-based tools, strategies, and macro filters to provide actionable and straightforward support.

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November 6, 2018

The S&P’s November to Remember

What follows is a blurb from the 14-page big issue Volatility Reports that is going out today covering all the various time horizons and where the market is at this eventful period.

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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 23, 2018

Market Timing is Dead

If irony evades you, you are in the majority, heads up.

Contrary Thinkers know,” the market programs the investor to do just the opposite of what he should be doing.” Contrary Thinkers also know that investors are not hard-wired to fail at achieving alpha, like so many others, would like you to believe. Its all a matter of being a Contrarian. Read More

October 17, 2018

One day wonders dominated in 2008 & 1932

Based on the evidence this is what I know

In the wake of the extended bull market since November 6, 2016, and more recently the advance from the April lows it will be hard to resist bullish actions the day after a 500-point rally by the Dow.

However, there are certain things I know, one of them is after a market experiences a panic low, measured by our Technical Event (TE) modeling, the best the market can do is a trading range, a change of trend from down to sideways has an extremely high confidence level.

All the major US indices experienced an S-T and in a few cases an I-T rule #1, a panic low on October 11. That condition will persist until the next TE happens.

Going into this week, I uncovered the AOD decline potential for this time frame, and it remains. A test of the low, successful or not, continues to be expected, before more sideways action into the election.

From an EWT point of view, a break of the low is needed to confirm the big bear. That break would also put trend followers in the bearish camp with a break below the 200 days MA.

Historically the rally yesterday is one for the books. The list below shows that of the top 20 one-day wonders, ten of them occurred in 2008, an election year, a bear market year, and part of the decennial cycle. But more importantly, lead to consolidation before more decline in 2009.

On a percent gain basis, the top 20 one-day wonders are dominated by the primary bear market leg from 1931 to its final low in 1932, where there are 12 of the 20 high percent up days that dominate the list.

 

 

 

With today’s focus on action, not the situation, having context before your trade is a good idea.

Source of data Wall Street Journal

Systems traders, our group, has a library of trading strategies that fit every trading style. All of our Algo trading strategies have the risk and opportunity management model – Technical Event Matrix (TEM) – embedded in their code. Our member investors/traders can implement a comprehensive system without no second-guessing. They have the governing model for visual control as well. Membership includes ongoing tutorials with open code; non-members are locked code only with 45 days of support. Library Link Here

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989

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 to your financial situation. Use only risk capital when trading futures or options

September 26, 2018

Nikkei and Bitcoin two to Watch

Volatility Report September 27, 2018

Nikkei 225

I wanted to focus on the NK for one simple reason; it is making a major pivot high in the current time frame. As such it has spilled over implications for the reaming stock market that are making new all-time highs in the same period.

The weight of the evidence is clear, but I did not hear anyone pointing to the recent spike up by the index before it occurred, and I am not hearing anyone now calling for a major peak. The chart pattern is a classic horizontal triangle, which based on EWT only occur in 4th of B waves. Here it is taking place after nine years of advance in a 4th wave position.  Based on 100 years of observation, the thrust out of the pattern is always a high rate of change affair that equals the widest high to low points in the pattern.

Math would be from “a” top “b” added to “e” for a target of 24.762. Or a more ambitious calculation is from “Three” to “a” added to “e,” which puts the NK near the high side of its long-term resistance zone at 25,328.00

Furthermore, based on the same historical observations, the “post triangle thrust” is the end of the trend not the beginning of a new one.

What supports these Amercian facts is the fact that our volatility model – the Technical Event Matrix – is registering panic buying, which is nearly always (99% likely) at a change of trend. In this case, the best case for the bulls is from up to sideways before the market flips on the trend followers. This FOMO is on a short and intermediate basis.

Given our MarketMap COT dates for the Dow coming in here at the end of September, the first phase of a cyclical bear market is expected.

Bitcoin

Triangles imply thrust, high ROC moves.  From a trading opportunity point of view, Bitcoin sets up for a straight-line trend after it breaks out of the wedge formation seen here.

For swing traders, the use of a band breakout, or a moving average crossover should get you into the trade. Use the largest width of the triangle measured from the last pivot inside the formation for a target.

This chart is the NYSE Bitcoin index, but the coin itself and the futures have the same pattern calling for a $4,500 to a $5,000 swing.

For Long Term investors: given that Bitcoin is a leading example of speculative exuberance and was a foreshadowing of the Dow peak in January, I suspect it will be a leading index of the Dow today.

If I reverse engineers this from the bearish outlook for US Stocks, expect a 4,500 dollar move to be a spill for this market going into the end of the year.

Furthermore, given the patterns are repeating here, if we use the Chinese markets as a similar pattern the expectation would be for a crash in Bitcoin prices.

A move to new lows, a move below 5,883 on the NYSE bitcoin index, should lead to lower prices; and this could lead the US equity markets into their bear markets.

Commodities with Related ETFs

Crude Oil

Tradition cycles have always phased the bull/bear directions of the markets from bonds to stocks to commodities to descending bonds followed by stocks followed by the commodities.

The turning point map for Crude Oil seen here syncs with additional independent modeling forecasting further uptrend by the commodities in general and oil imparticular.

 

The bar chart of the Crude Oil futures has traced out a 10-point wide triangle where prices have broken out. A measured move targets 80.00.

The post triangle thrust fits the Maps change of trend dates with a peak in the next two or three weeks.

S&P Sectors with related ETFs

Transports
  1. The transportation index has failed to hold the break to new highs.
  2. A head-and-shoulders top has formed with a breakdown confirming the top.
  3. Volatility measures allow for the trend to follow through.
  4. I-T target 10,000.

Oil sector (USO)
  1. The shares are following similar patterns to the underlying crude oil futures, which remains bullish and trending.
  2. The monthly sequence of Technical Events is textbook. Moving from a panic low extremely high volatility, a TE#1 (red vertical dashed line) to the end of base building marked by extremely low volatility, a TE#2 (green vertical dashed line) into the current time period with a TE#3 (the cyan blue dashed line) making the low volatility laboring trend.
  3. While the longer-term uptrend is maturing, the shorter-term backdrop is an extremely low reading of volatility. A set up for a short-term run at new recovery
  4. The middle daily chart shows a horizontal triangle breakout. Like the crude oil that targets $80.00, USO targets 50 – 17.00

Offshore Stock Averages with related ETFs

FTSE (PRF)
  1. Like the Dow, the major UK average made new highs at the same time. Unlike the Dow, however, it was not able to hold its breakout. Unless there is a quick recovery, the I-T has turned lower.
  2. The failure to breakout highlights here is an I-T sell signal with targets that are 5% to 6% lower
  3. The new high was emotional on panic buying signaled by our volatility model’s technical event #1. On the I-T model, the uptrend is low energy and laboring.

Great and Many Thanks,

Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
Copyright 1989-2018
http://www.thinkingmanstrader.com
www.ContraryThinker.com coming soon

Thinking Man’s Trader 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. www.ThinkingMansTrader.com, 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.

September 13, 2018

Dump Stocks after the Election

“American’s should be very concerned and pay attention,” Bob Woodward, author of Fear-Trump in the Whitehouse.

Besides being a dyed-in-the-wool capitalist, I am an ardent independent voter as in R. Reagan/B. Clinton, so I feel fine publishing this brief. I have some nagging voices from the 1950s rule not to mix politics and business, but the observation here has no political bent.

My analysis has more factual foundations than popular conspiracy theories like the Lizard People, aka “Reptilians,” are Running the World, or the Attacks on 9/11 was an inside job, etc.

Along with the mollycoddling of the younger generations not to be afraid of risk to the arrogance in the pundit’s bullish pronouncements, I feel vindicated speculating about the powers that rule on Wall Street.

In 2007 it was clear to almost everyone that it was time for a white house change. Traditional thinking was the Republicans could not win in 2008 because a two-term administration seldom wins a third term for the same party.

Well, the Dems sense that as well, and on February 10, 2007, Barack Obama, then junior United States Senator from Illinois, announced his candidacy for the presidency of the United States. Along with Hillary Clinton, the polls did not look good for the Party of Bush.

Some say the powers that the Treasury’s connections to Wall Street in 07 pumped the market up in 2007 in the face of the growing sub-prime debt bubble to dump the news events going into the 2008 election. Their goal was dumping a bear market, one that turned into the WFC,  in the lap of the Democrats, believing if not hoping the Dems would not be able to deal with it. They almost got their wish.

However, in 2008-09, in the face of the calls for austerity by the Tea Party, the Dems used centralized sequestration, engaged socialism for big biz, and bailed them out. Yes, centralized ownership of banks and companies “too-big-to-fail” that brought an end to the WFC along with the Fed’s QE.

Well, the same Wall Street power faction may be in the play again today. With one clear goal. They know they cannot win in November, and the Trump Republican Party will be under attack from at least the lower house of the Congress with signs from current polling and Senator McConnell that the Senate can be taken back by the Democrats.

So the question is, can the “powers that be” (PTB), feeling their power coming under threat,  keep what remains of the bull market pegged at these higher levels? Because to help Republicans stay in power, the economy is the only positive factor they have to sell in the mid-term election.

Given Trump’s dismal approval ratings of 32-35% and declining, the market should be declining now in expectation of the regime change, and it is not.

Given the evidence’s weight, a secondary peak after the January 26 high should be happening in the current time frame, yet they (PTB) have the averages on a trade war yo-yo.

Now they are trying to push through more tax cuts to encourage more share buybacks to keep the market inflated.

At this late stage in the recovery, another tax cut would be like putting gasoline on the barbeque, again.

They plan to deflate the market – pull the pegs – after the November election when the Democrats win, giving the Republicans an excuse for the market hitting the skids. They can blame the Dems and use the market as their issue in 2020.

Since January 2018, there has been a very clear sign of a market top; we published the sell signal on the 26th of January.

My bearish view was joined by Morgan Stanley in early August 2018 when the headline was “Morgan Stanley: The biggest sell-off since February is coming, and it’s going to hit the average investor hard.”  Today, Ray Dalio’s Seven Bubble Indicators Are ‘Flickering But Not Flashing.’”  I am in a position to say they are flashing. I will post them on the blog shortly.

Contrary Thinking

The majority of analysts point to the A/D line in gear at the new highs and a perfect leading indicator of a top. Hence without the divergence, there cannot be a top.

What they miss, along with coincidental A/D peaks like January 26, 2018, among other issues, is now out of gear the S&P sectors are; and how it is only a handful of sectors at best that is holding up and forcing new highs.

What the majority is overlooking is the emotional state of who invested in 2017. This is one of the key factors in Ray Dalio’s Seven Bubble Indicators, has new a new group of buyers entering the market?  Without a doubt. 

Our volatility measures show that from April 2017 into the January peak, the buying was based on FOMC. The Technical Event Model was in a sustained period of panic buying. Something that is normally an event, not an ongoing condition. These late-cycle buyers will flip out at the first sign of pressure on their account balance.

In fact, the February decline stopped right at their break-even level of these FOMC players; and from a long-term point of view, our targets for the bear take prices back the surprises Trump win in late 2016.

What else is clear in a casual and random viewing of the financial news is two overwhelming ideas everyone with airtime agrees.

There is no reason to sell now because there is no clear reason to do so, and two, the clear reasons to sell are well outlined by them – whatever their rationale happens to be- but these events will not occur until 2019!  Literally 90% of everyone you hear on the major financial news networks.

The problem with playing along with the “one for all and all for one” consensus view of 2019 is when the trend does reverse, it will be every man for himself. When their systems give a sell – you need to understand all of the systems are subject to hyper-correlation – the majority will be hitting the door simultaneously, leaving the historical decline of 1987 far behind as new records are created.

Hard-Landing

The annual issue of MarketMap 2018 – dated January 18, 2018 – bottom lined it this way after the record-breaking low volatility year of 2017:

“The idea of record-breaking will continue in the headlines in 2018. It is only common sense to know this.  In each bull/bear cycle since 1974, there have been record-breaking price events. Each bull market has been bigger, better, and greater than the previous. Each new period contained record-breaking events from the number of consecutive higher close days to the most significant one-day advance in history.

The same has held for the bear market cycles.

Since 1974 I have never joined the doom and gloom mob calling for 1929 and worse.

However, both fiscal and monetary policy has painted America’s economy into a corner, a corner that has no alternatives that are positive to bail out the market and the economy when the next down cycle occurs.”

Since my pronouncement, the debt situation has become worse. The Treasury Department says the government is on track to have a total budget deficit of about $850 billion in the current fiscal year that ends Sept. 30, and the Congressional Budget Office predicts a budget deficit of just under $1 trillion in 2020. The market is in a debt bubble that is widely recognized and just as widely ignored, and as I stated above, the majority of pundits and media forecasters are postponing the day of reckoning into 2019, 2020.

I will simply repeat what I said 9 months ago; there will be no way to support the next downturn with tax cuts and spending programs due to a pre-existing Trillion-dollar funding need.

 

September 3, 2018

Volatility Report September 4, 2018

Continued Weakness Offshore Leading the US and Canada

 

The ETF of offshore market EFA is following the Chinese market with a leading diagonal triangle, a bearish chart formation.

Read More

August 31, 2018

Chart Focus September 1, 2018

A Shift in Mood Forthcoming

8/31/18

Change of Trend (COT) dates from several independent studies are clustering in the current time frame. It is more than a random outcome. For one reason, the fractal method I use for diverse markets has a pivot – a COT-in the very near future.

Like volatility, these time windows point to a dynamic change in direction for the basket of commodities in this chart, “Bloom cmd map 2018.” When I look at the same fractals for Crude, Gold, and Silver, I see the same expected change.

The first two charts are overlays for the 18 1/2 year cycle.

History doe does not repeat itself exactly, but it does have a rhythm. According to the 18 1/2-year cycles, the timing of market events should be similar to the year 2000. Thus far in 2018, the dates are lining up with confidence. Looking at 2000, that model would suggest the next six weeks to be a sell-off of some proportion.

The 2018 chart labels the dates for the visual cross-check. What is a new price-based event os the crossover of the 50 and 200-day moving averages, nicked named the “death cross.” It provides trend followers with evidence of an estimate bear market.

Based on the current context when the sell-off does hit, there will be no fanfare beforehand. And when the indicators give clear sell signals to the big boys, the sell-off will be a high rate of change affair that exceeds the spill in February. As such it will be very profitable for long volatility strategies.

The number of long-term sell signals is mounting to go along with these COTs. True North on the majority of important sectors and all of the indices, is out of the market and suggests the engagement of long volatility strategies.

Rare TD sequential sell signals are hitting the major indices as well. The TDS long-term sell signal chart shows how the count succeeded in nailing the peak in 2017 and has given a 13 count sell signal in January, from which the market has not been able to recycle.

Volatility Report posted Monday for start of the week Tuesday, September 4.

 

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