July 10, 2023

Volatility Reports 7/10/23

AI Darlings Create, Destroy, Recreate. 

Thus far in 2023 only the short-lived AI buying panic provided any semblance of opportunity that was above average. Its leader is featured here.

From a technical point of view there is too much risk to consider new purchases in NVDA and the macro sector of high tech.

Contrary Thinker has pointed out that progress – all progress – is dialectic. Simply ignore the archaic term to know that capitalism grows through what Alan Greenspan calls creative destruction. Unless the system fails, which means falling back on itself, like communism has in the old Soviet Union or the Weimar Republic of Germany did.

It’s out with the old and in with the new until the new gets replaced.

Jumping ahead logically with that as the working assumption AI will need to undermine the current bastion of the high-tech industry before AI rebuilds it. From a ground up point of view new plugins, widgets and apps will replace the existing ones, and the beat goes on.

Contrary Thinker pointed out in our LinkedIn blog space that #NVDA was making a climatic top as it moved above four hundred. The volatility model suggested that the share market would start to fall back and fill probing new highs as it builds an I-T reversal.

If you are a part of the group, here is the link from four weeks back in this regard. https://bit.ly/3PBvJYP

That top building is done or nearly finished. An important top is typical after “panic buying” as objectified by the volatility model TEM on the weekly bar. Adding to the weight of the evidence is that price-based event (TE#1) happened when the market’s price squared with time at four hundred. Refer to the notes in the chart for trade ideas.

Part of being a contrarian…

…is finding the message in the market few others are hearing. For example, in an exclusive study the data used is that of the profits achieved from programed selling of volatility premium. These programs are one of the methods used by institutional types to achieve better than average returns, aka alpha.

The featured chart of the S&P is running my %BB-VIX oscillator on that data stream to provide buy and sell levels on a short-term basis.

The red vertical lines highlight recent selling opportunities. Like the long term off signal generated by Contrary Thinker’s systems in mid-May 2021, what has been gained by holding risk except a second chance to get out near the ATH.

In lieu of publishing a MarketMap™ 2023 Scenario Planner here is another look at the short-term timing expected for traders. To premise the following, unless the decline causes a climatic bottom with low to zero risk, it will only be used to cover bear market positions. With that is mind, the current double top is in line with the MarketMap™ 2023, which is now trending lower into late summer early fall (Map not shown here.)

The featured chart here demonstrates the highly correlated double top with a favored Astrological formation. Along with a few others has noted in the COT table for the top. However, what is more significant is the Crawford attractor that is expected to pull the market to it over the next two to three weeks.

Hyper-Correlation is a Market Condition that should not be ignored

Since the advent of the e-markets all markets have been correlated. When there is dis-inflation – aka mild inflation – everything goes up and when there is recession everything goes down.  The Bulls have wrapped themselves around the idea that the one lone negatively correlated market, the bond market (leaving the currency out of the mix here) will provide them with a smoother equity curve. Well, that has been true from the 2009 low until highs in 2021/2022, as the exclamations made headlines with bonds and stocks nearing a correlation “1”.

The following chart is our volatility composite index, which shows how perceived risk impacts all markets at the same time. The spikes in 2022 reflect that bond/stock relationship just highlighted. Today joint volatility has receded back to its lower levels but not as low as the fearless era of 2017.

From Contrary Thinkers point of view, tops are easy to predict. Being off-off-off wall street helps. However, spikes in volatility are difficult to predict, which is different from calling a top and the ensuing bear market. Because the reasons for the bear are not seen until the bear market has a well-defined trend or at climatic lows. So, spikes in VX are upsetting outside the market events, like the pandemic, which was public info in December of 2019.  Early enough for several US Senators to cash in their stocks.

The point is not political, rather to anchor one’s memory for recall and to stress a point. Contrary Thinker called that top with the same methods used today. So, “heads up.”  The annotation on this chart points out a the start of a cycle early in 2020 and that cycle unfolds into a secondary high in the fall of 2020. The same cycle hits again in this period with a Crawford attractor – a super-stellium of aspects – that should kick off the next round of inflation. Bearish for bonds, bearish for stocks and bullish for long volatility.

This exclusive offer is only for LinkedIn professionals that are part of the Volatility Reports Group.

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The brief by itself is worth $99, but we want you as a long-term client, so you get all the benefits of a permanent member, access to the blog, LI group, and the regular newsletters – MarketMap™ and Volatility Reports 

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Publications cover the US Stock Market, Offshore Markets, T-Notes/Bonds, Precious Metals, Rare Metals, Bitcoin, Currency Markets, Grain Markets, and Crude Oil.

June 30, 2023

Volatility Reports 6/30/23 Bonds

June 28, 2023

Volatility Reports 6/28/23

Two-thirds of U.S. adults aged sixty-five and older have money in stocks

“Nearly two-thirds of U.S. adults aged 65 and older own equity—up from roughly half of Americans in the same age cohort before the 2008 financial crisis. Conventional financial wisdom suggests investors should rotate from risk assets such as stocks into havens such as bonds as they age. And with rates having risen rapidly since last year, bonds and cash look more attractive than they have in a long time.”

Yet many older Americans say they aren’t ready to part ways with their stock-market bets.  the numbers from SJ and seen in a Gallup survey of U.S. Stock Ownership.  https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx

They have been warned.

But like a hammer hitting them on the head repeatedly with the same old quote and verse after a while it falls on deft ears. It’s like Aesop’s fable, ‘The Boy Who Cried Wolf,’ teaches a timeless moral lesson: don’t ‘cry wolf. ” After a while people won’t believe you when something bad is going to happen; they will lose their trust.

I proctored behavioral studies that prove this commonsense precept. But that is the market we live in today and the Truth will find you through Volatility. If you are married or in a partnership you understand.

Since 2018, the last time a meaningful bear was expected market timing and bearish calls are only the domain of the disenfranchised new kids looking for the great opportunities like I had at Dow 587 and throughout the 1970’s or early1990s or 2001, 2009, 2011, 2020. But all the buying opportunities happened after a period of “not so much fun.”  Hey, I haven’t made up the rules, and the rules have not changed.

So, you get it I am sure, the problem is when the boomers (the wiser and more experienced segment) stop hearing substantial risk get out, the hammering will have stopped, and it will feel so good. But, at that point it’s too late. What do you think will happen? What magic indicator do you think will set them off protecting their wealth?

Generations defined by name, birth year, and ages in 2023

According to the bulls, especially the big self-promoting bullish ones, “This is what is important to always remember. Stocks go up and they go down.  If you want to get some good deals, you need to buy when they are lower.” What?

The problem is they are always talking the market up, and implicitly are not buying here after a 20% rally. They cry bloody murder after a 5% correction and after a 20% dip they go back under their rock when in their words, the market is, not “fun.”  I am paid to observe I could not make this up and I never drop their names.

When you see a great deal I would take it, Country Thinker takes care of its own and no one does timing better. 

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Publications cover the US Stock Market, Offshore Markets, T-Notes/Bonds, Precious Metals, Rare Metals, Bitcoin, Currency Markets, Grain Markets, and Crude Oil.

June 14, 2023

MarketMap™ 2023 #12 Fractals TEM and Trade Ideas

Basics, fractals are patterns that are similar across different scales. They are created by repeating an uncomplicated process. The fractal business model creates a company, out of smaller companies, which in turn is made from smaller companies and so the pattern continues.

The Fractal Nature of Elliott Waves: Waves within Waves

Elliot Waves are fractals. This means that each wave is made up of self-similar sub-waves that have some relevance in the market. In other words, the same 1-2-3-4-5 up-a-b-c down pattern that makes up the basic Elliott Wave pattern can be seen in some form or fashion as you zoom in and zoom out. Same holds true of bear markets.

These unfolding trend structures are labeled according to fixed rules with the result providing the correct look. Each degree trend (size or proportion) is tied to the rules and related market price and market sentiment events confirming the count is correct.

I understand that many look at bar charts and see random coming and going. To an experienced eye the patterns jump off the computer screen. That does not mean 100%-win rate, but there is an edge.  Without getting into too many basics here, going right to the gist of this report is the big profit opportunity from irregular tops. Plus, you can work the stop loss to favor your tolerance but working down from the daily bars I will show here to the 60 minute and 15 minutes.

p.s. Contrary Thinker uses its volatility-based model to predict market dynamics thus filling in a void for EWT. 

June 12, 2023

Volatility Reports 6/13/23

Definitions allow us to talk about the same thing without confusion but a 20% recovery from 10/13/22 has little meaning without context.

Part of being a contrarian is finding the message in the market few others are hearing. In an exclusive study the data used is that of the profits achieved from programed selling of volatility premium. These programs are one of the methods used by institutional types to achieve better than average returns, aka alpha.

The featured chart of the S&P is running the %BB-VIX oscillator on that data stream to provide buy and sell levels on a short-term basis.

The red vertical lines highlight recent selling opportunities.

There are several reliable cycles that are tradable,

June 1, 2023

Volatility Reports Extra

May 22, 2023

Volatility Reports 5/22/23 Bonds

The dog waging the equity market tail is the credit markets. Who let the dogs out?

Interest rates hit their March 13, 2020, the 30-year T- bond market hit an all-time high (ATH) on the same date.

Over the next 19 months later risk traders ignored in general the run of higher credit rates until the Fed began following the market, its client’s market.

Near the first day of spring, two years from that (ATH) for the long bonds the Federal Open Market Committee enacted the first-rate increase on March 16, 2022. That hike was followed by seven more interest rate increases with an assumed end of fighting inflation May 3, 2023. Don’t take the irony the wrong way, but that was the high pivot on the right-hand side topping process ending the most recent counter trend rally.  Another endorsement of my Contrary Thinker moniker. (See weekly chart below.)

Today the bulls are hoping for a recession because they think that will lead the Fed to lower rates with today many of the big Wall-Street banks calling for the Fed to do just that.

The Street’s problem with that is whatever the bond market wants the bond market gets, and the market wants to get paid more…

May 15, 2023

Volatility Reports 5/15/23

May 8, 2023

Volatility Reports the Big Picture

Volatility Reports the Big Picture.

What has happened after all the crashes and bear markets since 1987 is the increased interest in portfolio insurance. That is an industrialized term for various ways to protect your investment portfolio against losses. Trend following systems do the same thing because they go long in up trends and add on the way and short in down trends adding on the way down. In fact, long put option programs are advertised as insurance against market declines and program trading of puts is portfolio insurance.

The waning of interest in portfolio insurance (aka hedges) is related to the distance between the most recent bear market/crash events and the peak of a current bull market. At least and until next bear market has done its damage.

Like almost all forms of portfolio it has nothing to do with the valuations of equities. Because they are all price-driven, based on technical factors.  Like all priced based forms of portfolio insurance, dynamic trend following is driven by market direction signals (e.g., MA crosses.) They are similar to the Algos, and program trading used in 1987 that offset the massive loss of profits for the few who were ahead of the curve. Ironically, after October 19 program trading was blamed for the crash. 

All of which in rational terms leads me to a major question…

With the state provision of insurance, which all started with the Greenspan put in 1987, is their anyway to justify market values at any level, not to mention the current one after a 13 year advance pushed in the last 3 years by pandemic induced QE? A QE that had nothing to do with values and everything to do with major market intervention.

While it is wholly a socially acceptable notion to have equity risk insurance provisioned like unemployment or other entitlement programs, the latter has always helped people. But what happens if the insurance does not work next time. Feature this, the bitcoin industry goes bankrupt. Will the Fed insure all or any of the diverse vested interest from brokers to miners and holders these risk assets from losing funds over 200k when they crash again?

What is the real value of Bitcoin? Bitcoin reflects the attitude of risk takers, as an investment/trading vehicle it has no intrinsic value, only what the market will bear. Furthermore. few merchants want wild swings in their currency of trade.  As a primary indicator of speculators’ confidence, it will not lag the Dow & Co into the next downturn.

Did the market produce its “Abbey Road” on Friday?

The market can’t have it both ways, it’s not rational. The only reward that emotional investing receives is volatility. From the start of the late inflationary cycle, it was good according to the bulls, until the Fed used that as their basis for hiking rates, at which time the bulls sustained focusing rather on the USD index being below 103, a risk on signal. But now with inflation seemingly under control, that’s bullish also and add to that a booming economy as last Friday revealed, the market ignores any negative issues gaps higher on the open rallies 500 points early and holds that gain into the close.

Yes, Friday was a surprise. According to the Bureau of Labor Statistics, the unemployment rate was 3.4% lower than the expected 3.6%, tied for the lowest level since 1969 coincidentally a hallmark year for the Dow. It was its second attempt at breaking out above 1000 and failed. It was not until its 6^th attempt at the break did the market succeed from 1966 to 1982.

As a guideline market do not top make major high pivots on bad news. Rather major reversal happens on good news or no news when the media and the pundits on the floor do not expect and do not shift their sentiment until a few AOD declines happen.

Scenario and Bottom Line

Longer-term members would confirm that the COT dates hit all the markets in the same time window within a band of a few days. In a series if you will. I will strongly suggest you do not get caught up in the most recent correlations like the “bullet proof portfolio mix of 40% bonds and 60% equities.

Bonds will not be a hedge; they will continue to relate in the same fashion seen the first half of 2022.

The most recent highs hit and reversed at the long-term descending channel line from the highs made in March 2020.

Add to that the FIVE high pivots at 134 by the bonds and notes. The primary cycle has topped.  The 6^th attempt came up well short of the 134 price and has tumbled since with the support of TEM on a rule #2.

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April 19, 2023

Volatility Reports 4/19/23

The New and Improved Inflation

While everyone is happy about the fading of inflation in the regular reporting, there is a new wrinkle: The Saudi-Russia oil alliance.

The OPEC+ decision to cut output for the second time since President Joe Biden sought an increase in production will widen supply shortfall later this year. Not to mention the administration trapped short oil for the SPR. For consumers, gas and oil prices have been going up based on futures & spot, pushing inflation back up while funneling more money to Vladimir Putin and his war.

Looking at time and sentiment according to implied volatility readings have not