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July 21, 2020

Volatility Reports 7/21/20 Fang Index

Panic Buying is Gripping the Premier Fang Stocks

On the 7th Volatility, Reports pointed out the occurrence of a TE#1, a backdrop of emotional buying. Furthermore, all of the below is in the context of the S-T tidal system flipping from long to short on the Nasdaq plus MarketMap’s annual fractal providing the big turn for the year this week.

The chart used today again shows the panic buying highlighted in red followed by a shallow correction. As a rule, 99% of the time a TE#1 leads to a “V” shaped bottom or an inverted “V” top following by a chipping range. The weekly bar sees the trend as moving into an old and low volatility background.

The weekly bar on the left uses our set of OB/OS oscillators, which is not used for the traditional divergence analysis. Rather the model looks for negative reversals at a top, when the oscillator makes a new high but the market does not.  The other sell signal is when one of the indicators is trending up and the other is diverting from the other indicator. This out of gear is a sign that momentum is about to change. The purple lines show the most recent sell suggestions.

 

The intraday chart of the FANG index shows an  EWT set up of five down and three up; plus it reveals a Gartley set up for a low-risk short opportunity.  The inverse ETF is a controlled risk vehicle to use.  Place a stop around the old historical high but above point “2”. 

The old high of the Fang index back in January 2020, just below 4,000 would be a target going into the end of the year.  That would put the inverse FANG at 50. The current price of 14 1/4 to 15 has a risk to new lows, out at 12.  A good risk to reward.

A number of the generals leading the Fang index are showing signs of “poor” buying. TSLA has made a climatic top. It has risk to 600. While I have heard many critics of the companies founder, he is a true genius who grounds what he does on the first principle thinking and I admire him. Be that has it may, the stock is toast here based on my first principle thinking, only time will tell.

volatility Reports have previously pointed out the peaking process of Netflix two weeks back and used the outside world’s back story of the companies compete. Especially now tih NBC/Universal getting into the field. What coincided with the launch of Peacock was the panic buying in NFLX both S-T and I-T and its first break of a support level at 501. Now the 480 to 476 area is pivotal, a break there should pick up a following.  The context behind the market supports a trending move, with a TE#2 on the daily bar.  The weekly bar has given a sell signal based on our OB/OS model.

Lastly, Google has made a climactic peak. Like the other generals, it made its highs on FOMO type buying with the OB/OS model giving a sell signal in the same time frame. A cross under 1527 should be the next bearish sign.

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 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.
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

July 16, 2020

Volatility Reports 07/16/20 Nasdaq

Nasdaq Hyperbolic Peak, in place. What supports this idea is equivocation by so many advisors and analysts on what this market is doing, and their subject lines or intros being “questions.”
————-

I’m sure not many recall the peak in early 2000 by the Nasdaq composite. It ended a secular bull market from the low in 1974. A great bull move. I wanted to point out the pattern at this inverted V top. For one it broke the upper channel of the long term trend from the ’74 low. Such “throw overs” are equivalent to investors paying any price for these shares of stock. The type of emotional investing old money likes to see for profit-taking.

Contrary Thinker’s volatility model on the monthly bar seen here signaled the uptrend was old, persistent and ready for a change. Please note that after the high in January and a month of decline the recovery – bounce – took a few months on backing and filling on the low side of L-T resistance – blue line – that was coincidental to 62% retracement before the other shoe drop.

Here is a snapshot of the composite from the wave [4] low in 2002, which reveals a similar set up at today’s highs. the throw-over the upper channel and the TEM reading of old, feeble, and ready for a change on the monthly bar. That is the Technical Event (TE) #3.  What else is nice is wave (5) is 2.618 times wave (1) and wave (5) is related to the length of the previous correction, wave (4) by the Fib-ration of 1.381.

On an S-T basis, the daily bar is saying that the tension behind the market is ready for a trend change as well, with a TE#3. The key price levels that would suggest a lower market are shown in the data window.

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July 15, 2020

MarketMap 2020 Issue #12

Change of trend time windows is popping up from early next week into mid-August. MarketMap-2020 discusses the methods and reveal the dates in this report

MarketMap-2020 issues early in the year provided ContraryThinkers with a hint that a peak was going to happen in the early part of the year.  One of the cycles was working back from 2020 with the Fibonacci series.

I said: “…working back from 2020, subtracting the beginning of the summation series from the current time window pinpoints the years of all meaningful – tradable – peaks back to 1929. I have highlighted them in the above charts.

The major or corrective tops posted in 1929, 1966, 1987, 1999, 2007, 2011, 2015, 2018, are all in the series counting back from late 2019 and the year 2020. Among other reasons, the market began to put in a major top precisely two years ago.”  In 2018 and 2020 fits as a major top year and 2020 fits with the Decennial cycle. Thus far it is proved very true.

By the way, reaching back 144 years – from 2019-20 – it pinpoints the panic of 1873. This financial crisis triggered a depression in Europe and North America that lasted from 1873 until 1879. In the United States, the Panic was known as the “Great Depression” until the events of the early 1930s set a new standard.

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July 14, 2020

Volatility Report 7/14/20

“Give me freedom or give me death against King George III, not Covid19”

A few weeks ago in Volatility Reports, I pointed out one alternative of the current rally’s change back to a bear trend. I pointed to the “1973-74 parallel. On that basis, “the current rally would take four to five months off the March 23, 2020 low before a dull and slow bear market took hold making new lows in 2021.” That timing for that peak takes the market into a July or August peak.

Volatility Report 7/14/20

The other alternative and the desire of many to get it over quickly puts the market early in the 1929 or 1987 crash, the first 62% retrace the first S-T leg down.

Given the fast recovery – the wishful thinking – of normal circumstances in the face of a pandemic and some in leadership pushing the libertarian ideal of “give me freedom or give me death.” So reopen fast and get back to work was their mantra. The problem is that we were fighting to be a nation, not fighting a pandemic.

The low cycle expected around the 4th to the 7th was a non-event, the cycle inverted, as previously noted. The cycles for long bar days have some potential this week. In other words, from the open to the close the day range can be greater than 4%. These are the types of days we lay in wait for, as low risk and better than 4 to 1 opportunity.

However, these dates jump out of the history books for long bar decline days, from July 20 through August 3, it should be hard down. These particular days are anniversary dates of previous long bar selloffs: July 19, 21, 26, and 30. As long as traders are on the front foot, it does not matter which day(s) hit, but the period from July 27 through August 3, should be the period of the highest rate of decline.

There are a number of things that need to start lining up to put Volatility into our bearish strategies, which is a futures short selling scalping system. Monday’s UpThrust – head-fake or failed breakout- was a beginning. Our featured chart here shows the typical set up for this distribution pattern.

Similar to the above model, the point on the mini S&P chart below wave (2) was the climactic high followed by the distribution range. The rallies to the peak of wave “a” is the phase “B” in the Wyckoff model; and the rally and intraday reversal is the phase “C.” That suggests the range lows should fall today, with possible testing pull back to the low end of the range. That puts the S&P mini futures below 3,000. The Dow has a similar chart pattern.

The important intermediate-term volatility model is set up to support a longer-term trend. Excluding the Nasdaq and its futures are ready for a trend, a dynamic forceful one-way move. Once it begins there should be little in pullbacks or whip-saws. The Nasdaq is a different story and not bullish, but I will take it up in a second VR today. Plus the newsletter via email that covers our proprietary volatility model

Here is the S-T chart on the ES, the price levels in red, in the data window, are the S-T breakdown levels that should accelerate the decline, once broken. If you have short or bear strategies, this would be your signal. Contrary Thinker members can use this break, but there are more details in the next two VR’s coming out today.

Contrary Thinking begins here. 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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 for your financial situation. Use only risk capital when trading futures or options.

July 14, 2020

Long Volatility Hedge Report

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July 7, 2020

Volatility Reports 7/7/20 Fanng meets Fang

While advisors and capital managers should not expect the FANNG stocks to roll over at the same time, the signs are becoming clear that the buying behind these stocks is emotionally based, investor’s greed going over the top chasing profit potential, thinking in a straight line. To the experienced, this looks like a steak dinner with cocktails.
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July 6, 2020

Volatility Reports 7/6/20 Short Term Indices

The background based on price is coiled up like a spring. A trend-following or breakout (down) signal will get carryover. Charts with breakout points will be posted with the opening of the day session.

Last week I pointed out that our volatility model – a leading indicator, never lagging – for both the intermediate and short term signaled a trending move was on the horizon. that the bulls have a chance for the 1929 or 1987 melt-up that they are looking for.

For s-t and day traders’ money is money, trade either direction, it does not matter if my outlook suggests deflation for the long term followed by hyperinflation in the recovery effort.  I saw a connection of mine post a brief headed ” the low is in for the year,” which tells me nothing. Granted I did not read the brief, but the headline should be captured in the writer’s content. In other words, the low could be in for the year and there could still gibe back 20 to 25% from here, and not make new lows until 2021. The sell-off does not need to be like the last three we have witnessed. It could be more like the 1973-74 slow Chinese water torture, low volatility, and dull bear market.

The big take away here and breaking old school thinking out of their box it’s how you get there that is key and to be clear about risk and opportunity.

Contrary thinker’s featured chart is the S&P futures going back 23 years with our Tidal Wave model. As a system, it can be refined into a day trader with the TEM as a filter. From a forecast point of view, it provides a basis for the outlook.  Since the near-perfect sell signal after the February island reversal, the buy signal was early setting the cycle system into inversion, that is buy mean to have a short bias and sell means to long bias.

 

A few things stand out in the above chart. for one is the island reversals at the February top and the June secondary or lower peak. Neither one has had their gap closed, a bearish tendency. Both reversals were failures to hold long term and intermediate-term support zones. As mentioned TEM is a new signal for trend-ability.

While the headlines since the 8% down day have been one-sided bullish and every random count I take in social media has the bears at 3 to 5%, the market has made little headway. Here is the Globex three hours before the open, and only the Nasdaq futures are in virgin territory.

The NQ is in the S-T resistance zone and a move below 10,451 would be a sign of weakness.  Support for July is at 10,334.00. The other majors have run into S-T resistance and fallen back thus far.  More on that after the open.

As intimated above, the mentality of small-time investors, measured by the put/call ratio provides an indication that the bottom of the pyramid is buying, providing liquidity for smart money to pad off into, to take profits. Smart money needs a broad base of small buyers to be well entrenched in their buy one day dips strategies so they do no collapse the market.

Given the speed of two of the last three declines since early 2018, bibs are being pulled and the market hits the panic stage quickly. However, from a market mapping point of view, there are only one of two places the bear market can be stationed, and this is a bear market rally in the big caps and an irregular top – Gartley’s butterfly formation – in the Nasdaq, with the new highs.

Referring to the above 1973-74 parallel, the current rally would take four to five months off the March 23, 2020 low before a dull and slow bear market took hold making new lows in 2021.  That time mapping brings the market into a July or August peak. The let’s get it over quickly scenario puts the market at the (2) point on the chart. Given the snap back to normal mania and the tension in the background measured by TEM, collapse is very possible here.

Here is the textbook example of an irregular top. Keynotes about the topping process are the nominal new high made by the (b) wave. This new high is not confirmed by market internals like the A/D line, which is the case.  The new highs are being led by a handful of marque stocks, not robust advance. The limit of the advance is typically 1.236 times the length of the (a) wave; and the subsequent decline takes prices back to the beginning of the major (5) wave advance.

Running those rations on the real chart should put a cap around 10,542. My I-T resistance zone has its outside resistance at 10,549 for July. The (C) wave sell-off would target 6,000, the low from 2019, and about equal to the overshot on the high side.

Lastly, referring to MarketMap 2020, there is a change of trend expected early this week. If it is an inversion the market should change from side-ways to down. If prices continue to move higher, the next orthodox time frame for a COT is the week of July 20.

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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 for your financial situation. Use only risk capital when trading futures or options

 

July 1, 2020

Hot Money the US Dollar and Currencies

Inter-market-relationships, the relationship between risk assets is temporal at best. They can exist for extended periods and end without the media’s “breaking news” alerts.  So the keen interest in measuring correlations is when they ALL reach “one.” When that happens you have hyper-correlation. In a phrase, all markets move in unison, and asset allocation or diversification is mute.  Today the background of all of the markets from commodity index to bonds sets up for a period of trends.

What is particular about the US dollar, is in the face of the proclaimed rabid printing of money since 2011 the dollar index has advanced from the low 70s to a recent high of 104 or 43%. A bullish move one would not expect with the world awash in greenbacks.  From the peak in early April, the index has corrected to the most recent area of bar chart congestion. That high to low range happens to be a 23% retracement of the entire move from 2011 low but more importantly, it is a 38% correction of the rally from February low. That advance is just the beginning of the meat and potatoes of the uptrend. In Ettiot wave terms, the third wave.

 

What gives Contrary Thinkers and this analysis confidence in this outlook is the context, , the volatility modeling underlying the market. The chart above on the left depicts a Technical Event (TE) #2 on the volatility data itself. This signal tells the investor/trader that a dynamic move is pending. This is based on weekly data hence it is a multimonth call. The weekly chart on the right shows the simple A-B-C decline with a typical “B” wave triangle.

The next chart is the first leg up from 2018 low that captures the A-B-C decline and the panic index on this weekly chart hitting an extreme and a buy signal.  It is also a low-risk chart pattern. From a strategy point of view, investors engage trend following systems here, letting the uptrend take you into the trade. with a system’s status off if the market falls below “C”. Much better risk management as opposed to simply going low here.

The condition behind the index is near identical to the volatility model for all other markets here in the early days of July.  For the buck, a TR#4 suggests that a low to high range of 10 points may be challenged, projecting 107.

The weekly chart in the middle says the current downtrend is old and ready for a change; and the short term chart on the right is registering a new TE#2. This background is calling for a trend and breakouts to get carried over. I have played the I-T support and resistance zones with the chart for breakout points. However, a short term band would be more sensitive to entry.

Back Story

The pace at which emerging market economies are losing FX reserves is staggering. In March, emerging economies lost around $1.5 billion in foreign exchange reserves per day, according to Bloomberg.

 

Become a Contrary Thinker Today. 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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 for your financial situation. Use only risk capital when trading futures or options

 

 

 

June 12, 2020

Volatility Reports 6/12/20 Hedge Systems Status On

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June 11, 2020

Volatility Reports 6/12/20

Looking back at the mini climatic low compared to the sell-off Thursday

Headline from contrary Thinker May 27, 2020 “late bear rally into panic buying and we pointed out that the “World Market’s recovery looks old and feeble,” based on our volatility models leading indication a Technical Event #3. That was eight trading days before the nominal price high and pivot.

In turn on Thursday the 11th the lower gap open left an island of buyers from June 6 through June 10, who will not be happy campers waiting to break even. All Contrary Thinker subscribers are aware of the time frames outlined to a peak in June. Whether it is a primary peak and the market only produces a failed rally or it makes a new recovery high before the onset of the next bear market leg is academic. From an investment, trading, and capital preservation point of view, the sell-off yesterday did not make a Short-Term (S-T) low.

That brings me to the main point of this issue, how to pinpoint high probability lows.  What I call “low risk.”

From right to left, you can see the three main indicators set up the low. The daily bar as early as February 19 made a mini panic S-T low. TEM reached a TE#1 and the panic index reached an extreme above 70.  That panic was the kickoff of the larger decline and provided a respite for a few days.

However, the weekly bar was not in gear with that low.  It is easy to see the same three indicators provide an extremely low signal in the last two weeks of March. TEM hit a TE#1 (%C below 40 and HV above 60) and the Panic index was above 70.  The monthly bar for March confirmed the low with its own TE#1 and a Panic reading at 70.

At that point you can go back to the daily bar and see the Panic index move back above 70 and a new TE#4, suggesting a change of trend condition from attending to range expansion.

When you look at Thursdays sell-off, there is no sign of a S-T low. The market peaks in low volatility TE#3 and has not provided a fresh event and the panic index is below 70. There is more decline to come.

A sidebar here, I have many long term clients that are very good trading and know these inside methods.  I missed this big tradable low. For two reasons, one is a tested low is ideal along with the above and that did not happen. Two I was 101% focused on the hedge program which did very well netting over 100k on 900k from February 24 to March 16. Once disengaged I was looking to do it again, which was partially put on for a few days with mixed results but no drawdown.

That decline, which we expected along with the amount of risk – expecting a 50% decline – hit fast, it was extraordinary, not leaving even the best hedger time to catch his breath. Part of my vision for Contrary Thinker was upscale communications, your input is something I listen to, keep me on my toes, I will appreciate your feedback.

One of the hedge fund masters I admire and work to simulate is Standley Druckenmiller. He missed the “V” shaped bottom as well. BOA moved their targets for the S&P higher after admitting on CNBC they missed the low.  Well, that may put me in good company but I would rather be right and I would rather provide the best advisory to my membership.  

Here is a short curated article on the Zero Hedge site about Stanley.

Lastly, heads up, hedges are going back on Friday or Monday. More on that and strategies in a private memo to full members only. New TradeStation workspaces that I use for the hedge program are going up before the open today. 

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 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 for 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

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