Volatility Report (click title for full report)
April 28, 2021
Bears are trembling with fear and falling like flies. Bear ETFs are making new lows while their bullish counter ETFs are still 5 to 10% off their ATHs.
From our Contrarian vantage point, that is a good thing and supported by the rest of the world either not confirming the highs set by the S&P or finishing off their advances from the March 2020 low in Long Term (L-T) panic buying as highlighted in my first featured chart.
The chart helps the longer-term trader put the market into a completed cycle perspective. What started at a panic selling low from October 2008 to May 2009 to a panic buying high from January 2021 to date. The World Index, not including the USA, also by various ETW counts, has completed a cycle as well.
This top chart portrays it as an irregular topping process, which implies two things. One, the secular bull market is still intact once the correction is over. But – and you knew there was a but coming – the next leg down is a (C) wave, which is the same form of decline as the first quarter 2020 decline. Moreover, it is of a larger proportion with risk from the 2021 resistance zone shown from 504 to 578 to the support zone for 2021 that runs from 207 to 278 or 62%—a fib-ratio to boot.
The next featured chart shows an alternate pattern, an expanding triangle, which puts the market’s March low in a 4th wave position and makes the advance from the March 2020 terminal, the end of the secular bull from 1974, or the 90-year cycle low of the 1930s.
The post triangle rally was a neat 1.618 of the triangle’s width, putting it right on target today.
Lastly, the Technical Event Matrix (volatility modeling) provides the same clues that a panic – irrational – buying period is putting a major top in place. CT’s volatility of implied volatility shows that the background is at an extreme level of complacency, measured by %BB-VIX (left-hand window).
Not good if you are on a pub crawl with your trading buddies and caught up in the trend is your friend mentality.
The vertical lines highlighted when the last extremes were reached at both tops and bottoms and that the same setup is happening in the current time frame.
Regarding the “Time Factor,” MarketMap-2021 Issue #9 will be out by the end of the week. In the meantime, refer to the map shown below for members only.
April 27, 2021
JG Wentworth Tells it like it is: “It’s My Money & I Need It Now.”
In Jerry Maguire’s words, “Show me the money.”
Immediate gratifications never go out of style. Everyone is a day trader, a scalper, even if they have a long-term investment time horizon.
April 25, 2021
A top is in place, and a more decline is expected.
Volatility Report of 4/16/21 did not mix words when it said, “The volatility background provides a setup for a 30% to an 80% fall in the next 30 to 45 days.” That forecast was based on both our timing method and our dynamics model. Our current work expects the decline to pick up speed, not based on some wild guess to get publicity. Rather Contrary Thinker’s methods, which include the curation of social media content all of this is excited about the “new game” on the street and speculating about what it is going to do next and why. All of which comes across as “… throwing it at the wall to see what sticks.”
For the EWT petitioner, the decline unfolded in a nice and neat five-wave structure, calling the larger trend down. Thus far, the decline has only been 25% in a week, which is certainly not the makings of a currency unless the vendors have a wide bid/offer spread to cover their risk and dispose of the digital currency at the time of the transaction. That statement can be expended to all the cryptos as not being a substitute for money.
I would add that it will not look much like a hedge when the profit takers are done.
The breakdown level of 58k was taken out on the open. After putting in a near term now at 47.5k, the remainder of the initial targets remain 45k, 39k, 33k, and 25k. The legend of Bitcoin will not go away for the next 20 years. The smoke dream of pennies into tens of thousands was last born in the late 1920s, and the hat cycle is repeating. The question is how many banks – which to all accounts and headlines came to the game late, will have deep enough pockets to hold for the very long term and still maintain client reserves.
It is worth repeating that Contrary Thinker sees BTC as the front runner of ALL “risk taker’s” markets. It is the bell-weather. So goes BTC, so goes the Dow Jones, the S&P, and the world indices.
The featured chart inserted below shows part of our time factor research. The 1 year and a quarter cycle – 65 weeks- began cresting back in January of this year. As with all bullish cycles, it is right hand translated, skewed to the right for its nominal price high, which gives it little time to make it to its cycle low due in June or July.
April 22, 2021
Signs of “reinflation” are clear. One of them is the Aussie buck leading the way.
What is also clear is the AUD had finished its first leg up in EWT terms, with a five-wave structure in a nice and neat ascending channel. That channel has been broken and a potential head and shoulders top is tracing out the right-hand side of the pivot.
April 20, 2021
March 24 headline from our pages was “Gold entering a waterfall decline.”
No need to rehash the panic buying and double top. CT does not need to look at the charts that say gold pays no dividend; in fact, it has a cost of carrying in some cases. It would be remiss to ignore all the sales pitch briefs itemizing all the “whys” and “what for” backing up the new bull market in precious metals, like the following:
Getting Ready For Gold’s Golden Era
Worried about gold sentiment? Don’t be.
The mainstream view of gold right now is an open yawn, and sentiment indicators for this precious metal are now at 3-year lows despite the gold highs of last August.
Is this cause for genuine concern?
Not at all.
In fact, quite the opposite.
Most investors are totally wrong about gold, and below we show rather than argue why they are missing the forest for the trees.
Unlike trend chasers, speculating gamblers and gold bears, sophisticated precious metal professionals and historically (as well as mathematically) conscious investors are not only calm right now, they are biding their time for what is about to become gold’s perfect backdrop and, pardon the pun, golden era.”
Use the above link if you would like to read more, but a search through LinkedIn public stream you can find much of the same.
April 17, 2021
The way the head goes, the body goes.
When I coached Jr. High School football in the states, one factor that was drilled into the offensive lineman’s behavior was to drive the head in the direction front-rower wanted the defensive player to move. The same holds in the stock market averages. The way the leadership goes in the market will follow in time.
Furthermore, as mentioned on these pages, the bigger the profits, the larger will they fall when trend-following systems kick in. Contrary Thinker uses the Fang+ index as described here to keep track of the leadership in this cycle, the one that began on March 9, 2009.
The NYSE FANG+ index is equal-weighted. At launch, five core FANG stocks, including Facebook, Apple, Amazon, Netflix, Alphabet’s Google, plus another five actively traded technology growth stocks — Alibaba, Baidu, NVIDIA, Tesla, and Twitter.
The first chart in our featured gallery is the FANG+ index clearly showing a non-confirmation of a new high putting it out of gear with the ATHs by the Dow and S&P. Such a set up leaves the “Generals” open to grave failure, and failures are dealt with harshly by investors and traders.
The middle window clearly reveals a similar top being made now on a Technical Event #3, like the primary high pivot 2/16/21 (a COT from MarketMap’s cycle’s table). Such a condition suggests the market background is feeble and due for a change. As you can see, the market’s potential secondary high is being rebuffed by Intermediate (I-T) (monthly) resistance starting at 7,023.00. Taking out last week’s lows of 6,862 would be a bearish sign.
Furthermore, the breakdown would gather a following because the I-T volatility modeling supports follow-through on new breaks or trend following signals. Tidal wave – without trend filters – has given a sell signal, as seen in the middle chart. The intraday chart on the right depicts a completed EWT pattern of a second wave rally irregular flat, which has ended.
The markets this week and into the end of April will be asked several demanding questions. For one “can you make a new high?” If so that event sends Contrary Thinker back to the drawing board; however, a new trend following cross under signal would be affirmative for the bearish camp. The same for a break below last week’s low at 6861.00.
Plus, a review of the components of the FANG+ index tells a story of pending weakness across them all, except for one or two on the outside.
To be brief, keep in mind the MarketMap-2021 longer-term scenario planner, if you are a visitor, Contrary Thinker suggests the eBook of MarketMap-2021.
Keep in mind that last week was an S-T change of trend time window where CT was looking for a change from up to down or sideways. Now the trend should turn decidedly lower, with the next week or two to be lower.
An astute observation came across my inbox
April 16, 2021
The topping of the cryptocurrency brand Bitcoin
The volatility background provides a setup for a 30% to an 80% fall in the next 30 to 45 days. The EWT count looks complete; furthermore, the long-term chart ran from 30k to 60k on panic buying as measured by our volatility model. The advance was all FOMC, which should be easy to flip without a logical base. The current L-T and I-T context call for breakouts or trend following signals to get carryover. Contrary Thinker’s bias is for BTC to signal lower prices. Hence trend following cross under, or breaks below the key level of 58,000 should get carry over. If so, the next stop is 45k, 39k, 33k, and 25k.
Contrary Thinker sees BTC as the front runner of the “risk taker’s” markets. So goes BTC, so goes the Dow Jones.
April 15, 2021
Tidal cycles reached an extreme early this week and have flipped to a downward bias.
Obviously, nothing will ever be 100% efficient, nail top tick and bottom tick, it is all about being on the right-hand side of the pivot for your timing entry for control risk.
After the Dow low on the 25th, the uptrend was within the scenario. Contrary Thinker is long-term
April 11, 2021
A High Pivot is Expected Early This Week.
Of what proportion is the query. Some markets have already put in their primary highs, so this will be a secondary or a tertiary high pivot for some. (Chart Gallery below)
April 7, 2021
Is Everybody Ready? “Yeah!” Ok, so here we go, a 1 a 2 a 1-2-3-4
Well hang on there, not so fast.
The sentiment is not – as nearly everyone knows – a precise timing tool. Surveys of what members of the American Association of Individual Investors are doing or put/call ratios are all good to know but as a background factor. AT a major turn or an S-T pivot, out of the massive proliferation of sentiment services, not all will be at an extreme of one side of the other. Some analysis will find a source that is unique and preferable, but to date, I have not found anything that works better than my team’s measures of VIX.
You will see below I use two recent charts from the public domain from “SentimentTrader” who from a researcher’s point of view provides some of the better insights around. I show them when my group sees them tieing indirectly to our independent research.