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December 21, 2022

Volatility Reports December 21, 2022 Dow & Co.

The issue for many is their analogical thinking.  Because knowledge is based on first principles, things that are undeniable. Context is one of the first principles needed to be certain what you are looking at is true. Otherwise, look-alikes will fool you.

The example here. The picture of Marilyn Monroe next to a look-alike is a great example that should get your attention. However, the chart overlay seen here is the epitome of what Contrary thinkers know, that background matters compared to statistics pulled out of the blue.

Here is a comment I saw in the public stream and responded to.  Just not because it is wrong-headed but because my traders need to know where I stand and why. Also, I am not trying to attract cynics, entry-level or anyone, not a professional or aspiring to be one.

Here is the bullish sentiment in full

  1. Consecutive years of declines in the US stock benchmark are rare
    When they do occur, the second year has been worse than the first
    Consecutive down years are rare for US stocks, so after this year’s drop, there’s only a low probability they will decline again in 2023. Yet if they do, history shows that investors will have to brace for another very unpleasant 12 months.
  2. Since 1928, the S&P 500 Index has only fallen for two straight years on four occasions: The Great Depression, World War II, the 1970s oil crisis, and the bursting of the dot-com bubble at the start of this century. In the benchmark’s almost 100-year history, such occasions are clear outliers. Yet when they have occurred, drops in the second year have always been deeper than in the first, with an average decline of 24%. That would exceed this year’s slide of about 20% to date. More than two back-to-back years in the red are even rarer. The S&P 500 tumbled for three straight years from 2000 to 2002 and from 1939 to 1941, while the longest losing streak remains the aftermath of the infamous Wall Street crash when stocks fell for four years from 1929 to 1932.
  3. To be sure, both fund managers and Wall Street strategists forecast a muted recovery for the S&P 500 next year. “Recession does not have to be doom for equities and markets tend to bottom before a recession starts,” said Manish Singh, CFAchief investment officer at Crossbridge Capital. He believes the S&P 500 saw its bottom in June during peak inflation.

I understand how smug the boys are in Boston, I have pals in the industry and interviewed with a few, and sat in Vanguard’s  “war room” for a number of their meetings. Be that as it may. It is the big picture and context that matters. Not what the public wants, the market is selling risk, not iPhones.

Looking back to the 1908 low (after the rich man’s panic), how the market trends in a 15 to 17-year secular bull followed by a sideways or down correction of the excesses for an equal number of years.

From the 1929 peak, Dow & Co stayed in a correction until 1949, 20 years after a 20-year bull. It is not arbitrary to start from 1932, it is a strong bullish bias to make their numbers look better.

From 1949 to 1966 (Dow hit 1000 for the first time) a secular bull of 17 years ended followed by a bear market from 1966 until 1982. So for 16 years, a broad trading range corrected the secular bull before a new secular bull.

Again, from the August 1982 low into January 1, 2000, high pivot, it was easy money followed by a secular bear of 10 years into 2009 (see Nasdaq.)

Finally AFTER the demographic baby boomer growth period another 13-year secular bull market to 1/4/22. What was crowned the “Great Bull Market” or the “Everything Bubble.” all of which was based on money growth, not population growth or productivity growth.

So in context, two down years is not rare, what is rare is after a secular bull market to avoid a secular bear has a low probability and given the added context of a Fiscal and Monetary policy that is painted into a corner.

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Below is the S-T chart for Friday’s trade.

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December 21, 2022

Volatility Reports December 21, 2022 (Crude Video)

Oil has a positive correlation to the S&P. Along with Apple and Bitcoin the premier risk takers market, Crude is also a leading market. A foreshadower of stock market’s direction

Crude oil futures made their recovery high on 11/6/22 providing a 23-day lead time to sell onto the last phase of the rally in the S&P and FANNG+ stocks, which topped on 12/2/22.

The weekly chart is plotted here with the SPY in the background to show the positive correction since 2018. The featured charts in this report focus on price, time, and dynamics.


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December 21, 2022

Volatility Reports The Financials (Video)

The facts have been ignored since 11/6/2016 and the market screaming to be released from the financial and volatility repression became clear from the peak 1/23/2018. From that point to today, traders have played nothing but long volatilioty vhencials and out performed the S&P by a wide margin. Are you ready for 2023, All Contrary Thinker wants is to back investors, managers and traders to reach their best.


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December 13, 2022

Volatility Reports December 13, 2022 (Dow Video)

Monday the $VIX closed UP 9.5% while the S&P 500 finished UP 1.4%.

2021 and 2022 experienced a 45-year topping cycle. Part of its unwinding – cycling from the high pivots 11/18 and 1/4 lower into the extra market events happening on 5/11 and 9/28.

What is amazing about these two dates is they create a 96-day cycle, which on the look back is accurate pegging tops and bottoms to the 6/12/20 and 10/30/20 lows.

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December 10, 2022

Volatility Reports Long Term Bonds (Video)

Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or for more information. Fed Chair Jerome Powell offered investors both good news and bad news at his press conference on Nov. 2. The Fed’s policy statement included new language that it would consider the effects on the economy of previous rate […]


The Long Bonds

Before you get into the video on the long-term outlook for bonds and how to use the new excel worksheet for cycles, here is a short-term update I started in the group. If you are a visitor and have signed up on the TradeExchange app, let me know.  In that regard, they are in the process of updating my UI and dashboard, make sure I know so you lock in your spot here in the group.

Unless you tell others that Contrary Thinker can make good calls, I have to continue to point them out. At the end of 2018, I warned the boys from Boston, the capital of the mutual fund factories, that the so-called “bulletproof” portfolio (60/40) would come to an end with the same kind of “hyper-correlation” seen in 2008.

Well after the first six months of 2022 all they are doing now is belly-aching about the 60/40 demise. Well, that is all well and good but in this industry, it is always about “what have you done for me lately? The updated chart featured here should help.

For equity players, it demonstrates how the bonds are leading the downturn. There are other leading markets, but this one has a broad economic impact. with that in mind, CT’s featured chart demonstrates the way the bond market speaks to you, once you understand volatility. Here I will point out how rule#3 preceded COTs by a day or two at the August high and the October. TE#3 is the definition of a low-energy trend that is due for a change. The trend lower walked the smoothed BB lower on the middle TE#3 with the help of an intervening TE#4 supporting the trend.

On Friday the decline in the 30-year futures was a failure, a reversal, and an S-T sell signal. With the TE#2 behind it, a move to 124 should unfold. That corrected the panic buying, retraces 62% of the counter-trend thus far, and moves below the smooth BB, which is an oversold signal.

Dates are highlighted in this chart that can be used if you plan to use the excel cycle worksheet.



Enjoy the 15-minute video, the other five are on the way.

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December 9, 2022

A Hotter Than Expected CPI Report Could Sink Stocks Into Year End

A Hotter Than Expected CPI Report Could Sink Stocks Into Year End

LordHenriVoton The CPI report for November is due out on Tuesday, December 13, just one day before next week’s FOMC meeting. Expectations show the y/y rate dropping to 7.3% from last month’s surprise reading of 7.7%. Meanwhile, Core CPI is forecast to remain sticky, rising by 6.1% year-over-year versus last month’s reading of 6.3%. It would be the fourth month in a row that core CPI was above 6%. […]

“They all go together when they go”

Everyone will be focused on the CPI number and actions by the Fed. As a hard and fast rule it is not the news that matters, it is the market’s reaction to the news that is telling. For example, as the bear market becomes more widely acknowledged, more good news is ignored and bad news is exaggerated.

Also, highly anticipated news is used by day and floor traders to run stops with a long bar event. Therefore going into such an event from a tactical point of view, regarding positions longer than a day following a trend, stops are pulled or widened out, because the trend will be your friend. And that trend is down and gaining momentum.

This featured chart of the MSCI ACWI Index, MSCI’s flagship global equity index, helps make the bearish case and points to what to look for that will build confidence for the bearish case.

This ETF is designed to represent the performance of the full opportunity set of large- and mid-cap stocks across 23 developed and 24 emerging markets.

A number of things are clear from both the weekly and daily charts of the world composite. The context of the market is trend ready. That trend is down on an S-T basis as seen in the right-hand window, the breakdown of the channel, our Alpha Trend MA has crossed under, a sell signal, and the market failed to hold the S-T support zone. From an I-T basis, the dot on a close weekly chart is plotted with one of our Vidya MA versions. A close this week below 86.27 would likely close the door on any bullish arguments.

The video below covers the use of the cycle spreadsheet when applied to the S&P and the Dow. Along with that expo, I cover the outlook for the market from now into the early part of 2023.

As always your feedback, questions, or issues are welcomed.

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December 5, 2022

%BB-SVOL Oscillator

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November 29, 2022

Blog for the week

November 21, 2022

Volatility Reports November 21, 2022

VIX data does not suggest the daily wide swings in the stock market. Over the last 30 days, S&P 500’s minimum gain on an up day is 2% (rounded).

What the data reflects is more precise than the widely used put/call ratio. Today that statistic is just not a bear/bull ratio because there can be calls on leveraged bear (short) ETFs. Even if they have made changes in the ratio calculation, it is thought to reflect the mentality of risk-averse risk-takers compared to futures traders, as such it is the little guy that is assumed to be dumb money.

Well, the data used in Contrary Thinker’s fear and greed oscillator is more than the current perception of risk in the stock market today, looking out at various lengths. We also use the UVXY and others, which is a portfolio of S-T volatility futures. UVXY is ProShares Ultra VIX Short Term Futures ETF, long volatility futures. For a hedge fund, the cost of carrying a hedge is the value of that portfolio decreasing.

From an Alpha-achieving point of view, it is the process of moving to long volatility, that achieves Alpha, not the longer term carrying the position. The index has a slow-down trending bias because the stock market is known to be bullish most of the time. However, the index spikes to higher levels. Today the low 20% range suggests these investors see little risk of a volatility breakout. So, on the other hand an uptrend in the index is more like a spike leading the stock market. Back when Covid19 made the mainstream media the index spike to over .85.

With that in mind, a bear market always has

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November 14, 2022

MarketMap™ November 14, 2022

“The US Securities and Exchange Commission and the Justice Department now investigating, remains of FTX “

Bill Clinton’s Treasury Secretary Larry Summers making Enron comparisons
Back Story Contagion from the Crypto

THE WOLF STREET REPORT: Where’s the Contagion from the Crypto Implosion?


Here is a sample of the headlines.

The fix is in, there is only one Intermarket relationship that matters to the bulls and that is the USD against the world equity markets. While all eyes are on the dollar staying below its breakdown point, other relationships are being overlooked by the majority. For example, the inversion of long-term rates with the shorter-term.

Their study of the dollar relations is cited at best, looking back at 2017 as their model that says “when the bastion of safety is down” its risk on for stocks. Their research is front-end loaded. They forget the dollar bear in 2008 along with the world financial crisis or the dollar bull during the neo-liberal Clinton stock bull market.

Inter-market relationships, come and go. But this one has set up an influx of a liquidity pool for the smart money and big money to sell into.

So the news is good, inflation is under control, the Feds are going to pivot, and the dollar is “risk on.”  Now it is all clear, the game is the bulls to lose. They have all the analogies backing them up. They even pulled out the old Philly A’s trick, because if the Phillies had won the world series it would be a bearish omen, dead set. But they did not mention that an original NFL team, the LA Rams, won the Super Bowl as crème de la crème of bullish analogs. I guess they remembered the G-men beat the Pats in 2008, a nasty exception.

So what can go wrong?  “All you need to know. $UUP $DXY $USD” if you listen to the public stream?

“…One of the biggest developments this week was the breakdown in the US Dollar. The US Dollar Index dropped 4% this week, marking the worst week since 2009… that broke the uptrend line that has been in place for the majority of 2022. The strength in the US Dollar has been putting pressure on stocks and risk assets all year, so this is exactly what the bulls have been waiting for. “

Here is CT’s chart of the US dollar index showing the ruler trend line everyone is excited about its break. However, the long-term and intermediate-term trends are up; and the best the bulls can hope for in the “USD indicator vacuum” is a high-level trading range from 104 to 114.

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