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    Volatility Report

October 16, 2018

Netflix is a short

The only thing that bothers me about my headline is CNBC’s Technical Analyst just went bearish on the air.

Our volatility model noted the buying going into the recent historical high was based on FOMC, not reason based.  Such emotional buying will not provide good support when a decline test the investor’s resolve.

From Contrary Thinker’s point of view, our True North and TD Sequential are on long-term sell signals and the bar chart is finishing a classic head and shoulders formation.


Prices are sitting on the low end of I-T support zone, a break of 317 would signal a continuation of panic selling.

The Technical Event Model provides a context for a dynamic decline at 4-2-1, leaving the S-T bottom the bulls are hoping for with the S-T panic selling vulnerable to continued dynamic decline over the intermediate and longer term.

The 207 to 237 support zone is a reasonable long-term target.

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— 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  My indicators and strategies can be withdrawn for private use without notice, at any time.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 15, 2018

MarketMap™ 2018 Annual One Day falls (AODf)

The 8.85-year Cycle

Just like any relationship, anniversaries are important to the market, and many traders know it may cost them if they do not recognize these occasions. As a nation, there are days we will not forget, like 9/11. Just like a rock thrown into a still pond, the effects repeat over time.

The same big splash effects happen in the market, and it does not forget. Since 1885, some ten major DJIA AOD falls (≥ -3.60%) occurred between September 10 and October 31.  These are sizable price events.

There are many more than ten referred to above when you consider declines in the one-day class that are less than the 3.6% but happen with a negative geopolitical news or media event.

MarketMap draws many parallels to the 1972- 1974 period based on the events from 1973 (9-year cycle x 5) this week is the anniversary of the “Arab oil embargo” among others in the 9-year repetition.

While MarketMap came into the year headlining “Geopolitical Security threats will precipitate financial distress” it is noteworthy that the real-life headlines read “Saudis threaten retaliation after Trump warns of ‘severe punishment’” for the suspected killing of a self-exiled Journo, Jamal Khashoggi, one of Saudi Arabia’s most prominent journalists.

However, what has become the new normal in the last 18 months is nothing ever happens, the problems simple pill one on top of the other.

However, cathartic market action in the current timeframe may lead to a clearer vision of what the future has in store.

One of the “among others” referred to above is the weekly long bar low in the 3rd week of October, highlighted in this chart. That big splash in the 2nd and 3rd week of October 2000 was a 12.% decline to the intra-week low. The week of October 20, 2000, declined 6.2% before putting in a mini panic low to recover.

The dates that come up for an AOD fall are today, the16th or the 17th. They set up as panic days from open to close. The longest bar of a move tends to be the last bar of that trend. The long weekly bar that ended the move in 2000 was 6.2% the one that precedes it was 5.8%, for example.

Thus far, since the October 3 peak, the biggest decline is only 3.2%. Exceeding that daily range will suggest a low is nearby, and MarketMap will look for cross-checks to confirm a low. Also of note here, the AOD decline in February was 6.9% and in a period of great extremes, in this era of the “tremendous” where anything is the “probably the greatest ever done,”  and after 2017 a year of the lowest volatility on record, expecting an AOD decline exceeding the 6.9% this week would not be a surprise.

The scenario has not changed: risk/reward favors selling with selective long V hedges. A low here in the latter half of October followed by a failed rally into the election with another decline into the COT dates mid-November. There is the potential of an alternate or second AOD decline hitting on or about November 23.

 

October 14, 2018

The New Paradigm in Risk Management is Direction Neutral

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October 14, 2018

Volatility Report October 15, 2018

Momentum Surge in Volatility

Looking at the CBOE perceived risk data as well as the long volatility futures ETFs (bearish investment vehicles) across the four major indices there is a momentum surge. Our chart on the left of the 3Xbull S&P ETF gives a clear picture of two failed tops at all-time historical highs followed by breakdowns. Following January peak, the February/April low pivoted when %BB-Oscillator was a divergent overbought long volatility ETF “SPXU”– right-hand Our Bollinger band oscillator is not yet at an extreme suggesting more decline to come.

What else is clear is %BB SPXU never moved above .382 during bullish trends. Looking back over the complete history of this bear ETF %BB-Osc only moved above .382 when the market moved into consolidation at least or a meaningful correction. With that being the context of the market now on an I-T basis, expect more decline.

Bottom line is our measures on V have surged past a point that implies follow through or lower prices for the major averages.

October 12, 2018

S&P Banks & Brokers

What the Bell Weather is Saying

While the small-cap leadership is taking a hit the key industry to the overall health of the financial markets is not getting too much attention.

The first thing you notice when looking at a long-term chart is the recovery from the ’09 low has not exceeded its historic highs in 2007. Such non-conformation with the major indices from the industry that is the engine room is a bearish sign, which is just the start of a running list of failures and sells signals.

The lower high it was able to achieve in January failed to hold in long-term (L-T) overhead resistance and again in September. On an I-T basis the XLF failed three times to break out above its resistance.

In the above chart you can also see the Elliott Wave count supports the bearish outlook with a leading digital triangle for the first leg down; followed by a 62% retracement for wave 2, a typical relationship. The wave two ended in our fixed resistance zone on 9/20, which is not accidental.

Momentum on an S-T basis measured by RSI has reached an extreme bearish reading that in every case this decade has to lead to a more decline.

A look at the monthly chart has our Bollinger Band oscillator breaking down, a technical event that leads to more decline.

Volatility Model (Technical Event Matrix)

The rally into the September peak was on panic buying as measured by out Technical Event Model. Emotional behavior in the market always has a high price to pay.

The volatility background supports continued monthly range expansion (TEM Rule #4) which projects a price low at or below 25.50, another 4% from here. The model sees the current trend as persistent and only on a short-term basis is it in a panic mode. It is only this latter bit that can suggest a near-term rally.

This sector is a bell weather for the long-term direction of stocks. Keep in mind that our call for another 4% decline from here is modest. If the sell signals pointed to above take prices below that 25 price level, the inference fits with our longer term bearish

Long Volatility  ETFs

Here is a bear ETF on this sector.  Prices are moving out of a weakish wedge formation. If the sector over the long term get back to its 2016 pre-Trump levels it is looking at 55 +/-


 TEM plugin is available for TradeStation

and NinjaTrader platforms, individual trader rates still apply.

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

Jack F. Cahn, CMT 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.

–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.

NO WARRANTY / NO REFUND.CBI 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 9, 2018

Volatility Report October 9, 2018

INTEREST RATES

1. Long-term RSI is at the lowest oversold readings since 2000, such a surge in momentum implies a new bear trend and further downside momentum.

2. Our volatility model has the market in panic selling, but not an extreme yet. The panic index is not over 65 where 70 is normally the signal near the end of panic.

3. Prices have broken below the I-T support zone – see daily chart – the next price level of interest is June low at 131 17/32 just below L-T outside support seen on the monthly chart.

4. There is a COT due in mid to late October.

5. %BB- $SRVIX reflects a volatility breakout support the current trend.
Outlook remains bearish

CRUDE OIL

On a near-term basis, crude has some un-resolved business getting to 79-80. TEM for all three-time horizons are signaling the trend is persistent and old. Until there is a fresh TE to change the trend condition, the trend is higher.
True North is long the Crude futures.

PRECIOUS METALS

Keep in mind the big picture always, “The bull market that began with the 9/11 terror attacks ended in 2011. Volatility Reports expects new Geopolitical events over the next two years, yet gold is not discounting them at this point, and the events remain an “unknown- unknown.”
It may not be so “unknown” today, I did point out in the 10.8.18 update that China and the US may be on a collision course.

1. Along with the moving averages the descending steps of fixed S&R point out the clear downtrend for gold.

2. Systems remain short, and the S-T TEM remains on a TE#2 supporting breakout or trend trading. However, prices are in I-T no man’s land trading inside the I-T fixed S&R zones.

3. If implied volatility – measured by %BB in the right-hand chart can spike to a higher level to reflect a greater amount of perceived risk while prices continue to hold, difference, that would be a bullish signal

4. As stated in last month, there is no clear panic at this time. So the gold market is on hold, not knowing which way the market will break and not much in TEM background to support a big sustainable move.

5. There is a COT date expected in Mid to late October.


US DOLLAR AND FX

A new high by the dollar index – above 101.62 – would confirm a longer-term bull market is in place. A bull market that began in 2011 it has L-T resistance from 102 to 106 1/2.

1. I mentioned last time that: “It falls into line with “hyper-correlation” that volatility will affect all the markets at the same time. So, it is no coincident that our volatility modeling – is in sync across all time frames and supports a dynamic trend from here.” The L-T and the I-T models have stayed on the TE #2 supporting a dynamic trend. S-T has not reached any other extreme as well, while it is close to moving into a persistent old trend mode.

2. The Intermediate-term trend is up, prices remain above long-term averages and the I-T S&R zones – right-hand chart – are stair-stepping higher.

3. True North is long the DX, and HedgX Superfund is long as well, both coming off support zones.

4. The wild card going into October is the expected Geo-political events, in a month notorious for market panics, our bias remains bullish on the USD. Will the dollar or gold or cryptocurrencies or something other is considered a haven.
We remain bullish on the buck.


S&P SECTORS WITH RELATED ETFs

Most of the sectors appear to be modestly bearish with 11 of the 16 position’s short on a long-term basis and evenly split on an I-T basis. We view this as a better indicator then the A/D line, which is now out of gear on some of the major indices.

1. The previous leadership from the high-tech sectors is now in the early states of a mini-panic sell off and no signs of a low, yet. IVG, for example, should test L-T support at 180, at least.

2. I pointed out on LinkedIn the problems the biotech sector had; it is now in a full-fledged decline just now entering panic mode. I do not post much inside info in the public social sphere. However, it is the only marketing I do, so please consider giving my newsletter to a capital manager you know. XBI has already broken I-T support, and a move much below 89 takes out the L-T support. Long Term support is below 60. The March lows around 80 may be the risk this time around.

3. The health care sector (XLV) is persistent here with a little momentum on the upside and no set up for a trend on the downside either. Waiting to suggest a long volatility hedge pending the next signal from TEM for a change in dynamics.

4. The financial media is trying to talk up banks and brokers sector (XLF) group, which had a rally as a result recently. They took advantage of the S-T panic to get a bounce. However, this key sector has failed twice to reassert its bull market since the January peak and has failed. Prices are mid-range without direction and little background technically to use as a springboard either direction. L-T TEM remains on a TE 2, but the I-T and S-T do not support a trend.

FAANG WITH RELATED ETFS AND OPTIONS

1. Apple is the strongest out of the bunch with the others completing top formations. Here are a few examples. The risk is considerable, and TEM provides the context for trending moves here based on all three-time frames.

2. Berkshire is showing good RS here and new highs. It is a place the capital manager seem to trust in the face of a pending decline. Please keep in mind hyper-correlation here. BRK will not avoid the bear market.

NOTE to Capital Managers. Cash or kind sometimes is a good place to be. With that in mind, relative strength analysis works best during bear trends. To see where the next leadership is emerging. As they say, “cream rises to the top.” Volatility reports will keep you posted.

OFFSHORE STOCK AVERAGES WITH RELATED ETFs

Last issue I pointed out that “Excluding the Nikkei and the FTSE, the remainder of the foreign markets are in bear markets are finishing their topping process. Value type investors are talking about buying China, but on a technical basis they are early, there is no sign of a panic low yet.”

Here is a recap of the Volatility Report update Sep 13, 2018
“After the February spill, it was unclear if the Japanese stock averages had put I a clear peak and kicked off a cyclical correction like the Dow and S&P. TMT had deemed the advance from the 2009 low the beginning of a new secular bull market that would rival the big bull run from 1950 into 1989.” And

“The …. – the multi-month horizontal triangle is a pattern that is resolved by a high rate of change trend when prices break out of it. At the time I pointed out that “TEM model on the weekly bar supports a high rate of change trend with Technical Event #2.

The market gave us what we expected, a 2500 point near the vertical run. Now the Nikkei has made it final top and has begone a new bear market.


Over the next 18 months to two years, it targets the bar chart resistance in late 2016. The bear market ETF for the NK is Ultrashort MSCI Japan EWV @ 25.70. CT is long this ETF today target 38-42.

Capital Managers Note: The very long term of the Japanese market is bullish and preceding the timely accumulation of shares the yen looks bullish today. If investment policy allows moving cash into the yen to maintain its buying power for the accumulation of Japanese shares looks favorable. A special report is forthcoming.
More offshore:

The only Bric nation with bullish technicals is Brazil, which will be monitored during the current downturn for positive money flow, good buying

V-Reports on the 24th of September pointed to the Nifty Indian index represented by its oldest ETF, Investco India with its topping pattern. The head and shoulders formation mixed in well with the weakness seen in the remainder of the chart. The call was for risk to 17 – 18 or 25%.”

However, the real-time PIN is in an I-T and S-T mini panic, typical of a low. This does not mean the market is not going lower longer term. The long-term chart’s Volatility modeling supports more monthly range expansion, hence lower prices. The October range thus far has broken out of its historical band, so another 10% is likely. The TEM set up is 4-1-1.

The Hang Seng is about to place catch up with its big brother. The risk is 30% from current levels. After looking at the historical chart from 1963, a cyclical correction is overdue. Context supports a period of range expansion backed up by the dynamic trend. Prices have failed to hold its bar chart breakout as well as its fixed ratio L-T new support zone. Shifting to long Volatility investment vehicles here is suggested.

What is curious is one of the most popular ETFs in Hong Kong a bear ETF. According to Blomberg “ The CSOP Hang Seng Index Daily Inverse Product has attracted some $148 million worth of cash in 2018, the biggest inflows for any fund trading on the city’s exchange.”

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 25, 2018

New Highs Majority see a Breakout

Stock Index Futures

On 9.12.18 in the TMT community, I posted: “The TEM set up gives way for the bulls to kick off an uptrend here with a Rule #2 background for the short term. If they do not take the opportunity, the bears should have their way. ”

The point of our volatility modeling was the market’s ability to trend. It did and made new highs in the process.  In the chart above the set up preceded “ii” on the chart.

The broader averages and big caps are now entering the late September COT time windows pointed to in Monday’s “Volatility Report.”

The Dow futures chart here provides the same picture of the S&P, an ending Diagonal Triangle.  It remains a valid pattern unless it breakouts above the pattern. From here what is expected as dull trade, a small decline for “b” and a small rally for “c” to finish off the 5th wave.

We often see a very sharp reversal after completion of the Ending Diagonal Pattern especially when EDT is a bigger wave (5) of the main trend, which is the case here – it is an ending fifth wave from the 2009 low. Therefore its effect will not be muted as if the pattern was in an inner wave (v) of bigger (3).

September 24, 2018

Volatility Report September 24, 2018

Interest Rates

  1. Bonds made a major reversal head and shoulders top, with prices breaking below multiple necklines. The very long-term chart of interest rates at the same time has reversed its secular descending channel.
  2. True North on both a short and intermediate basis is short the markets, and prices are now testing long-term support zone at 143 to 134. The head and shoulders top projects 108 ½.
  3. Volatility modeling for both S-T and I-T provides a background that supports a high rate of change trend – refer to the blue higher boxes on the weekly and daily charts. Given 1 and two above the bias is to be a seller.

Precious Metals

Gold is in a clear downtrend with no long-term low likely here. The bull market that began with the 9/11 terror attached ended in 2011.  Volatility Reports expects new Geopolitical events over the next two years,  yet gold is not discounting them at this point and remain an “unknown- unknown.”

  1. The market background supports a high rate of change trend with our model – Technical Event Matrix – in sync for all three time-
  2. Strategies are on sell signals, being supported by the TEM setup.
  3. The daily chart on the right uses the I-T support and Resistance zones to project next likely lower extreme to be 1140 to 1164, which suggest a break of long-term support at 1121.00.
  4. There is no clear panic at this time. Hence the likelihood of a longer-term tradable low is a long shot.

US Dollar and FX

The bears jumped all over the recent weakness in the greenback, the majority being gold bugs. Their Intermarket relationships to support gold as a haven vs. USD does not hold water in the face of the longterm bearish outlook for the Eurodollar, and the carrying cost of gold.

The contradictory relationship worked from 2001 into 2011 but has stopped with the base building of the buck from the 2008 low to date.

  1. It falls into line with “hyper-correlation” that volatility will affect all the markets at the same time. So it is no coincident that our volatility modeling – is in sync across all time frames and supports a dynamic trend from here.
  2. The Intermediate-term trend is up, prices remain above long-term averages and the I-T S&R zones – right-hand chart – are stair-stepping
  3. Prices are in I-t support zone from 92.77 to 93.68, movements above or below this zone normally signal the direction of the next trend. This is especially true given the volatility background mentioned in #1 above.
  4. The wild card going into October is the expected Geo-political events, in a month notorious for market panics, our bias remains bullish on the USD.

Stock Index Futures

I will not rehash here MarketMap’s change of trend dates and their accuracy so far this year, please refer back to issue #1 dates January 18, 2018.

What I wanted to see after we called the mid-January peak and the type of decline that followed was a test of the January highs with a resurgence of the emotionally based optimism, that occurred in January.

On Feb 12, 2018, I pointed out: “Here is the background traders should expect now that a low is in place for the s-t to i-t.  ,…there is indifference reflected by the public and the media.  Buy dips is programmed into the mob’s behavior. However, smart money…uses the volume of new entrants to sell into.” Furthermore, “Typically, the news is still good, as prices retest the prior highs. Bullish sentiment quickly builds, and “the crowd” reminds anyone who will listen that the bull market is still deeply ensconced.”

I wanted to call it a déjà vu rally, which is only a test of the highs, a failed test. The market had its way and made new highs. An event, however, that negates nothing from a long-term risk management point of view.

The scenario was for the failed new high in late August early September, but as the January COT date was early by ten days. Now it looks like the peak will come at the end of the calendar month leading to a sell-off into mid-November.  Along the way Volatility Reports expects an AOD decline,

Dates for the expected AOD decline are 12-Oct, 17-Oct, and 22-Oct based on the January peak cycle in this century. The annual one-day (AOD) rise or fall is taken as the biggest percentage one-day DJIA movement in the year. For this measurement, the academic research started the year on March 1, and since 1885 some ten major DJIA AOD falls (≥ -3.60%) occurred between September 10 and October 31.

The small tech sector has put a top in, the NASDAQ and the Russell both climbed to new highs from chart patterns that are considered terminal moves.

This picture of the mini Russell futures provides confidence because it did as expected.  Refer to our publication on the Nikkei as it is the same pattern and measuring method.

The big cap stock has a little more to go on the upside along with the Nikkei. With that in mind, the background going into this rally was supportive. The Technical Event model signaled a TE #2 preceding the trend move higher by the Dow and S&P.

The chart of the S&P below illustrates how the extremes by %C and our measure of historical volatility – highlighted in blue – lead to a break into resistance and a trending move, which remains in force.

What is appearing to be a top like the January peak is the emotional buying, which is something smart money will not ignore.

Along with the unfinished wave count that will push this market higher, our measures on volatility area nearing readings of panic buying.

If and when reached, alerts will go out to subscribers.

The problem with the bulls waiting for a clear reason to sell is this is the vast majority point of view. Add to the fact that the majority of systems and strategies all have sell signals within the same price range when the signals hit it will be a rush to the exits.

Top capital managers are patient, they endure and wait. When they see a weakness when they are provided the liquidity to exit – given the current risk/reward measured, they will act, leaving trend following for the average.  Single day risk measured by the Dow is 2000 points and risk going into November is at least 4,000 Dow points.

S&P Sectors with related ETF

Twelves of the seventeen sectors we follow have long-term sell signals.

The leading FAANG stocks are following with topping formations. There are long-term sequential sell signals on Netflix and Google plus Apple, Amazone and Facebook are all tracing out head and shoulders tops.

The banks and brokers sector just hit panic buying, and prices are now in long-term resistance, which sets up its success or failure to sustain. Prices need to stay above 74 if the market planes to attempt a break to new highs.

The I-T volatility context supports a low V sustained and persistent uptrend, and the s-t v modeling sees buying into an emotional frenzy. Not what is considered good long-term rational buying.

Offshore Stock Averages with related ETFs

Excluding the Nikkei and the FTSE, the remainder of the foreign markets are in bear markets are finishing their topping process.  Value type investors are talking about buying China, but on a technical basis they are early, there is no sign of a panic low yet.

Our long-term strategy – True North – is on a sell signal for all the markets except the Brazillian, where it has caught a counter-trend rally.  The other Bric nations have completed ahead and shoulder top with the opening today breaking the neckline.  This breakdown was a news related event that is sending contagion worries throughout the news media.

The chart above it the oldest ETF on this market and has a risk to 17 – 18 or 25%.


–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 19, 2018

Dollar Doldrums to End Soon

The historical volatility context in general behind the greenback provides the essential foundation for a forceful trend.

Back in 2014 on these pages, we isolated the significant move potential of crude oil. We knew it was going to be an explosive run and all the trader had to do was trade the breakout – in either direction – and hold on.

When you look at the monthly, weekly and daily bar of crude leading into the crash in prices the Technical Event Model registered a rule #2 for all three time-horizons. On the daily chart, it went from Rule #2 to a Rule #4, which is also supportive of a trend via range expansion.

Today the TEM background for the Dollar is very similar, as you can see in the charts provided here.

Our strategies for the three different trading styles – long, intermediate and short-term – are not in gear, which is fine as the short term system will adjust of the long terms will. But it is clear from the charts our bias holing for weeks and months from here is bullish.

I am bullish and think 120 is a good target. However, let your systems take you into your position with the expectation of a forceful trend running 20 points or better.

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