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    Volatility Reports 07/27/20 World Index net USA

    July 28, 2020

July 28, 2020

Volatility Reports 07/27/20 World Index net USA

The race to the bottom by the central banks will not end well. The shift from central bank puts as they are called that are “reactionary” to pre-emptive stricks on financial risk through unconventional monetary policy amplifies hidden short convexity. A market that is trained like Pavlov’s dogs.  A backdrop that leads
to tail risks that are near impossible to gauge.

The world stock index, net the US market did not confirm the highs in 2018, 2019 or 2020. Here it the weekly chart with dates and a proposed EW count. Such a wave count on the backside of the ascending channel break leads Contrary Thinker to suspect a rapid decline from here. In EWT terms, this market is going into the 3rd wave of a 3rd wave.

Supporting the above bar chart work is our volatility model that measures the anxiety and tension in the market. The overbought or oversold condition of risk. On the right side is the I-T %BB-Oscillator measuring implied volatility at oversold levels. The chart-window in the middle is TEM on the same data reflecting a spike in %C and a new TE#2, suggesting a forceful trend. The EFA’s volatility data is sitting on support, a move above the high side of the zone would be a reversal and add more support to the bearish case.

when VXEFA does make its move above the high end of S-T support, the two long volatility – bear ETFs should be considered for a short to an intermediate-term play with targets in the I-T resistance zone, at least.


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Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

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