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    Volatility Reports 5/15/23

    May 15, 2023

May 15, 2023

Volatility Reports 5/15/23

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Montgomery said to one of his soldiers that he would never attack until he thought it was perfect to do so. 

May is a period with many remembrances of the start of the war in Europe.  I listen to a BBC biography on one of the greatest British field marshals since the Duke of Wellington. In May of 1940 German troops overran Belgium, the Netherlands, Luxembourg, and France in six weeks starting in May.

At that time, during the early months of WWII, Montgomery commanded the II Army Corps and was forced to retreat towards Dunkirk, sailing back to England on June 1st, 1940.

There are two analogies that can be pulled from the above. Regarding cycles, we know that form persists only the substance will change.

Two, regarding the discipline of investing and trading, looking at the leadership of the “Great Bull Market from 2009 to 2021,” there is too much evidence to ignore that a meaningful top has been seen by the FANNG and the FANNG-plus stocks.  From a commander’s point of view, they are begging to be attacked.

In our LinkedIn space “Volatility Reports” I pointed out Thursday, “The context, the mindset behind the buying of the FANNG stocks, is one of panic. Like Air BNB and MSFT and others the sudden break higher will not stick because they were all emotionally based.” I pointed out.

“A break lower that takes out the 5/3 low would put cycles into a bearish left-hand translation.  A move below the 4/25 low would confirm that cycles have become bearish.” I used the chart shown here which now includes Friday’s action.

The charts also reveal how the evidence has stacked up against the big-name index with both dominant systems and cycles selling the market. This weakness began to show up in the individual shares’ components of the average in the first few days of May.

After CT’s trader took long put positions (05/01/2023 3:43 pm created idea for META May 26, 2023, $250.00 Put Bot 8 @ $12,) I posted in our LinkedIn space that, “Meta’s gap higher is on panic buying. The Volatility model’s event #1 is nine times out of ten a “V” pivot, in this case an inverted “V”. Risk is 205 to 193.”

From that date the chart shows textbook action off the panic buying in I-T resistance, which is seen here in the next featured chart.

 

Sentiment

I pointed out in the group that a recession was the majority thought. The heads of the major banks like Jamie Diamond all paid lip service to the forecast of a recession. One week ago Volatility Reports said, “The broad base consensus by the well public and big names – from the IMF to Deloittie to the CBO and the Conference Board and the “Business Insider” is the recession is coming this year. I went on to say that,

“Contrary Thinker does not play the economics factor, but we do factor in extreme sentiment when is jumps out of the internet at us.” But here is the bottom line if you missed it,

“Contrary Thinker is long tail risk, which precludes a recession.” In other words, deflation of inflation.  A good old fashion business slowdown, the “R” word that everyone is Skinner programed to fear, is not in the cards anytime soon.

CT needs to get your attention here it is tail risk; and you will need nontraditional ways, timing and means to prosper from it.

Regarding the CNN index, remember this is a lower high, don’t expect it to reach the same level of greed seen at the ATH.

I cannot go past a week without reading or hearing one of my professional brothers (CMTs, etc) put out in the public domain something incredibly imbecilic and regrettable. Regarding the old saw “sell in May and walk away…” So, when asked Mr CMT said, it’s a misrepresented term ” …it does not mean simply sell everything in May move to cash and go away. Can you imagine, he says, telling your client we are moving to cash for six months; it’s not going to happen?”
That is regrettable for the clients in 2023, when the thinking is that Alpha is about performing better by losing less than the average.

That industry sentiment is ingrained from the top down and yes, here in May 2023 the only choice investors have is what currency they want your cash in.

What has finally become a public talking point is the dull action of the averages, which from a Contrary Thinker point of view is telling that dynamics are about to change. For example, here is a listing highlighting the dull trade:

“The S&P 500 fell 0.3% this week–its sixth consecutive week of moves less than 1%.”
“43 days in a 3% trading range 🤪 $SPY “
“For the third time this quarter, we went an entire week without a 1% daily swing on the S&P 500. Over the preceding 5 quarters combined, that happened only once.”
“$SPX – “Hey siri, show me a chart that makes people go bald””

 

Not one bullish or bearish comment this past week, lots of neutral comments pointing out the obvious. For CT signs that this dull trade is ending.

MarketMap™ 2023 Scenario Planner Abridged

The next chance for a meaningful low is 6/22/23 based on the 45-day cycle, which would be at the end of the third quarter.

Relating that to a 83-year recurring theme and the story line used for the introduction, the climatic event was France signing an armistice in late June 1940, leaving Great Britain as the only country fighting Nazi Germany. This late June time zone is coincidental to the next COT date of the 45-day cycle.

 

Early this week any bounce will be seen as a selling and hedging opportunity. While everyone has focused on the buying rotation thinking that is the new game, i.e., buying RS in a trading range. They are missing the lay up sales and short sales. The 5/15 date +/- is a high COT. From 5/21 to 6/4 long bars are expected based on time. Volatility Reports will meld time factors with the TEM background to improve timing for new entries and leveraging up.

Coordinating the calendar count cycles with outside geo-cosmic events provides added weight to the idea of a series of lower lows starting on 6/1/23 and another 7/1/23 going into the holiday.

US Dollar Index

The USD (ole Dixie) is correlated to a bear market in risk assets. Such relationships are temporal but still in vogue and well known for now. Members know I am bullish on the Buck for many reasons. One of which every vocal analyst, trader and content provider is bearish on the dollar bar none. They are the traditional doom sayers expecting the US Treasury to implode with debt. That is all good, but the amount of debt does not stop at the US borders; and Gold can go bullish relative to all other currencies meaning a bull market for the Dollar index.

The US will pay its debt. The last debt crisis in 2011, which has geo-cosmic relationship to the current period, the S&P credit people had the audacity to lower the US’s credit rating from AAA to AA+ and that has not changed since. It was a SUNDAY! Give that some thought.

It pays to be ahead of the curve. The FORM of cycles – time and price squared – is an eternal verity, like a geometrical form. The only thing that changes is the substance that fills the cycle making it an event.

 

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Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2023

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