Volatility Reports 5/7/21
May 7, 2021
May 7, 2021
Price Based Method, Risk/Opportunity Forecast, Strategy, and Plan or Algo System Engaged with Timing
It is this last bit that the majority do not get. Rather it’s all about the forecast. The methods and systems often repeat enough that it can not be, by chance, some random event. It’s a simple understanding – like life insurance or a casualty insurance underwriter – to expect losses. The actuaries expect some people to die young. Trader Vic Sporandio teaches the idea of “actuarial thinking” in his approach.
Regarding the market, when we have an “ideal” set up over the long term, the big gains will more than outweigh the small losses. That’s why P.T.Jones and Stan Druckenmiller have outstanding returns. They wait for their perfect – ideal – set up that provides a 25 to 1 opportunity to risk where they can be wrong ten times in a row and still nail it in number 11. Add on top of that Turtle Contract/Share sizing, and you have Alpha.
Too many, if not 90% of investors, managers, and traders hear or read the rationale behind a market or the story behind a stock, all of which are to buy, bullish, for the assets to go up. It’s always happening now because the industry is programmed that way. If not by the sales hyperbole, it’s by the transactional nature of the industry. It’s all about the sizzle, not the steak.
Whereas being able to read the market language provides the analyst and his advisory group of clients and capital managers the steak.
With that in mind, here is the scenario based on a combination of MartetMap 2021 Time Factors and risk assessment with Volalaity Reports dynamics timing.
The Russell 2000 sets up as the low-risk entry because it is on the right-hand side of the ATH or 52-week high pivot. That allows a near buy stop placement. Also, the Volatility Model is telling a story that the RTY is ready for a waterfall trend, a high rate of change directional trend.
The close Thursday at 2238.50 puts the market above these triggers clustered around 2325-2329. Obviously, a day trader would have his bands on the short bars. Here it is on the daily bar for an S-T trade.
The following chart of Russell’s implied volatility reveals a few items that are meaning full. One is the seven-year base and breakout of volatility in February and March of 2020.
The recent 2021 suppression of its volatility testing the seven-year base and holding. Contrary Thinker can also see the potential Bull Trap with RVX ready for an S-T short squeeze. To be clear, Contrary Thinker does not expect a crash from the high, and there may be a mini panic low in late May. the above