July 31, 2023

Volatility Reports 7/31/23

A Fibonacci twenty-three-year bull market, which span a Fibonacci thirteen primary cycles from the 2009 low.

From March 9, 2009, to the Dow ATH on January 4, 2022, the market trended for 4684 days or thirteen perfect 360 degree/years.  With a closing high at 36,799.65. A mere eight hundred points or 2% away from a mathematically perfect one hundred times 360 degrees.

At major tops, crest that investors need to be protected from it is not expected for the majority to see the cause for exit.  The high at the end of 2019 was not seen by the majority but they have a pandemic to blame as a grey swan that could not be seen by the majority (even when the news was out ala Trump in December.)

Yet today after the majority missed the high at the end of 2021, the consensus will prove again why Contrary Thinking works and will not be emulated by AI. Life is full of second chances.

In 1987, the S&P 500 tanked 22% on the infamous Black Monday. That bear market (by definition) lasted for only four months and the economy avoided a downturn. Other bear market declines in 1947, 1962 and 1966 did not bring on a recession as well.

Based on that 20% standard definition the decline in 2022 was a bear market. Without consideration of context providing meaning and significance, we will go with the industry standard definition, to forgo any debate.

Given the current recovery in Dow & Co up over 20%, then the market’s story from the double bottom of late September early October 2022 is telling economists they were wrong in their predictions of a recession because the averages are in a new bull market.

The bulls have been looking for a shift from growth to slow growth aka disinflation. This prediction brings Powell perceived monetary control skills in line with their bullish wants for the stock market. So, the facts are in, and the risk is on the other side now.  The risk is for too rapid of a recovery from the slow growth period.

With little or no slowdown at all and growth statistics firing back up with new signals of inflationary pressures to be, the market suggested what would happen.

Hot spots where inflation is coming back can be seen in the commodities, Oil & Gas, and raw materials. The media is playing it down, but employment cost pressures exist not just from a lack of supply in the work force. But from inflation being sticky at the retail level around the industrialized world.

All of this was seen last Thursday, July 27, when looking back. An extra-market event that caused one day reversal of 1.7%. Here is the news that truncated the market

NEW YORK, July 27 (Reuters) – “Global equity markets fell while the U.S. dollar gained on Thursday following news of stronger-than-expected U.S. economic growth despite consecutive interest rate hikes from the Federal Reserve and European Central Bank.

U.S. gross domestic product (GDP) increased 2.4% in the second quarter, Commerce Department data on Thursday showed, beating estimates from economists polled by Reuters and dampening concerns of a recession due to the Fed’s aggressive rate-tightening cycle. A Labor Department report also beat expectations as fewer people sought to claim unemployment benefits, indicating labor market resilience.”

So now the market is in corner painted by the financial press, no more rate increases because that is bad for stocks aka competition or they would say higher rates will cause a recession, which to them is the same as a bear market.
So, like the news on the 27th, they want their cake and eat it to as the media shifts to improved economic data. They may attempt to keep a lid on things with continued recession talk, but the market tell’s all.

Da bulls, can’t have it both ways, if the pandemic was an aberration regarding the market and the economy’s mini recession then ignoring the crash of 2020 and the mini bear as outliers the USA has experienced 23 years of solid growth.

Bullish on the green back, panic low trapped large numbers below 100.

A lead indicator for the bulls who see the emerging market’s currencies and stock averages as risk on and a flight to USD as risk off. The focus this week will be for a break with the USD index above 103. The bulls have made the mistake of announcing to the world this is their trigger price for playing defense aka off risk.

Gold in my view has started a new bull market that will breakout above the large triple tops at two thousand. For decades Wall Street has hated gold mostly because it is a counterbalance to the stock averages. That idea fits Contrary Thinkers expectations for a bullish dollar, a bearish Dow/Nasdaq, bullish on interest rates, bullish on commodity prices, including oil/gas/petrol and bullish on gold but short currencies of America’s major trading partners and emerging markets.

The bullish set up on gold now with the market churning just under the three major high pivots, such action is deemed bullish. There is day trading algos that define such backing and filling just under previous highs to trade the breakout, which are high performers. The idea does not work on the short side. The feature chart here of the big gold futures showing both size bars mid-range. The daily bar is using I-T S&R zones and a breakout above resistance would be a signal to buy. Depending on aggressiveness, the low side of the zone can be used and once the market moves above the high side, the entry price becomes the stop loss.

CT likes the UGL to trade the bullish side of gold. The corrective channel can also be used as a trigger on the breakout. A brief side note, price triggers are many for breakouts, I am sure everyone is knowable of the variation. There is not the best set of bands or channels. If that is your style of trading pick the one that you understand the best. Same with moving averages (MA) use as entry and exits when they cross. Don’t get booged down looking for the best, it does not exist.

You can see the target I have project for UGL. That ninety level is an equal move to the advance from the October 2022 low to the recent high 2,150 on May 4, 2023.

Opportunities do not come every day.  Great opportunities are even rarer.

Here is a chart on the underlying that I will be trading. Considering new positions this week. As I have said before, I put my money where my advisory is. In that regard, if you are not on my Trade Exhange channel, you should be.

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This work by Jack Cahn is licensed under a Creative Commons Attribution-NonCommercial 4.0 International