September 3, 2020

Volatility Reports Primary Markets 9/3/20

Sunday, February 23, 2020 Volatility Report said:  our aggressive short scalping systems are engaged for the Russell and the Crude Oil; and the group is status on Monday for the long-only the VX futures system and short-only  Nasdaq futures.

Today 9/3/2020 the markets are flashing “DANGER” and no one is paying attention, NO ONE.

Recap of major markets, click to enlarge charts

Bonds:  If we take the Fed chairman at his word, the real economy is his focus vis-a-vis 2% plus inflation and improving employment. Why? Because full employment is no longer an inflationary concern.

If true, they will not be coming to the aid of the stock market if and when it hits the skids. Rather they want to support increased inflation and full employment.  And, the credit markets will lead the Fed back to normal.

This is publically available information and should not be considered a black swan.

The interest rate volatility index has provided a breakout and a new uptrend in the implied anxiety index. The trend-following systems on bond volatility remain on a buy signal. Contrary Thinker’s position is a secular low that has been reached by interest rates and a long term return to normalcy.  Junk Bonds wedging out a peak.

Euro Dollar:  Since its major bull market peak in 2008, the downtrend is a new secular bear market, that is being corrected today. The dollar bashers are out in numbers gaining confidence in the counter-trend, the first leg of which has run its course. From a trading point of view, the risk is from 1.18 to 1.13 at a minimum, whereas a test of the low or an undercut low is also possible.

The long term chart seen here reveals the market hitting resistance at our fixed annual L-T zones and just under a Fibonacci 23.6% retracement of the secular bear.

The chart is the daily Euro shows a wedging out of a top; and with the underlying support of our volatility model, a TE#2, a trend should break in the near term.  The same model when applied to the Euros implied fear index also reveals a TE#2, which supports a breakout when it takes out its S-T zones or the Smoothed Bollinger Bands (not shown).

Bottom line we are Short Term to Intermediate-term bearish on the Euro. Contrary Thinker is expecting to go back short via the bearish EUO ETF and short the futures upon confirming signals from its systems and indicators.

US Buck: Began a new secular – very long term – bull market in 2011. The recent correction is counter-trend, which found support in both I-T and L-T support on a mini panic washout and extremely high bearish sentiment. Even the analyst that see the low are backing off the bullish outlook for the buck as it may impact negatively their bullish outlook for stocks.

Contrary Thinker is expecting to go back long the UUP and long the futures upon confirming signals from its systems and indicators.

Crude Oil is breaking out of its bearish wedge. I do not think I heard one content provider say that the wedge was anything but a continuation pattern bound to resolve itself to the upside. While longer turn Contrary thinker is bullish on “inflation” in the short to intermediate-term the rally in Crude appears counter-trend and the rally in the commodity indices looks like the first leg up of a new bull market.

The flat trading range bear market correction of 2019 will be alternated for now by something more complex, based on the rule of an alternation. An irregular flat would call off an undercut low by 1.236 times the most recent advance.  If it is a triangle, traders would see support come in at a 62% retracement of the counter-trend or $21. In either case, the decline should be a quick A-B-C.

The featured charts on Crude is all about the market context, its market-based condition. Implied volatility measured by our %BB (for Bollinger Bands) oscillator dictates how fear or concern about market prices being too high was non-existent for a prolonged period. This sold-out fear is now being reversed with a move by %BB above recent highs giving the appearance of a new trend. The Chart window on the right is the data itself pushing the upper limits of the smooth Bollinger Bands, breakout pending.

Tidal cycles are pointing lower for Crude and the weekly and daily bars both support breakdowns or trend signals to get carry over with a Technical Event #2 (charts not shown).

The Crude is worthy of an aggressive short strategy and sometime today or Friday the FastEd trend following scalper will be engaged.  Two big topics here to be clear, crystal clear. One this is new school trading where we use a macro filter to tell us when to buy (status on) the strategy and when to sell (status off ) the strategy.  Two the macro filter has nothing to do with the trailing P&L, NOTHING. Why you may ask?  Because the market does not care about my P&L,  and what Contrary Thinker looks at is a price based – not a money-based – model, a governor if you will, to make the strategy into a comprehensive system.

…Market Map 2020 to follow

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