March 20, 2020

We are not chart whisperers

Contrary Thinker’s the Debrief

March 20, 2020

“To know where you are going, you have to know where you have been”

“The idea of record-breaking will continue in the headlines in 2018. It is only common sense to know this.  In each bull/bear cycle since 1974, there have been record-breaking price events. Each bull market has been bigger, better, and greater than previously. Each new period contained record-breaking events from the number of consecutive higher close days to the most significant one-day advance in history.”  I sent on to say,

“The same has held for the bear market cycles… both fiscal and monetary policy has painted America’s economy into a corner, a corner that has no alternatives that are positive to bail out the market and the economy when the next down cycle occurs.”

Many investors, traders, and managers focus on the outside world, the exogenous shocks, the known unknowns like Convid19. It was on Homeland Security’s radar at the end of 2019.

Like previous virus emergencies, the market’s reaction was based NOT on the morbidity of the virus, instead the market’s action is based on the condition of the market when it hit.

If you look at the two worse in terms of S&P damage, SARS hit at the end of a three-year bear market, to accent the low and scare buyers away. Zika hit during the most significant correction of the “Great Bull Market” to put an exclamation mark on the end of the correction.

However, Convid-19 is different, not so much in its morbidity, that is not the judgment we can make. Rather, what we can say is that after the tax cuts in 2017 and the QE monetary policy over the last 3 to 4 years, there is nothing left in the trick bag of the authorities to soften the landing of the market – and the market drives the economy.

So, after the Dow Jones falling 35%, what are the various sets of opportunities and problems; and if you feel ill-prepared, it is not too late to get caught up. Read on

Contrary Thinker wants your business, to “cover your six,” make sure your clients get your best and the time they deserve.

“As you can see in our change of trend (COT) table, the market is in a cluster of time windows likely to lead to a high pivot price, confirmed by a sizable decline %5 plus – established by our big swing (multi-month) systems sell (taking profits) and sell short signals before the end of the month.”

Contrary Thinker stays hedged until our measures of volatility exited panic mode, the nominal price low has nothing to do with profitability.

Volatility Report
September 24, 2018

Contrary Thinkers is not a chart whisperer; we have mathematical tools that confirm what the bar charts are saying. They precede the market’s bar charts.

In the above 9.24.18 VR, I said, “The scenario was for the failed new high in late August-early September, but as the January COT date was early by ten days. Now it looks like the peak will come at the end of the calendar month leading to a sell-off into mid-November.”

I went on to say that along the way; traders should expect long bar day decline, declines that measure near the expected return a buy and hold investor can achieve in one year. To keep our group on the front foot, our models project dates for the long bar declines. I said, “Dates for the expected long bar decline are 12-Oct, 17-Oct, and 22-Oct.” the long bar day hit October 10, of 3.6% from open to close.

Volatility Report
December 3, 2018

Without boring you with all the reasons for this conclusion, our group was ahead of the curve: “Bottom line is if the market cannot break out early this week, get above I-T resistance, there will be a crash going into Xmas.”

What was surprising is how the bravado mentality became so entrenched in 2019, “buy the dip” was the war cry. Today, nearing the end of March 2020, it still is.

Yet, what has a so-called perma-bull gained by holding since the end of 2017, over the last two years? Without the use of market timing at pivotal highs, all they have now is temporary social media bragging when they were at the new highs? Hence their investment method is based on pride and the unprofessional badgering and taunting of advisors that were advising bear market timing.

Today all they can do is hold their client’s hands as they see their 401k or other long-term investments give away their profits to the tune of 36%.

Volatility Report  February 10, 2020,

it was pointed out that “Multiple non-confirmations to go along with extremely high levels of optimism by 100% of sentiment readings provide a peaking background.”

All of the major stock indices made climatic tops on panic buying. So  given the 50% risk and the brazen attitude of the bulls, it was clear it is not going to be a pretty ending.”

Which brings us to the chart on the right and the Volatility Report dated February 19, 2020. Where, among other market-based reasons, one can see that volatility was about to go into panic mode. A situation that hit home in 2011 and 2008.

Our bottom line was the following: Risk is off, like cash and algo strategies to hedge (profit) from decline is the status on. Over the weekend, Contrary Opinion published.

 

 Hedges on short only CL, EX, NQ and RTY plus long-only VX. CT’s volatility model of CBOE’s volatility index gave a buy signal the week beginning Sunday the 23rd.

We don’t need to show you the profitability of our strategies, because the simple act of just raising some cash – taking some profits – would have been a great benefit to the investor/manager.

Contrary Thinker has been waiting for this debacle since late 2017, it was not wishful thinking. Rather it was based on research that covers over 120 years of the market history and new aged volatility modeling that provided risk warnings.

The good news is over the next ten years is Contrary Thinker can now shift its focus from the avoidance of risk side and from profiting from bear market corrections and larger declines to the buying opportunities side as well. To be clear, the timing of market dynamics at highs and lows will be more important than managers and investors have experienced since the late 1960s into the early 1980s.
We are not gloating here

 

Contrary Thinker, its private group of programmers, traders, and fundamental analyst friends have been working to protect our members, show them ways to prosper during the downturn and working to provide transparency to potential new subscribers so they can gain the confidence to let us do the same work for them.

 

I guarantee my work based on your happiness.

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 760-459-4681 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

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