Is the true source of alpha moving between short and long volatility exposure?

Posted by on Sep 8, 2018 in Geopolitical Risk, Market Advisory, Market Map, Newsletter, Volatility | 0 comments

ContraryThinker is warning its professional following since January 18, 2018, of the topping process with 28% plus bear market risk that will unfold over the next two years.

Our most recent subject line read, “The rational market cycle from bottom to top moves from bargain buying to value buying to growth buying to momentum buying into panic buying and now lack of liquidity with the arrogant bullish sentiment.”

MarketMap’s January 31, 2018, subhead

The boys at EWT must be jumping out of their skins!

“The first five is done and dusted.

Pivotal times, the market’s ability to make new highs is key. Failure to do so will be met with a ton of selling = both profits taking and new shorts.”

What makes it even more important is the financial media’s lack of rationalizations for the most recent sell-off “out of nowhere.”

MarketMap On July 13, 2018, said,

“… 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.” and went on to say.”

“The stock market today is about to make a turn for the worse, and the events will not be clear until later this year, August and October. My historical work on cycles tells me the events are coming not what the events will be.”

Volatility Report August 22, 2018, said,

“The Nasdaq futures are on a long-term technical event #4, a volatility backdrop that presages an expansion of the monthly high to low range. The current average range over the last seven months is 560 full points. If the range expands as expected to exceed this seven-month average, the market is looking at the move from the first day of trading in September of better than 560 points or 8% However, the largest monthly bar in the last seven months of 780 points will likely be exceeded, hence a 10% plus spill is minimum expected.”

Tops are a process vs. a low which are more of an event, a clear, sharp and painful event if the professional is not careful. Having a strategy gives a long-term sell signal is not 100% efficient, in that they seldom if ever provide a sell signal at a top-tick or even on the bar the signal occurs on. Instead, it points out the risk in the market when combined with other factors.

This lack of transactional motivation and the lack of efficacy fits the reality. In that after the signals, the process of unloading risk and management begins and only later in the process are long volatility systems engaged in opportunity management.

A great Technical Analyst (TA) is nothing without great marketing. One of the first lessons learned from the bastions of TA at Merrill and the MTA “back when.”

So, what good is my groundbreaking work – Technical Event Matrix, volatility model- sitting on the desktop collecting virtual dust?

Do you believe that the true source of alpha – above-average returns – is moving between short and long volatility exposure not the underlying asset mix?

Contrary Thinking Starts Here

We cover financials, currencies, commodities, all S&P sectors, and offshore country averages.

Great and Many Thanks,
Jack F. Cahn, CMT
on the web at Contrary Thinker
1-800-618-3820 (fib-o!)
Copyright 1989-2018

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