The Verdict Is In: Reversal

The first hour is over:  XOP (Oil & Gas) posted a new daily low.

Correspondingly, inverse fund DUG has posted a new daily high.

This is now, potentially a very dangerous juncture in the markets. 

The firm is fully positioned (not advice, not a recommendation) in DUG. 

Wyckoff analysis directives concerning bear markets, were used to identify (at this point) the single position.

More specifically, those directives are to identify the weakest market(s) not the strongest.

It’s the weak markets that will go down farther and faster during mark-downs (or bear phases).

Through a process of iteration (lasting months) as detailed in these updates, the weakest market up to now, has been identified and short positions opened via DUG.

Based on today’s action thus far, we have a hard stop in DUG which is the session low:  DUG @ 24.727.

It’s unlikely price action will return and penetrate that (24.72) low.

The firm uses trading tenets from three market masters as detailed here

There are essentially two main tenets from the late Gerald M. Loeb (former Vice Chairman of E. F. Hutton) and those are:


Significant market opportunities are rare.  When one is identified, use it to its maximum extent.


Do not diversify.  Diversification is for those who don’t understand market behavior.  Diversification is for the average … the mediocre.

That last admonition is harsh indeed. However, it’s backed by evidence from the top traders.  Over and over we see their positions (detailed in the press after the fact) were highly concentrated.

Of course, none of the above is a recommendation. 

In the next instant there could be an event which completely turns around the oil sector’s fundamentals … like a major earthquake taking out millions of barrels of supply.

As we have seen with seismic activity increasing dramatically, that scenario is not too far fetched.

At this point, we’re positioned in DUG.  Hard stop, DUG 24.73

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.
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