Bonds On An Island

If bonds (TLT) finishes the day essentially where it started, it will have printed an island bar on the weekly chart.

Bonds (TLT) are currently trading in the pre-market around 144.15 – 144.65.

If trading stays in that tight range, with the technical conditions shown below, TLT may set up for a Monday gap-up reversal.

The potential island gap is shown on the weekly chart:

The part that’s not so noticeable on the bar chart (above) is better displayed on the weekly close chart:

TLT is right at established support.

To borrow Steven Van Metre’s assessment, with all the selling and the extremes in short positions taking place over the past six months, bonds have only been able to retrace to well known support levels.

Trigger events have a nasty habit of happening over the weekends.

That’s when the largest number of participants can be trapped with no escape. It’s how the game is played.

The island-gap weekly bar may not happen. Bonds could reverse (or collapse) during the up-coming session.

However, successful participation in the markets requires awareness of what could, or what’s likely to happen … before it does.

Stay Tuned

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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.

Silver: No Squeeze In Sight

There are so many reasons why the silver squeeze is over; not the least of which is the constant bombardment of the supposed event in the financial press.

If the mainstream financial press is covering the topic (any topic) whatever the event, it’s over, irrelevant or an intentional miss-direction.

The little guy’s not going to put the big guys into a bind.

The big guys (the controlling interests) will just change the rules of the game as is being done with SLV.

Let’s move on.

Potential action in SLV is above. We’ve got hits on the right side of the chart indicating a potential trend has formed.

There’s already precedent for a trend change with the massive volume spike on February 1st.

Inverse fund ZSL (not advice, not a recommendation) is showing the same trend potential but in the opposite direction … up.

As always, anything can happen. For example, an earthquake (seismic activity picking up world-wide) could wipe out production at some major mine and affect the price.

The chart above, shows the current potential. A trend may have been formed. If SLV price posts a new daily low (below 24.93), we have additional confirmation.

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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.

Miners, GDX Accelerates Lower

With GDX posting a new weekly low (below 33.23) early this session, it’s helping to confirm a pivot and acceleration to the downside.

Bullish or bearish, it’s a crowded trade that we’re avoiding (not advice, not a recommendation).

It took over a week of oscillating price action before GDX decided to post below the February 4th, low.

Even so, when an established low is penetrated, it puts the market in “Wyckoff Spring Position’.

That means there’ll (potentially) be some type of rally or rally attempt. If that happens, it’s just more oscillations that result in erosion of leveraged inverse funds.

Other areas of the market are performing better on the downside. Real estate IYR, looks like it may post a narrow range day (as of mid-session).

It’s typical action when at support. If there’s no break lower today, then IYR could make an attempt higher at the next session.

Based on previous analysis, that attempt (if it occurs) is expected to be short lived.

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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.

Shades of 1987

Wasn’t it August of 1987 when the markets were stretched to extremes?

Then bonds headed lower … with rates going higher?

We know what happened after that.

Back then, the market peaked, retraced and then tried to make a new high which failed.

It was the failed move that set things into motion.

Then it was fast and volatile in the days leading up to Monday, October 19th. Markets do not repeat exactly but they do alternate.

So maybe it’s not August now, but February, March or April?

Getting back to October 1987. The late Dr. Martin Zweig discussed the possibility of a Monday crash during Louis Rukeyser’s Wall Street Week: Time Stamp 6:50 – 9:00.

While his assessment was important, perhaps more important was the rosy market forecast by the sell-side (retail) analyst (time stamp 8:37, link above).

That response to Zweig didn’t age well did it?

Three days later at the open, the market vaporized

Is truth more important than fairy tales? This site is about presenting objective analysis along with potential outcomes.

It’s likely we’re an order of magnitude greater than ’87. There’s no argument markets are stretched to obscene levels.

Now, we have interest rates rising sharply.

Will the result be the same? In the markets, anything can happen. However, if enough time has passed to forget (or be ignorant) about the past, it’s possible that it’s time to repeat.

Stay Tuned

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.

AMT: Downside Leader

Early in the session, looks like AMT is leading the way lower.

In addition, a new pivot may have been established along with a new (lower) trend line. Subsequent price action will determine if we’ve seen acceleration to the downside.

Separately, IYR has just posted a new daily low … helping the case for reversal (and not ‘throw-over’) at this juncture.

The firm maintains its short position via DRV (not advice, not a recommendation).

Separately, bonds (TLT) broke lower at the open which was unexpected.

The long position in TMF (3X TLT) was exited just after the open. Not advice, not a recommendation.

Even though expectations are for TMF to recover, we’re not going to wait around and hope.

One gets the sense events are happening quickly at this session. Was the Texas blackout the ‘event’ to trigger a market reversal?

It’s possible. Real esate, IYR now trading lower at -1.38%, just 90-minutes after the open.

Stay Tuned

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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.

Throw-Over, Or Not?

IYR’s in a terminating wedge … will it throw-over, or reverse from here?

American Tower (AMT), the largest cap in the ETF, bounced off a 23.6% projection during last Friday’s session.

That keeps a short term bullish possibility alive. Longer term, AMT still remains in a downward trading channel.

Bonds and the dollar continue at extremes. On the dollar side, it looks like a significant bottom is in the works.

Weekly UUP, MACD has posted a bullish divergence along with an MACD lines cross (to the upside) signal.

Bonds (TLT) remains at its near term lows; near support levels formed back in September, 2019.

IYR is right at the upper wedge boundary and volume (upside pressure) has dropped significantly.

It could still levitate higher … however, it seems that getting a significant ‘throw-over’ is going to require more energy than is currently available.

We’ll see what price action has in store for Tuesday’s session.

Stay Tuned

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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.

Bonds: A Closer Look

The last report on bonds said to expect fireworks soon.

Price action has the final say. It’s saying not yet but close.

The weekly chart of TLT shows the area we’re going to look at a bit closer.

The chart has been expanded below:

In the past six weeks, there have been three decisive down weeks.

The black arrows on those weeks show each successive down week has less net travel.

Last week was the shortest net travel of the three. In addition, that week had higher volume than the week prior.

Less range, more volume.

The late David Weis in his Wykoff analysis video (link here) discussed a similar situation using Apache Oil (APA).

The short version of the story is: Less range, more volume … ‘somebody’s buying’.

Although not really a bond fan, the opportunity is there. Risk has been or is being removed (never entirely) and one way to participate in a reversal and bull move is using leveraged funds (not advice, not a recommendation).

This past Friday, I positioned the firm in TMF, a 3X leveraged bond fund.

Volume (liquidity) is acceptable at around 600,000 – 800,000 shares daily (allowing pre-market entries/exits).

It’s important to note, while TLT was making new daily lows, the high yield HYG, ticked just 0.01-point above its post recovery high. Since August of last year, TLT and HYG have been inversely correlated.

On way to read this, we’re at extremes.

We’re just one ‘incident’ away from sending things violently in the opposite direction; complete with down-gaps, trading halts, brokerage lock-ups … the whole nine yards.

Stay Tuned

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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.

American Tower, Revisited

Last week, the analysis of American Tower Corp., signed off with this:

“The expectation for the coming week; AMT continues its reversal and takes the IYR sector with it.”

The chart above was provided to support that analysis.

The chart below shows the result:

So, AMT met expectations by reversing on cue. Did it take the rest of the market (IYR) with it? Before that’s addressed, let’s look more at AMT.

The 3-Point P&F chart is shown below with projected targets.

For over a hundred years, this is how P&F charts are used to identify potential.

Price action indeed, met the target and then reversed.

What’s more, we can see AMT bounced off the top of the projection (~216) area first, then came back to the target.

AMT then went on a counter-trend move to ~238, before again, reversing lower last week … which brings us to now.

Stated several times in these updates, if and when IYR reverses, because of its own price action, it will create even lower targets.

A good illustration is to use AMT:

Now that its moved lower, met targets, rebounded only to reverse again, we have a new projection.

When and if IYR reverses, it will create similar downside targets.

The daily chart (below) has AMT price action overlaid with Fibonacci projections to lower levels.

It might be a little hard to see but Friday’s action bounced off (exactly) at the 23.6%, projection.

What this means is, AMT price action is “respecting” the Fibonacci level.

That gives high probability the level is valid. If we really are in a continued AMT reversal, now we have high probability downside targets.

Tying this all together and using the weekly chart of AMT (with the Fib targets) we get this:

Note how the 1:1 projection (shown as 100.0) is near exact at the March 2020, low of 174.32.

Price action itself defines what levels are important.

The ultimate P&F projection of 84 – 117, is far below what’s shown on the weekly chart.

However, AMT: 77 – 78, does correspond to Fibonacci projection at 261.8%, … very near the ’84’ P&F low.

There’s a lot more to AMT and IYR but the post has gone on long enough.

There’s also no guarantee AMT and IYR will meet any projected levels. That is the way of the markets.

However, what’s being done is to (continue to) present a significant case for long-term sustained downside reversal; carrying the real estate sector to levels (ultimately) below that of 2009.

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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.

Not Sustainable

The Russell 2000 (IWM) puts it into perspective.

Trending higher at nearly 1,000% annualized, it’s obvious a break is coming.

Exactly how or when of course, is not known.

However, it has been proposed by this site (for years), when the final bubble-break comes, it’s likely to be an over-the-weekend event that results in a severe gap down open.

A gap down of say, 20% – 50%.

Can’t happen? After the events of 2020, we should all know that anything can happen.

Theoretically, a gap down of -25% from current levels, puts IWM right at long-time support around ~170.

Under such conditions when a severe disconnect is possible, one approach is to prepare on the short side (not advice, not a recommendation).

Using Wyckoff analysis techniques (for bear markets), that means to look for sectors not participating in the mania. When the downdraft hits, those markets will (potentially) move lower farther and faster.

That brings us to real estate, IYR

Using the same time-scale and trend line notations, we get the chart below:

From a purely visual perspective, the struggle to move higher is obvious. The past two sessions have made no net progress.

Looking more closely at recent action, IYR is following a Fibonacci time sequence.

From the low on January 12th, to the most recent high on Wednesday the 10th, is a Fibonacci 21 days.

The added bonus is the inflection point on Day 13.

Bid/Ask spreads on inverse fund DRV, in the pre-market are not that reliable; at this juncture, 8:10 a.m., EST) they indicate a higher open.

Stay Tuned

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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.

Bond Fireworks, Dead Ahead

With the highest level of short positions in bond history, it’s reversing.

Short sellers have been hypnotized after six months of non-stop downward action … sometimes the reversal begins quietly.

The clues are there. Bullish MACD in both histogram and the lines. The price action trap-gap.

The purple oval has been expanded to the left showing the ‘trap-gap’. This type of action is common during a surprise reversal.

The problem is, it’s all connected. Bonds rising indicate the economy is weak. Actually, the economy is dead (by design).

Just take a look at one of Jeremia Babe’s walk-around updates.

Businesses and malls are ‘decimated’ in his words. Here’s the latest from him … just out.

The TLT and HYG (junk bond) both reached their extremes on the same day but in opposite directions.

TLT reached its low and HYG reached its high.

Now, both those markets have reversed. The latest CPI numbers were a surprise. It highlighted that hyperinflation is not there.

That article also pointed out, rent inflation (i.e. commercial real estate) is decreasing.

One last thing. The broker used by the firm has posted a message each day upon logging onto the trade platform. That message is to the effect:

‘As a result of increased market activity, we’re experiencing especially high call volume and hold times’

This message is being posted when the market is going up!

Are any of the major brokers going to effectively handle the herd of retail calling in a panic, trying get out of a downside trading halt?

Stay Tuned

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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.