IYR made an unexpected print high; then failed to hold into the close.
The inverted chart of IYR puts it all in perspective.
It’s obvious we’re working the area of IYR, where medium to long term reversal is possible. The inverted chart shows how each successive thrust lower (blue lines) covered less net distance.
Instead of exiting out of DRV, then getting back in, the position was held with the expectation new IYR, print highs would not hold.
They didn’t.
Not only that, there was plenty of intra-day kabuki:
Early session lower, then reversal to new highs, then fail and lower close. Anything can happen but IYR’s upward action looks exhausted.
If IYR had maintained its new high into the close, DRV would have exited (not advice, not a recommendation).
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.
Expectation was for a measured move higher … about 2 – 3 points.
As soon as price action penetrated the stop area, it reversed.
Shown above, is the re-entry (DRV) when IYR action posted an outside down hourly bar.
The chart below has more detail which indicates successive market rejections as price attempts to move higher
There are no guarantees. Some kind of demand could come in to move IYR higher.
However, based on the failed attempts to do so thus far, the market’s saying we’ve seen the highs for this cycle.
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.
The stop on our ‘Project Stimulus’ account was originally listed as “TBD”.
The market itself needed to define the stop. Now, it has.
The 4-Hour chart of IYR shows a wedge pattern that’s right at resistance. The early session is over and posted a narrow red bar.
We’re just into the second half; price action is inching up.
If IYR gets above the inter-session high of 92.50, it’s likely to make one last push higher into a measured move.
We’re short via DRV (not advice, not a recommendation) so we don’t want to be around if that happens.
The Project table has been updated with an approximate location for a DRV stop:
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.
“It’s unlikely silver is going higher any time soon. There could be some upward spasms as the crowded trade exhausts itself; it’s likely we’ve seen the SLV highs for quite some time.“
Taking today’s pre-market action into account, SLV is down -12% from February 9th, and down nearly -20% from its most recent top of 27.98, posted on February 1st.
The weekly chart above shows a huge bearish divergence in momentum (MACD); thus far, it’s in-effect.
The next chart has SLV breaking out of a wedge, forming a measured move that could take SLV down to 17.50 – 18.00, area.
The so-called ‘Silver Short-Squeeze’ is becoming a distant memory as the public are being herded into the next non-event.
There’s always the caveat, anything can happen. Somehow there could be a change of character in the market. For now, we’re still leaning toward a deflationary event of some type.
For those that may be new to these updates and as a reminder, rising prices (food, lumber and gasoline) are not signs of inflation. They are signs of supply constriction.
It’s becoming very clear that’s the game (or the plan). Perhaps the most critical constriction is the food supply.
We’ll leave that one there. If you need more info, search Food Supply on this site.
As this post was being created, SLV has continued lower in the pre-market; currently down -2.00%
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.
We’re going to stay with chart labeling and retrace positioning as described in the last update.
The fact price action oscillated around the previous target (early in the session), then moved up, tells us there’s a more significant pattern at work.
Using that, we look at the AMT close. The ‘x’ location was a 38.2% retrace. Now, today (‘z’) we’re right at 50%.
Note the advance as slowed.
Net distance covered today is significantly less.
The parent index, real estate IYR, could not follow through to the upside; even after Friday’s aggressive move.
At session close, IYR just posted a reversal bar on the hourly chart.
We’re remaining short via DRV (not advice, not a recommendation).
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.
‘The next twenty minutes are going be long and boring. You might want to skip to the end to see the conclusion.‘
His rabid and loyal fans then proceed to hang on every word of his self professed ‘boring anecdote’ until the very end.
Not saying this site’s in the same league as Harrell’s.
Just saying, the following is going to be a tedious discussion of American Tower (AMT) and how it just might be ready to start an Elliott Wave III, down.
Market Extremes:
Its been no secret. The markets are at price levels and valuations never before seen.
In this site’s opinion, going long anything, is insane.
There could be a break, upset, world event, container ship run aground (oh, wait…), cyber attack, volcanic eruption (oh, wait …), major earthquake, nationwide weather freeze (oh, wait…) food supply disruption (oh, wait…) bond bear raid (oh, wait…) currency devaluation, or any myriad of disconnects that would instantly change the dynamic.
Change the dynamic in such a way as to make low-risk long exit, or short positioning impossible.
This site has documented several times where major brokers have already gone off-line as a result of markets fluctuating to the upside.
What happens when it turns down? Good luck getting out.
Looking for the (short) entry:
Its been an on again, off again, and back on again affair with shorting real estate, IYR. Anecdotal evidence such as Jerimiah Babe’s updates from his area, show the market’s been vaporized and is not coming back.
We’ve shown from a Point & Figure chart perspective, IYR has built significant price action congestion.
In Wyckoff terms, congestion equals potential.
The IYR index has built enough congestion that if/when the reversal comes, price action has potential to decline below the 2009, lows.
American Tower (AMT) Symmetry:
Now, for the analysis of AMT.
We’re going to start with the daily chart which has an interesting pattern of equal distance moves (or waves):
This equal move structure gives a hint that something’s up. The market’s moving in an orderly fashion. But what order?
To add more intrigue, we’ll go to the weekly chart. We see each retrace of the two initial waves, was Fibonacci 62%.
The last retrace (up to Friday’s close) is essentially 100%.
Looking up Elliott Wave “equal waves” turns up this presentation. It helps some but does not cover the current situation. The take away from the video is that equal waves do occur.
Looking at the daily close chart of AMT gives us this:
The Wave 1, down is placed at the low extreme. Price action then corrects to pivot (magenta oval) at the Fibonacci 38.2% retrace level.
It’s a near perfect retrace.
The reason to think AMT just finished a complex correction that terminated at “z” which is also “2”, is the structure of the fifteen-minute chart below.
The first chart is unmarked except where price action changes character:
Then we put in the Fib projection tool at that location; the inflection point, to get the following:
Incredibly, the top of Friday’s price action is also a Fibonacci target (423.6%) projection.
Getting back to the daily chart and labeling it using the above information gives us this:
Removing all but the labels is more clear:
There could be other ways to label the structure. It may become (very) apparent at the next open whether this interpretation is correct.
However, coupled with yesterday’s analysis of IYR, and its technical condition (at the extreme), we get the sense we’re close to some type of price action hesitation or outright reversal.
Summary:
We’re short this sector via DRV (not advice not a recommendation).
Price action appears to be at extremes and is meeting Fibonacci and support-resistance levels simultaneously.
Not related but an interesting coincidence (maybe): Van Metre’s update on Friday night:
“Is This a Sign Real Estate Prices Have Peaked?”
The futures markets just opened … S&P down 7-points. Let’s see what happens next.
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.
It may have been Robert Prechter Jr. that said years ago;
‘You’re either going to be early, or late’
He then went on to say his trading method usually puts him in a little early on the move.
That means there are times when the anticipated direction does not materialize.
So, your either suffering through the pain of anticipated reversal (for seconds, minutes, or days), or you’re chasing the market.
You make the call.
There really is no other choice.
Both methods involve psychological pain.
Referring back to Prechter, he also said some of the best traders he knew were former Marines. By definition, they are well trained to deal with pain.
My former mentor, the late David Weis would say after hit on a set-up, if conditions warranted, he would enter again; as he told me, he would ‘stick his chin out’ and effectively tell the market to ‘prove him wrong’.
It was an interesting choice of words for him as one can see from his training video …. he had a distinctive chin.
Trading Style:
The trading style presented on this site is a combination of Wyckoff tape reading coupled with anticipating price action.
As inferred above, that means there may (and will ) be times of draw-down while working to enter a market reversal.
That’s where we are now.
Trade Actions:
Yesterday’s upward action in basic materials forced the ‘project’ out of its short (SMN) position. That sector may attempt to make a new 52-week recovery high before it’s ready for reversal.
Analysis: Real Estate, IYR
One market that did make a new 52-week high, setting up technically for a short, is real estate:
The weekly close of IYR has been inverted (turned upside down) to show the unique technical condition.
IYR has created a large terminating wedge that’s in the process of a ‘throw-under’. At times a market will attempt to breakout of a wedge in the opposite direction of eventual reversal.
This type of breakout tends to fail. Based on the dashed line contacting a prior congestion, there’s’ potential to at least hesitate in this area.
The daily chart below provides additional nuance:
It’s clear price action has contacted two prior areas of support – resistance during ‘throw-under’.
Anything can happen but it seems that IYR’s at maximum extension.
On Friday, IYR price action closed just 0.05-points off its high for the day. That high was also a 52-week high.
We’re now in a support-resistance zone.
If IYR is to move significantly higher, it might need additional fuel (a retrace lower) to break through.
Positioning:
The action then (not advice, not a recommendation) was to short the market via DRV.
Once again, the market itself is telling us where to go for opportunity.
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 could be reversing but have already pushed rates high enough (long enough) to choke-off critical sectors of the economy like here and here.
Now we see the dollar has bottomed as well.
It looks like a strong multi-month (or year?) rally. Correspondingly, gold is weak. The overall markets are stretched to ever-livin’ extremes; never before seen.
Whenever this baby pops, try logging on to chaos, or exit any position (except maybe for the long bond).
Our approach then (not advice, not a recommendation), is continue work on positioning short. So far, the ‘project’ is taking small hits in those attempts. We’ll see how basic materials (SMN) works out today.
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.
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.
DuPont is next and then Newmont mining. So, this is a potential deflation play (Newmont) as well.
A post just out yesterday, Uneducated Economist does an excellent job destroying the inflation narrative.
Steven Van Metre has also repeated many times, we’re likely to get a deflation impulse first before inflation.
One of the most important things he’s said, the Fed is not going to correct the public’s (false narrative) perception that inflation’s the danger.
If everyone’s pointed in the wrong direction, and it serves their interests, why correct it?
Which brings us back to Basic Materials. ‘Nobody’s watching’ this index. How do we know?
Look at the inverse fund, SMN.
Russell 2000 inverse, TZA, averages 6 – 10 million shares per day. Compare that to SMN’s 2,500 shares on a good day.
Volume does pick up as price action becomes active. Some days will be 100,000 – 200,000 shares.
Looking at the technical condition, there are bearish divergences on both daily and weekly time-frames. The chart at the top shows a Wyckoff up-thrust (reversal) condition just tested yesterday.
The response is to go short via SMN (not advice, not a recommendation).
Since we’re actively managing accounts throughout the day, it’s not a problem to monitor SMN and the bid/ask of the fund when trading is light.
The ‘project’ table has been updated:
Pre-market has SPY trading down about -1.5 points or -0.40%. The expectation is for Basic Materials to follow suit.
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.
The Danger Point® 