Biotech Technical Discussion

Yesterday’s swift move lower in IBB looks like the start of the next leg down.

Update 10:34 a.m. EST in red below:

Closer inspection however, shows biotech could pivot and move to higher levels … if only temporarily.

We’re looking at the 30-minute chart of IBB. Yesterday’s action penetrated minor support and stopped dead.

When price action behaves in that manner, it puts the index in what Wyckoff called ‘spring position’ ready to move higher.

Then we have the wide 30-minute (red) bar from the session; likely to be tested. To do that, action needs to move higher.

The target area is near a 62% retrace of the entire down move from the high on February 10th, to the low on March 5th.

Note, yesterday was a Fibonacci Day 13, from that March low.

Even though IBB’s likely to move higher, we’re leaving it alone.

If action gets to the target, we’ll be ready to short (via LABD) if there’s opportunity.

Update:

It’s not called “The Danger Point” for nothing.

Price action penetrates deep below (minor) support effectively negating the ‘spring’ scenario discussed.

We’ve now penetrated below another support level

Price action can still spring upward from here … although probabilities appear to be fading.

Either way, we’re not interested in going long at historic valuations.

Separately, our ‘project’ has maintained short real estate via DRV (not advice not a recommendation), to be covered in a later update.

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.

S&P, Down in Pre-Market

The last update on the SPY said this:

“The SPY shows a nascent reversal. Price could come back to test resistance (black line) or continue to decline from here.”

That’s what it did. Price came back to test.

It’s early in the pre-market and SPY is showing a slightly lower open; currently down -1.29 points, or about -0.32%.

Thrust energy on the test was low. There’s potential for continued down action from here.

Recall that last week’s price bar was a reversal. A new weekly low would help confirm there’s more (sustained) downside ahead.

The ‘project’ is already short real estate via DRV (not advice, not a recommendation). If it follows suit, downward action in IYR can be expected.

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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.

Real Estate Reversal

If IYR’s reversing, we’ll get continued downside action.

Earlier today, low risk potential for going short IYR (not advice, not a recommendation) was presented.

At this juncture, risk for going short is approximately the distance from today’s high to the last session high … about 0.49-pts.

The past four sessions have posted lower daily highs, lower daily lows.

Today was a test of the reversal. Volume was down significantly (-63%) from the prior session.

Contracting volume on the way up shows lack of commitment. The reversal has been tested; at this juncture, there are few buyers.

From here, expectation is for lower prices; beginning with a lower open at the next session.

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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.

Project Update

Early today, LABD was exited having hit the stop.

If there is a story for the day, it’s the long bond TLT.

Potentially a nascent reversal.

Interest rate sensitive markets, like real estate, appear positioned for reversal as well.

Inverse fund DRV above, shows penetration below support and then testing action today.

We’re at the extremes of price action. IYR and DRV do not need to go far to confirm or negate a reversal condition.

At this point (1:03 p.m. EST) our ‘project’ has no position … although DRV looks enticing and low risk (not advice, not a recommendation).

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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.

Sentiment Shift

There’s been a change in direction; a sentiment shift.

Not in any particular order:

The Fed will not, or does not want to control the long end of the curve (long bond).

Interest rates (mortgage rates) are now rising and have been there long enough to start affecting the real estate market.

As reported by Uneducated Economist, there’s been a shift in behavior of his lumber customers.

Instead of furiously attempting to secure lumber (as prices continue to rise), now, there’re backing off; Not wanting to be holding overpriced inventory if/when there’s a reversal.

Remember:

Sentiment first. Then volume. Then direction

From way across the pond, Bjorn Andreas Bull-Hansen gives his input that ‘Things are changing … the entire structure of society’.

He also sates, as this site has done many times … ‘it’s not coming back’.

Has all this fed into the markets?

Let’s take another look at the S&P 500 (SPY), analyzed on the 15th.

At that time, we stated the SPY’s at the danger point.

The original location of that analysis is the orange arrow. Indeed, the SPY continued a brief rise before reversing.

Downward pressure (thrust energy) has increased.

Unless it’s a flash-crash, markets do not go straight down.

The SPY shows a nascent reversal. Price could come back to test resistance (black line) or continue to decline from here.

It’s important to note the overall market position (of the large indices) as they affect everything else.

With that, our focus remains on biotech (IBB) as it appears to be the weakest of the major sectors (not advice, not a recommendation).

Sunday futures open in a few hours.

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.

Run The Stops

It took the entire session on Friday for price action to hit the LABD stop @ 18.96.

It’s the way it happened, that defined what happened next.

Since we don’t have access to the order book, we can only conjecture where stop orders had accumulated.

The market’s interested in transactions, not levels. Wherever there’s a preponderance of orders … that’s where it goes.

Martha Stokes, CMT, put it well when she said (paraphrasing):

‘The Market Makers don’t know you are there; they’re not interested in your tiny little stop order.

If your order does get taken out, it’s because too many small traders put their stops at the same location.

There’s an order imbalance. The market’s response is essentially automatic … take out the stops.’

While the original LABD 18.96, stop may not have been a popular location for the small (and maybe big) traders, price action throughout the day could have ‘pumped’ the stops to that location.

Case in point is the huge block trade just at the 1:00 p.m. EST, mark.

At that point, 31,500 shares went by (on the tape) at price 19.10 … which equates to over $600,000 in one transaction.

So, where are you going to put your stop for that position. Below the market, right? Maybe at 18.95 let’s say? Especially so ,when price action instantly rallies away from that entry; all the way to 19.78, intra-session.

The stop would appear to be tight but well positioned.

However, if there was a stop for that huge block and it was too close to the market (with other stops accumulating), it would act as a magnet for price action; drawing it back to that level to get the transaction (hit the stop).

Of course, it’s all conjecture and we won’t ever know for sure.

If the LABD market opens significantly higher (IBB lower) on Monday, then our assessment looks correct.

A lower or unchanged open, signals us to get out. If that happens, then IBB is likely to be heading higher.

As you may have guessed by now, the response to all this kabuki was to re-position the stopped-out order.

The table below has the summary:

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.

Project Stimulus: First Trade

The first objective on the newly announced ‘Project Stimulus’, is protect the position.

As yesterday’s announcement stated, we’re taking the stimulus payment and trading a separate account.

The trading techniques to be used are presented on this site.

The magenta bar shows the entry at LABD 18.835 (not advice, not a recommendation) opened during the Fed speech this past Wednesday.

The reason for the entry at that time was two-fold.

First:

Biotech IBB was already at 50% retrace and had rejected that level once.

Monthly and weekly momentum MACD, indicators were (and are) pointing down; giving extra weight to a potential reversal.

Second:

Empirical data (i.e. experience) gathered over a thirty year period had shown, whatever direction the market took during a Fed speech, was quickly reversed in the coming days:

I’ve labeled such events as “Fed-Fake”.

At this point, the position is well in the green, closing at $1,552, yesterday. We’ll be putting in a hard stop at 18.96, shown above.

If we’re in a sustained reversal, it’s not unreasonable to expect price action to get back to previous near-term highs (lows for IBB).

Using highly leveraged LABD (not advice, not a recommendation) that would equate to about a 50% gain.

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.

Project Stimulus

A check for $1,400, figuratively just came in the mail

We’re going to take that, trade a separate account, see where it goes.

Six-percent of those surveyed at this link say they’ll ‘invest’ their stimulus in the markets

So, we’ll join them. Mater of fact, yesterday was the start.

With 74 shares of LABD, entry point @ 18.835, we start the project; not advice, not a recommendation.

74 shares at 18.835 equals $1,393.79 … good enough.

Details such as account targets, objectives, equity curve and trade execution process, to be announced.

As of this post (2:21 p.m. EST) today, the balance is up to $1,465 … so, it’s off to a good start.

More later.

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.

Gold (GLD) Path to 166

Early action GLD points to a rebound, target area 166.

The 30-minute charts shows a push below minor support (black line) that’s retracing.

Any time a market pushes below established support, it will attempt to ‘spring’ off that support level.

In this case we’ve already identified the 166 area as the target.

At this juncture, a GLD target of 166 would correspond to an April ’21 futures target around $1,765.

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.