Shifting Sand

Or … How To Spot A Change Of Character

Art & Science: Interpreting price action requires both.

Since the September 2nd, high in biotech SPBIO and low for inverse LABD, the character of the market has changed.

Price action has become tight and orderly.

Typically, when that happens, someone (some entity) is gaining control. They are preparing the market for a directional move.

That’s the science part; the observation part.

Art is ephemeral. You don’t know if it matters to the subject at hand or not.

You won’t know until it becomes obvious.

In the markets, when it’s obvious, it’s too late.

News Of Note:

Within the past few days, there have been at least two news stories of note: Here and here.

It’s not really the stories themselves but what they represent.

Go to time stamp 8:10, at this link. That’s what it’s about.

The so-called controlling entities may be in the early stages of consuming each other.

What does that have to do the the markets and specifically biotech? Those thinking they were safe and getting fake ‘protection’ could be realizing, maybe they didn’t.

Maybe it was the real thing.

Mid Session:

SPBIO (Inverse, LABD):

The market’s had a change in character.

Whether or not the above links were the reason, just part of the reason or not at all, won’t be known until long after the market opportunity has passed.

We’ll start with the un-marked daily chart of leveraged inverse fund LABD:

Tight price action identified:

Now, it gets interesting.

We’ll zoom in on part of the tight area using the hourly chart:

LABD has oscillated around support and then penetrated that support as shown.

Price action rose dramatically from there. We’ll label it as a sign of demand (Wyckoff term).

Next, we have the testing action. David Weis used to call it “The Gut Check”.

Tests can either pass or fail. That currently puts LABD at the danger point.

Positioning:

My firm’s position remains unchanged: Short biotech via LABD (not advice, not a recommendation).

Summary:

As this post is being created, LABD is moving up off the test lows. So far, overall price action has been well behaved.

Thus far, there has been no major (news generating) price break.

That type of controlled movement allows large positions to be built carefully and quietly (not advice not a recommendation).

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.

The Danger Point®, trade mark: No. 6,505,279

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