Biotech: Time’s Up?

It’s been seventeen days since the first post that biotech (IBB) was about to reverse.

Fotosearch_k2638638-borderHysteria, hope and greed take time to bleed off.  It looks like today’s the day.

Unsuccessful attempts to move higher have exhausted the bulls.

The expectation is for a swing trade to lower levels. 

A close below IBB, 130.81 would provide extra weight to the down-swing potential

However, if “this is it”, the two-trillion dollars of bottled air (as David Stockman puts it) may be on its way out.

Technical, price action discussions on IBB and the inverse vehicles BIS, LABD, can be found at this link.

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.

Where’s The Crash?

No recovery in sight.  Pay cuts set the stage for sustained decline.

The markets however, appear to have their own agenda.  Like Clara Peller from the old Wendy’s commercial; Where’s the crash?

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If we use 1929 as the model, then we’re either in one of two places.

The ’29 market had a sharp drop in May of that year before it went on to September all-time highs.

We could be there … with new all-time highs ahead.

Or, behind door number two; after the initial leg down in September – October of ‘29, the market recovered until late March of 1930, before rolling over.

Market behavior now, mimics the latter scenario.

The bond market continues its reversal.  Real estate’s a lagging market, having pushed higher and negating its previous reversal potential; at least for now.

Biotech seems to be in a world all its own.  The reversal identified here, continues.  Instead of an immediate move lower, we’ve got a topping process.

The 30-minute chart at this link shows attempts to move higher that are not (for now) successful.

If a new daily low is posted in today’s session (below 126.63), we may consider the topping process complete.

No Bailout: Real Estate

Commercial real estate has not joined the bailout party; it may be strictly political as described here.

iStock-1048065504If that’s the case, with political backlash a possibility, commercial real estate may be left to implode.

Highlighted four days ago here and here, was the probability of a counter trend move for real estate ETF, IYR.

That move appears to be over.  As of this post, IYR has just penetrated the prior day’s low (of 72.29), adding weight we may be in the next leg down.

Using standard tools such as Fibonacci, a projected move points all the way to ~35.50, for IYR.  At current levels, that represents a decline of 51%.

Short Squeeze Bull Trap

Yesterday’s action in the markets looked like a short squeeze; a sharp, near vertical move higher.

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Only later can one be sure.  When the squeeze is over, prices collapse.

At this point we’re at a critical juncture.

A reversal could signal the beginning of the next leg down.

With that in mind, SPY is trading lower in the pre-market session.

Mask on, Mask off

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Over the past few months, through empirical observation and interview, one can sum up the differences between the ‘mask wearers’ and those who don’t or refuse.

 

Mask on                                           Mask off

Rule followers                          Entrepreneurs

Conformist                                Independent

Wait-and-see                            Action oriented

Mediocre                                    Driven to excellence

Buy the dip                                Sell the rip

All in this together                You’re on your own

Whenever it happens, the next leg lower will rip off the mask of rule followers; exposing their false belief that a little piece of paper will keep them safe.

Remember Neville Chamberlain waving his little piece of paper?

‘I give you the peace of our time.’

One of the markets set to continue its collapse is commercial real estate.  The tracking ETF, IYR, just broke out of a wedge pattern to the downside.

The coming week(s) may see an upward test of that break; with a potential reversal and continuation to lower levels.

Behind The Curtain

Looking behind the curtain, we see how deep the rabbit hole goes.

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Nearly a century ago, back 1921, Jesse Livermore said in an interview, the prime objective of the markets was “deception”.

Nothing has changed.

Price action is truth; all else is vanity.

Over the past several days, the market looks to have made its turn.

If we’re in that next leg lower, at some point the curtain will be pulled back to reveal what may be the largest financial wipe-out in history.

A reversal in Biotech was identified two days ago.  That reversal continues with the sector (IBB) opening gap lower.

 

Biotech: Reversal

While the rest of the market is well off its highs, the biotech sector (IBB) made a new all time high just yesterday.

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The problem is, it’s a reversal.  Price action opened sharply higher and then closed lower on heavy volume.

It’s taken nearly five years for biotech to push past highs of July 2015; Not a roaring bull market

As the current medical delusion fades into some other delusion, focus on biotech may fade as well; Look-out-below when insanity returns to reality

Could it be at this juncture, going short the biotech sector is the least risk trade?

Sleight Of Hand

While all eyes are focused on the “V” recovery, the bond market is in a stealth reversal; interest rates moving higher.Fotosearch_k4326128-Magician

Everyone’s expecting negative rates.  What if that does not happen?

Today (Tuesday, May 12th) could be the day where the long bond (TLT) makes a new daily low; confirmation we may be in a dangerous reversal to higher rates.

For those who can remember the fall of 1987, the market was extended;  bonds had already pivoted to the downside.

It’s About To Get Real

Part of success in the markets is the ability to catch the nuances of price action or sentiment.

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Once such nuance is the decision of Sven Henrich to take (up to now, no cost) market updates, and move them behind his website firewall.

Just a casual viewing of this latest YouTube post, should be enough to determine that his level of skill and market acumen is at the highest level.

So, the market (S&P 500) made a potential historic reversal last week and Mr. Henrich goes behind the firewall.

One can take that nuance and project it out (based on unprecedented market extremes), that we’re in the very beginning stages of a world-wide, historic market crash and ensuing economic depression.

Pivot Point: Russell 2000?

What are the odds?

What are the odds that IWM, the Russell 2000 tracking ETF is going to make it above the resistance level shown?

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This resistance area is an exact Fibonacci 38% retrace off the lows.

Other markets such as S&P are doing better in their retrace.  Small caps seem to be the worst off.

Using Wyckoff theory, in a bear market we are to focus on the weakest sectors (for shorting).

IWM and its tracking inverse TZA are at the danger point.  Upward risk for a short position is low; while downside opportunity as previously stated (in the “Whacked!” update) is near the 2009 lows.

 

Three Ten Trading, LLC is structured as a long-short fund implementing proprietary trading strategies.  As such, we are not registered by the SEC, do not provide investment advice and do not engage in paid solicitation or advertising. 
This site is for the purpose of demonstrating the truth of market behavior; outlined by a market master: Richard D. Wyckoff in his text, Studies In Tape Reading, published 1910.