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 Return on Equity for the list is Negative – 31.9%
With returns like that, it’s unlikely a positive P/E, is showing up anytime soon.
The Market Itself
Livermore worked to prefect his technique, searching for what’s going to happen in a ‘big way’.
Wyckoff discovered the market itself, decides on its next likely course.
Loeb presented the power of ‘focus’; Concentrated positions that eschewed the mediocre mantra of ‘a well-diversified portfolio’.
It’s important to note, Loeb was the former Vice Chairman of E.F. Hutton. The old commercials from the 70s, like the one linked here, were talking about him: ‘When Loeb talks, people listen’.
The Biotech Short
The vultures are circling this sector.
We’ve already shown in the last update, speculative volume on the 3X Inverse fund LABD, is literally off the chart.
The corporate links above, give us a potential ‘why’ for their short positioning.
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.
According to this, just out on ZeroHedge, that’s what’s happened.
As we’ll see below, there’s certainly something unprecedented going on, specifically in biotech.
The prior update made the argument, biotech SPBIO, has a unique distinction that’s showing up on the leveraged inverse fund LABD, shorting the sector.
For illustration purposes, we’re going to do a little ‘trick’.
The weekly close of SPBIO, is shown below.
This index does not provide volume but we’re going to ‘fix’ that by putting in the lower panel, weekly volume for leveraged inverse fund LABD.
It’s clear, as SPBIO reached all-time highs and reversed, short activity via LABD picked up significantly.
However, the past several weeks tells us from a Wyckoff perspective, something major could be about to happen.
As SPBIO, has moved counter-trend higher, activity going short (via LABD) has gone off the scale.
Spring-To-Up-Thrust
If the unprecedented volume activity weren’t enough to draw attention, we also have a repeating set-up that’s well, repeating; Spring-to-Up-Thrust.
With the idea originally obtained from the late Daivd Weis, later confirmed time and again, it’s a unique (high probability) characteristic of market behavior.
That’s where we are now.
SPBIO: Up Close & Technical
It may be hard to see in the above chart.
The next one, moves closer-in.
The upward advance of SPBIO slowed dramatically last week, closing up just +1.68%, for the week.
Contrast that move with the week prior at +13.83%, and the slowdown is evident.
All Hands, On Deck
Figuratively speaking, everything’s been dropped to focus exclusively on this sector. It’s obvious, what’s going on at this juncture is unprecedented.
That goes for the rest of the markets as well.
However, this sector alone, is telling us to ‘look here’; potentially setting up for a major reversal.
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.
Moderna (MRNA) appears likely to join the ranks of Carvana (CVNA), with a decline from all-time highs that’s well over -90%.
Even a ‘modest’ projection (as we’ll see below) puts the downside potential for MRNA, far below current levels.
Starting with the weekly chart, MRNA, has just barely retraced upward to an anemic 23.6%, before breaking to the downside.
Moderna MRNA, Weekly Chart
Zoom version below
The Wyckoff up-thrust (reversal), will be confirmed if/when MRNA pushes below last week’s low of 160.06
Projected Decline Over -90%
Unless it’s negated, the weak retrace (23.6%), tells us that MRNA, is probably just getting started to the downside.
Using a modest 1 : 1, projection from current levels, we have MRNA’s downside potential to the 45-area; representing a decline from all-time highs, of approximately -90.9%.
However, for such a weak equity (at this point), the decline also has the possibility to go a bit further, to a 1 : 1.382 projection (shown as the lower arrow).
Declining to the 27-area, would put MRNA, down a stiff -94.6%, from all-time highs.
If MRNA gets to those levels, that’s when the fun starts.
Class Action?
Recall, we’re using the Carvana Crash as the model, right?
Let’s hold that thought and go way back to October 17th, of last year. Reviewing the first bullet item of this post; some of which is repeated below, it said:
“Whenever a high-flyer darling stock changes course and reverses down in a big way, the lawsuits start.
‘Investors’ only know one direction … up.
They figure they’re so smart, any decision from them that does not work out, must be someone else’s fault.
Class Action for Moderna (with discovery) may be dead ahead.
Let’s start our stopwatch and see how long it takes for the first ‘Notice’.”
Getting back to Carvana (CVNA), it posted recent lows on July 14th this year. That was a decline (from all-time highs) of -95%.
Three weeks after that low, and just days ago on August 4th, we get ‘Notice of Class Action‘.
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.
Everyone talks a big game, wanting to trade like the next Jesse Livermore or James R. Keene.
To aspire and reach the performance level of the legendary, few know, it’s almost a requirement that several fortunes must be won and lost along the way.
That’s why Prechter said it years ago (paraphrasing), ‘It’s best to lose your first fortunes early; that way, you have time to recover.’
One very public and famous ‘recovery’ from a blown account, was Livermore’s trade during The Panic of 1907.
He was flat broke but sensed a big down move about to happen in the markets.
Legend has it, he pawned his car for $5,000; then, using that capital, shorted the market during the panic and profited over $1 million, covering shorts near the bottom.
That was then. Is there a now?
The short answer is yes. Huge moves (especially down) are still a potential.
Let’s take a look at how one opportunity presented itself.
Big Move Characteristics
There are at least three characteristics for a major move:
Price Extreme
Sentiment
Catalyst
To demonstrate how that criteria can be used, we’re going to use one very recent example:
The Carvana Crash
From the all-time CVNA, high of 376.83, set on August 10th, 2021, to the most recent lows (thus far) posted July 14th, this year, was a collapse over -94.8%.
“If your biggest claim to fame is that you ‘invented’ a vending machine … you’ve got real problems.”
With that, and hovering at nearly $380/share, it’s reasonable to say CVNA, had reached an extreme.
Sentiment
To go along with the price and no earnings was the sentiment … literally off the charts.
Used cars, years old, selling above the original MSRP. It was a never-before-seen event.
From a trading standpoint, it does not matter the ‘reason’ for the sentiment; only that the extreme was there.
Catalyst
Now, the hard part. The ‘catalyst’.
Just what was it that pricked the bubble for CVNA?
For our example, it looks like it was one sub-par earnings release too many. At the time of release, there was a subtle change in the character of price action.
About one week after the earnings release in August 2021, CVNA, broke a long-term trendline and never looked back.
Summary
The above example has been highly simplified for brevity.
Even so, we can still use these criteria to look at other market conditions … other sectors.
As you may have guessed, one sector that meets at least two of the above conditions, is biotech, SPBIO.
The third (Catalyst) condition may have been met this past week on August 3rd, with this report. Another link is here.
The take-over candidate GBT, releases earnings on Monday (tomorrow).
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.
Evidently, according to this out on ZeroHedge, stocks will be a good buy when the Fed pivots; apparently getting back to 2%, inflation.
So many lies, half-truths and pre-suppositions, all in one sentence. Let us count the ways.
Actually, let’s not.
At this point in time, one does not want to draw any undue attention.
A better idea is to see what the market’s saying about itself. This is the crux of Wycoff analysis.
Wyckoff stated a century ago (1902, to be exact), stock prices moved based on an energy of their own; at times, completely disconnected from fundamentals.
Looking at those markets and from my own tracking spreadsheet, 106, indices or equities are currently monitored.
That list will change over time but it’s typically around 100 or more ticker-symbols.
Of that number, the following are those currently in a downward sloping trading channel.
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.
If that’s where we are now (a big if), price action SPBIO, will not stay at elevated levels long.
Summary
If we’re in yet another shakeout, the expectation is for price action to retrace the opening gap higher within the first hour of trading.
How price action behaves if/when that happens will help determine if we’ve had a failure; SPBIO, heading much higher or one more shakeout before lower levels.
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.
Sometimes you feel like an idiot and sometimes you don’t 🙂
Question: How do you know where the market’s going to go?
Answer: Put in your stop; that’s where it goes.
The stop level mentioned in yesterday’s update was not physically placed in the market but a mental identifier; indicating if the LABD trade was subject to failure.
As if on cue; no sooner was the stop posted than today, the market heads right for it.
In or Out
With the level being tagged so easily, it means that one’s thinking is right along with the amateurs, doing the same thing. Ouch.
So, price action penetrated the LABD 26.50, lows.
It’s what happened next that’s important.
It took less than one hour for LABD, to reverse off the lows and begin to print decisively higher.
Therefore, we just witnessed a run on the stops.
At the trader’s discretion, LABD-22-05, was maintained throughout the stop-run process.
The hourly chart of 3X Leveraged Inverse Fund LABD, provides detail; note LABD got itself back above an existing trend line.
SPBIO 3X Leveraged Inverse LABD, Hourly
Time is approximately 2:11 p.m., EST
Typically, a ‘bump-and-run’ move like this signals the kick-off for price action.
Summary
Biotech appears to have gyrated enough at the extremes to frustrate both the bulls and bears.
With today’s run, we may now be ready for a directional move; LABD to the upside.
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® 