Last Thursday, the day the XOP report was posted, it topped.
The day after, Friday, it reversed.
XOP opened gap-lower and inverse fund DUG opened gap-higher.
Sometimes, it’s that simple. Went short the the sector (not advice, not a recommendation) at DUG 21.5899
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You don’t hear about Pont & Figure anymore. P&F looks old, stodgy and boring; but that’s exactly how one should approach the markets to be consistently profitable.
Paraphrasing Dr. Elder from ‘Come Into My Trading Room‘, he says:
‘Trading is an old man’s game; you need to have a good, long memory.’
Well, the author of these updates is certainly old … well into his sixties and with a long memory; The crash of ’87, debt wipeout of ’98, tech bubble crash of 2000, the 2008 meltdown and now, today.
Those advanced years tempers one’s desire to constantly jump in and out on the swings. Not to say that might need to be the method at the time; but like Van Metre’s approach, the big money’s in the big move.
The jobs data released yesterday basically tells us ‘The economy ain’t coming back’ … possibly ever, in our lifetimes.
We’re at an order of magnitude greater than 1929; it was thirty years before that market returned to its prior levels.
Which brings us back to real estate and IYR. The P&F chart shows us, if there’s a breakout to the downside, initial projection of the move is to support around 69 – 73.
Keep in mind that if (or as) price action passes down through the low 80’s, it then builds up another area of congestion projecting even lower. The initial breakdown would only be the start of downside potential.
With that in mind, the firm is in position (not advice, not a recommendation) using DRV as the trade vehicle. Stop level is in the vicinity of yesterday’s DRV low @ 10.38.
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The clip below is the last 20-minutes of IYR going into the close. It’s less than a minute long, so the trade action has been sped up.
There are several important parts.
First, there’s a Fibonacci retrace tool being used that has top origins off the view of the chart.
The dashed line at the top of screen is the 38.2% retrace of the entire move over the past two months.
It’s clear IYR has tested and pulled back from this area.
Next we see to the far left price action topping around 83.75. Following that line to the right, in the middle of today’s session is a small triangular wedge that’s six-candles wide (approx: 90-minutes).
As the recording starts, price action has come back to that (83.75) area. It can either bounce off to the upside or break down.
A breakdown indicates support is weak; we may have seen the end of the counter-trend move discussed in the mid-day update.
As noted, price action broke through minor support and closed below. We’ll see what happens next.
For the day, IYR tested and pulled back from the 38.2% retrace area; suggesting it’s ready to continue subdividing lower.
TC2000 Charts courtesy of Worden Brothers, Inc. www.worden.com
It’s just after 11:00 a.m. EST; typically the time markets end their counter-trend action and reverse.
Yesterday saw the firm’s exit of DRV positions in anticipation of higher action (lower in DRV). That’s what we’re getting now; except IYR is hitting and testing the underside of established resistance.
The DRV positions have been re-opened; not advice, not a recommendation.
If this test is going to hold and IYR reverses lower from here, look for price action to stall during the day or even now, just after 11:00a.m. EST.
Well traded inverse funds for IYR, are SRS (2X inverse) and DRV (3X inverse).
Recall that conditions are in place for a general market top and reversal; bonds, dollar have already reversed higher. Gold (inflation proxy) is continuing lower.
The entire setup along with the insane unemployment claims from this morning, suggest when the market heads lower, the move will stun even those who are ready on the short-side.
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The dollar and bonds have reversed.
Yesterday, oil futures posted a downward reversal bar. This morning’s (pre-market) session is lower again by about 1.00%.
Longer term perspective (above), Oil & Gas Sector, XOP is at resistance.
Shorter term, the daily (below) posted a measured move off the wedge formation.
There’s not ever ‘no risk’ in the markets … but there is ‘low risk’.
That’s where we are now with XOP. Risk is low the up-trend will continue unabated.
To get past long-term resistance, (if it’s going to do so), XOP may have to come back and retrace for fuel.
With unemployment claims just out at 965,000 does anyone really think the economy’s going to bounce back?
Back in the day during a real (not contrived) recession, it was bad when unemployment claims hit around 385,000. Those were the days.
One of the Inverse funds for XOP that’s fairly liquid (not advice, not a recommendation) is DUG.
Stay Tuned
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If the dollar (UUP) keeps going, its trend-line’s rising at a stiff 65%, annualized.
Sectors like Oil & Gas, which have essentially been a ‘dollar-short’ theme are at risk of significant reversal.
That’s in addition to anecdotal data from Van Metre’s updates, the oil patch is awash with inventory.
XOP is a good proxy for the long side and DUG for going short (not advice, not a recommendation).
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Seems like Tesla (TSLA) is always in the news.
Now, we have ‘the big short’, as reported by The Money GPS, doubling down on a possible even bigger short.
Is TSLA a good short opportunity or just a high visibility gamble; or maybe at this point in our history, just another psy-op?
How many minions are flagellating themselves over TSLA, anyway?
From a trading standpoint, TLSA could reverse from here. It could also gap higher into a wedge throw-over. With the weekly MACD showing no signs of erosion, probabilities are about equal.
Bad Short
Now, let’s look at another chart:
Real estate, IYR is showing classic signs it’s about ready to roll over.
Its been struggling for months at the 85-86 area and just yesterday, posted a new weekly low.
Yesterday as well, bonds reversed to the upside. Pre-market activity points to a higher open … solidifying the reversal.
On top of that, the dollar shows a higher open having (downward) tested its up-trend at the last session.
The list can go on but we see the difference.
One is a gamble (or even a psy-op manipulation of followers) and the other is a trade with high probabilities.
Good Short
The table below has current positioning (not advice, not a recommendation):
Special Update: 9:52 a.m. EST. Price action in DRV pushed to stop level and has recovered quickly.
Position is being maintained (for now) with analysis to follow.
Update: 2:21 p.m. EST. IYR looks to be headed to a 38% retrace at approx 84.25, level. All DRV positions exited. Will look to re-enter shorts at higher level, price action depending.
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Now, it gets interesting.
Bonds sold short the most in history.
Then, today’s action is reversal with moderate volume.
On the dollar side, at first glance it looks like a terrible day.
Action was down 0.53%.
The reality is, UUP came down to test an up-trend line formed as part of its own reversal last Thursday.
Both dollar and bonds are in an upside reversal; the dollar looks slightly ahead by a few days.
Real estate (IYR) has rallied (sort-of) which may only be temporary; likely on the (false) belief lower bond yields are good for higher yielding sectors.
Not true when we still have (as Van Metre puts it), the ‘insolvency event’ yet to come; everyone going bankrupt all at the same time.
Anything can happen and the above analysis could fall apart tomorrow.
On the probability side, looks like we’ve seen the extremes in the major sectors; now ready for reversal pivots.
At least that’s the way it looks right now.
Under the radar, the sector (IYR) may be getting ready for a dramatic break lower.
The chart above is the 3X inverse fund DRV (inverse of IYR).
The table shows entries over the past few days; not advice, not a recommendation. Currently, the firm has no other open positions.
Early in this morning’s session, IYR posted a new daily low with DRV conversely, posting a new daily high.
At this juncture (11:23 a.m. EST), we’re in a very tight range (both tickers, IYR, DRV) that’s oscillating in an attempt to determine the direction of least resistance.
From a weekly momentum standpoint, MACD has been positing lower for two weeks and is near a zero crossing.
With that, we’re favoring the downside for IYR and upside for DRV.
The market’s hovering at all time highs … effectively masking the fact, air is going out of IYR.
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Tracking fund CORN, has broken out of its five-month channel.
Price action is coming back to test and in the process, may be forming an inflection point.
This just out from ADAPT2030, has the food shortages accelerating.
The uninformed mistake food price rises as inflation. It’s an availability problem.
As reported late December here, there’s historical precedent, food comes first … then gold and silver.
No matter. The gold bulls power on. Buying into the metal and its tracking funds only to be whacked again and again at the most inopportune times.
Two reputable sources of long-term food supply are here and here.
Stay Tuned
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The Danger Point® 