Harbinger of Future Implosions?
One-minute, Tricolor Auto is Triple AAA rated.
The next minute, it’s bankrupt, in Chapter 7 (liquidation) along with fraud allegations.
Livermore said it himself, ‘surprises tend to come in the direction of trend’.
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The Danger Point®, trade mark: No. 6,505,279
Downside For Both?
The ‘bubble’ is obvious, Artificial Intelligence.
The ‘beast’, not so much, but revealed below.
The last update, presented a case for the SOXX top, a proxy for A.I.
Note: If the SOXX, has made its final high, it’s still very early in the reversal:
Wyckoff said a century ago, ‘It’s as if the weight of a feather can move the market in either direction’.
That’s where we are now.
For biotech (IBB, XBI), different forces are at work.
Biotech IBB, Weekly
The 38.2%, retrace from 9/19 high, to 9/25 low, is in the vicinity of 140.90 (magenta dashed line).
Fridays are typically biased to the upside.
There’s a possibility IBB, may test (upward) throughout the session, heading to (at or near) 38%, by the end of the day (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
Did The Bubble (just) Pop?
The SOXX, closed lower yesterday and is down again, in today’s pre-market.
If we’re in a sustainable reversal, volume provided the clue.
As with Carvana, SOXX volume in the last session increased substantially from the day prior.
Lower close, higher volume, increasing pressure.
In pre-market, SOXX continues to drop as we speak. Is this the ‘gap-down’ Bert Dohmen talked about? Link here.
Semiconductors, SOXX, Daily Close
We’re in Wyckoff ‘up-thrust’ condition. Pre-market action says it’s a draw-down, best case.
Worst case (for the bulls) is that we’re at the top … and it’s a long way down.
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The Danger Point®, trade mark: No. 6,505,279
Trading Below Support
Carvana spent three days hovering above support.
Yesterday, trading started above support, then, ended below.
Adding to that, price action was down on double volume from the prior session.
Volume study is part of Wyckoff analysis. It typically does not get attention as it’s boring, generating no ‘clicks’.
The increase in volume suggested pressure’s building to the downside.
Based on that, a (small) short was opened yesterday (not advice, not a recommendation).
Carvana CVNA, Daily
Short position is being maintained; stop to be moved at the end of this session to the day’s high (not advice, not a recommendation).
Other Markets
From the ‘notes’ discussion on yesterday’s post, the WMT position was stopped out (at essentially break-even) early this session (not advice, not a recommendation).
Price action looks like a secondary test of the reversal.
However, from a preference standpoint, the focus is on CVNA … and the SOXX.
More on that later.
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The Danger Point®, trade mark: No. 6,505,279
Repeating Pattern
During the last multi-year, market melt-down from ’07 – ’09, Cadence Design Systems (CDNS) crashed over -90%, in a relatively ‘well-behaved’ collapse.
‘Well-behaved’; straight down, sideways, then straight down again.
Looking at the current price action on a closing basis, we see the ominous (potential) pattern of Spring-to-Up-Thrust.
Cadence Design Systems, CDNS, Daily Close
Other Wyckoff ‘spring’ set-ups are noted.
However, this time around, we may be in up-thrust (reversal) condition.
The next earnings release is late October; there’s time to assess action (if/when short) before any Kabuki theater (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
Watch The Volume
The last update on Walmart (WMT) had this:
Will we get an upside test, even if only briefly?
Watching price action early this session, it looks like that test is happening now (not advice, not a recommendation).
From a Wyckoff (and David Weis) perspective, what we’re looking for if WMT, keeps rising or holds steady, is volume to contract on the day.
Contracting volume indicates a test of the up-thrust (reversal) and helps to add probability to the downside.
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The Danger Point®, trade mark: No. 6,505,279
One of Many?
The last melt-down in 2008 – 2009, was precipitated by subprime mortgage.
This time, will it be auto loans?
Is this just one of many implosions to come?
Digging-in on auto finance, we have chief cook and bottle washer, Ally Financial. Old timers know this outfit as formerly GMAC.
Let’s not forget, Carvana (CVNA) and Ally are (potentially) joined at the hip, link here.
Moving on to the chart.
Ally Financial, ALLY, Weekly
This price action is eerily similar to biotech.
Note how long ALLY bounced around below support (in spring position) before finally moving to the upside.
Nearly a month ‘hugging the lows’, could be an underlying indication of weakness (not advice, not a recommendation).
The next earnings release is scheduled for October 17th.
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The Danger Point®, trade mark: No. 6,505,279
Heavy Down Volume
Looking at the big-cap discount stores, only Walmart has made a recent new high.
Costco, COST, with half the market-cap of WMT, posted all-time highs back in February, this year.
Next up, Target TGT, a real dog, with all-time highs way back in November of 2021.
Walmart WMT, Daily
All-time high as Bank of America raises price targets because of, what else, Artificial Intelligence, link here.
Yesterday, Friday, posted a new daily low and was Fibonacci Day 3, from the reversal.
Will we get an upside test, even if only briefly?
If we do, and depending on price action, it’s likely to help narrow the risk on a potential short position (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
Repeating Pattern
The graphic at left, is a segment of biotech tracking ETF, XBI.
Note how it exhibits a repeating pattern of spring-to-up-thrust (S & U).
Today is also Fibonacci ‘Day 5’, from the ‘S’ labeled low.
As seen with gold GLD, slightly higher, not correcting immediately, anything can happen.
However, with XBI, we’re in a multi-year downtrend that may be finishing its countertrend move, ready to up-thrust and reverse lower (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
Measured Move
We’re there now.
The chart below, shows a (potential terminating) wedge with measured move.
Tracking fund GLD, has met the wedge target.
As always with the markets, anything can happen.
Gold GLD, Weekly
If gold (GLD) does correct, even just a little, it’s likely to hit the miners, GDX, GDXJ as well (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
The Danger Point® 