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.
In the past few weeks, it seems like the markets have been whacked with a lot of, ‘the largest, ever’.
Trading in bonds, specifically TLT, is no exception.
While the media and pundits alike, deflect with ‘who’s doing the selling’ (hint: it’s not important), we’re going to look at the harder question of ‘what does it mean?’
Kick-Off, or Capitulation
Borrowing from research and writings of Wyckoff, Weis, and Prechter, when we get such a huge thrust downward (chart below), it’s typically one of two events:
A massive kick-off to much lower prices or a capitulation that washes-out the weak hands.
A bond upside reversal (rates lower) is a common sign of nearing or active economic downturn (not advice, not a recommendation).
In this interview with Greg Hunter, Ed Dowd covers the topic … the expectation for the reversal. However, that interview, was before the massive thrust lower.
Long Bond Proxy, TLT, Weekly
For years, it’s been one failed upside (reversal) after another.
Is this time, different?
The right side (magenta arrows) shows unprecedented thrust and volume.
So far, there has been a weak recovery to 38.2%, retrace of the recent down-move.
If that retrace level holds, with bonds continuing lower (rates higher), it does not bode well for the ‘capitulation’ narrative.
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 things don’t change soon, the wheels have come off the bond market (not advice, not a recommendation).
At this point, it’s common knowledge the (U.S. Treasury) bull market of forty-years, ended in March of 2020.
It’s been nothing but rates ratcheting higher, ever since.
Recession Reversal … Where?
However, a strange thing happened on the way to the anticipated bond reversal … typically, a long-time indicator of an impending recession.
Just weeks ago, during the market meltdown with the largest trading volume ever recorded, bonds did not respond as expected.
The Blip
During that wipe-out, bonds (TLT) blipped higher into a false breakout, a Wyckoff Up-Thrust, and have since collapsed on the largest weekly downside (thrust) energy and volume ever seen.
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.
Yesterday, the 3-Day chart was the best fit for biotech, XBI.
After Thursday’s action was complete, now the daily looks better.
Either way, we’ve got a tight stop (nearly hit, yesterday), and a trendline; decisive violation of either one, indicates an exit of (short biotech) LABD-25-08 (not advice, not a recommendation).
Biotech XBI, Daily
There’s so much going on with this chart.
We’re at the point where the downtrend either continues, or morphs into a different scenario.
Even as this post was created (late Thursday), the after-hours session continues slightly lower for XBI; an encouraging sign, if short (not advice, not a recommendation).
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.
We’re letting the market decide what support/resistance, trendlines, and Fibonacci levels are significant.
We’ll even make an attempt to pick the timeframe(s) that best describes current action.
There’s a lot going on in a market sense, as well as ‘behind the scenes’ with revelations like this, and this, and this.
With that said, we’re looking at the 3-Day chart and Fibonacci levels.
Biotech XBI, 3-Day
The 3-Day is being used; it best shows current trending action (planned for next update).
The XBI, has near perfect (Fibonacci) symmetry.
Price action has made its way back to the 23.6%, level, and is hesitating.
Watching the action in real time, XBI gives the sense it does not know quite what to do … is it in a pause, gathering steam to move higher, or was the massive squeeze, on Wednesday, the 9th, all there was?
Positioning
As stated in the earlier update, XBI action on the 15th, put it at The Danger Point®; the location where risk was least for a short position (not advice, not a recommendation).
It’s been slow going since then (ratcheting lower) but the one thing XBI, is not doing … is moving significantly higher.
More trade discussion, stop levels, link here (not advice, not a recommendation).
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.
First, it was this (RFK Jr., nominated, then confirmed), then it was this, and now, the latest is this.
While the financial press toys with the idea ‘the worst is over‘, (which might be true), with biotech, price action itself says it may be preparing for its next leg … lower.
Biotech XBI, Hourly
We’re drilling down to the hourly; it shows (as of 12:24 p.m., EST) a Fibonacci a-b-c, corrective retrace.
Wave ‘a’, was the massive short squeeze.
Wave ‘b’ was a test of the lows; then on to wave ‘c’, the same (net) distance as wave ‘a’, making it a 1:1 (potentially complete) corrective move.
Also note the ‘alternation’.
Wave ‘a’, was essentially straight up. Then, wave ‘c’ alternates and is a labored slow process, ratcheting higher.
We’re at The Danger Point®, where the risk of a short position is least (not advice, not a recommendation).
Currently short, Trade: LABD-25-08, with stop at the LABD, session low (not advice, not a recommendation).
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.
Bear markets are not (always) prices going straight down, a la 1987.
Bear markets are ‘price destruction’; a series of ups and downs that effectively drain (whipsaw) the typical market account.
The last two weeks have seen record breaking extremes; the latest being this update, indicating the market posted the largest volume ever recorded.
Dodging Bullets
A case in point, this site’s narrow miss on having a huge gain (LABD-25-06, short biotech) being completely obliterated in last week’s largest short squeeze, ever.
It’s (almost) a ‘no-brainer’, this type of market behavior is not bullish (not advice, not a recommendation).
Then, The Propaganda
If it’s not dodging bullets, it’s sifting through the propaganda, half-truths, and outright lies.
The latest of these, (could be) ‘China dumping dollars’ and other ‘collapse’ narratives.
There’s volatility for sure. That’s what bear markets are about. However, this link might help mitigate the hysteria around the ‘It’s all blowing up’ narrative (not advice, not a recommendation).
In the above link, how it really works, time stamp: 17:58
So, here we are. What’s next?
Gold & Silver, Update
Even though both gold (GLD), and silver (SLV), are trading lower as of this post (12:52 p.m., EST), the Junior Miners GDXJ, posted a new daily high, thus, short JDST-25-09, was exited (not advice, not a recommendation).
Today’s activity does point to a new potential (developing) set-up, this time, silver miners SILJ.
Silver Miners SILJ, Daily
The set-up (spring-to-up-thrust) may develop from here, or it could diffuse into chaos.
It remains a possibility, until price action itself says, ‘no’.
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.
Gold (GCM25) is holding steady with a marginal decline.
Silver (SIK25) has posted a characteristic opening ‘spike’ reversal (5-minute bar), threatening to move lower.
At this juncture, the important part, is what’s not happening.
That is, neither metal has had a (significant) gap-higher open; they are not continuing their unabated advances.
For silver, we’re going to update the SLV, ETF, chart.
Silver SLV, Daily
As of this post, the (futures equivalent) ETF close of last Friday (29.19), is holding.
Trading is still at the 61.8%, Fibonacci retrace.
From a positioning standpoint, this sector (precious metals) is already held short via the Junior’s leveraged inverse JDST (not advice, not a recommendation).
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® 