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.
Most of the major indices finished higher today except for the miners, real estate and biotech.
The early session update said IYR, price action may be in a test of its up-thrust (reversal) from October 18th.
If that’s a valid assessment and it was a test, the volume is important.
Whether it’s an up-thrust or a spring, when the set-up gets tested, the volume gives additional clues.
What we’re looking for is when price action comes back to test, volume contracts.
If that happens, it means (with good probability) there’s no commitment to sustain prices at the test level.
Real Estate IYR, Daily
The real estate situation may be about to get interesting.
Volume contraction is near-textbook.
This is one of the rare times, there’s a high probability expectation; that is, IYR price action resumes its downtrend (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.
Not to be outdone, we have this ‘me too’ melt-up article as well.
Let’s not forget, all the ‘Fed must do something’ rumors and feigned concern by its members.
If anyone really wants to know the big picture, the overall plan (a wide majority do not), this interview may be the best explanation to-date.
With all of that, we certainly could get some kind of rally in the coming week. We’ll let the price action speak for itself.
As a reminder, Wyckoff analysis does not concern itself with press releases, rumors or ‘fundamentals’; Wyckoff himself, determined based on price action alone, they have no material effect on market movement.
In his words, ‘other forces are at work’, and it’s those forces that interest us.
Gold & Silver
As said in this update, gold (GLD) was just ‘ticks’ away from posting a new monthly low. In fact, it got just 0.24-pts, from a new low before rebounding.
Of course, each time we get any kind of rally in the metals, there’s the usual hysteria. Even though for the past seven months and counting, those rallies occur at lower and lower levels … i.e., a bear market.
Shown below, it’s in a trading channel with price action at the right-side channel line.
Gold (GLD) Weekly
The chart below gets closer-in.
From left-most contact point on the channel to the initial contact on the right side is a Fibonacci 13-weeks.
Also note, the weekly high posted at the center line is a Fibonacci 5-weeks from the left-most contact.
Highly emotional markets tend to adhere to Fibonacci until either the emotion wears off or ‘everybody’ recognizes the structure.
Obviously, to keep the channel intact, a lower open (and lower action) at the next session is needed.
Looking at the daily chart of TLT below, Friday’s level of (down) volume has occurred only three times in the past three years.
Each time, there was a near immediate rebound or in the case of March 2021, the rebound came several weeks later.
Bonds (TLT) Daily
Moving in closer, we see the possibility of an ‘island-gap’ at the next open.
What could drive capital into the bond market?
Well, how about a ‘shock’ or continued market melt-down (not advice, not a recommendation).
A quick check of the local newsfeed (as of 12:45 p.m., EST) shows nothing on the horizon other than usual nuclear attack threats, power outages, child mutilation protests, marauding bears and the disarmament of Canadians.
Nothing to see here …
Real Estate
There is no mistake, events in real estate are happening at the fastest pace in recorded history.
As Scott Walters put it, over 10-million people bought into the ‘work from home’ hype and got themselves instantly (nearly) upside down in their transaction.
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 last update, posted late in the session, said with the upward bias provided by the sizable Op-Ex event, we can look for the weakest (or one of the weakest) sectors.
The chart below summarizes yesterday’s action:
Friday 10/21/22, Single Day Gains
Gold miners GDX, is the outlier at the top and real estate IYR, the outlier at the bottom.
Before anybody gets excited about ‘hyperinflation’, just a reminder; silver SLV’s, action has retraced to a weak 38.2% (chart not shown), as it was forecasted to do from last week’s update:
“Silver (SLV) is currently at support levels; therefore, some upward action (staying below SLV: 18.5) is normal behavior.”
Price action is the final arbiter; we’ll see what happens next.
Back to real estate.
Professional Wisdom: ‘The Crash’
We’re going to use the experience and insight provided by Scott Walters concerning the potential for real estate; that is, we’re in a world-wide event the scale of which, no one alive (and possibly, ever) has seen before.
The Economic Ninja has just seconded that opinion (time stamp 3:45) with his quote:
“Right now, we are in the greatest collapse since The Great Depression; and I believe it will be as severe, if not worse, sharper, faster, than what people experienced in 1929”.
So, what would that ‘collapse’ look like on a chart of real estate, IYR?
Ah, yes. That’s the hard part.
To take useful wisdom like that above, and somehow map it into potential market behavior.
For that, we’re going to use the Quarterly chart of IYR.
Real Estate IYR, Quarterly
There are still two months and one week left to go in the 4th, Quarter.
We’re at a confluence of price action as we’ll cover in the Hourly chart farther down; first, what’s the potential?
Here is one artist’s rendition (not advice, not a recommendation).
That puts it into perspective.
We may know at the very next open, if we’re pivoting higher or continuing the decline.
Butterfly In The Amazon
Of course, the market’s not going to tell anyone its next move. We have to decipher that (read the tape) ourselves.
Sometimes, as Wyckoff said a century ago … ‘It’s as if the weight of a feather is all that’s needed, to push the market further or to reverse.’
So, let’s look at that feather (the butterfly) on the hourly chart.
Since we’re positioned short (DRV-22-05), the chart’s inverted to mimic leveraged inverse fund DRV.
Real Estate IYR, Hourly (Inverted)
The important part is we see a repeating pattern of trendlines.
Moving in closer, we have this. The blue arrow is ‘expected’ action based on the analysis up to this point (not advice, not a recommendation).
Moving even closer, the zoom shows IYR, finished the day in Wyckoff spring position; having pushed past minor support (resistance on non-inverted).
Summary
If IYR opens lower or gap-lower, we’ll have to wait and see if it posts a new daily low (below IYR ,77.24).
If that happens, we have some confirmation lower prices are ahead and can then set a definitive stop for DRV-22-05.
Obviously, a higher open (pushing past IYR 78.91), negates the trade.
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 $2-Trillion Op-Ex today, provided upward bias for the overall markets.
Not expected, was biotech SPBIO, to be part of that move.
After today and possibly because of this announcement, we’re out of the sector until price action demands attention.
While the Dow, S&P, NASDAQ were up significantly for the day, obviously absent, was real estate (IYR).
Days like today help narrow the focus. Who is not participating in the up move?
While the other indices are up multiple percentage points, IYR, finished the day up only +0.69%.
Real Estate (IYR) Weekly
The prior linked YouTube post from Scott Waltersis not the premise for going short (not advice, not a recommendation).
It is, however, a reminder that what’s going on, is at a level no one has seen before.
Unless IYR, somehow gets out of the channel, it’s declining at -84%, annualized.
The set-up for this short trade (DRV-22-05) is based on a weak retrace (to 38.2%) on the daily with the anticipation, today’s reversal bar will ‘fail’ at the next session.
Real Estate, (IYR) Daily
The expectation for the next session is straightforward; lower open or gap-lower open and posting a new daily low.
The chart of IYR below, shows what we’re looking for (not advice, not a recommendation).
Obviously, a new daily high at the next session negates the set-up and warrants a trade exit.
A new daily low and we’ve got a ‘failure’ of the reversal bar; DRV-22-05, is liklely to be increased (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.
Biotech is not behaving as expected; LABD-22-08, has been exited completely with an overall profit of about +8.5%.
We all know that real estate is in the largest bubble in U.S. history … and that’s not hyperbole.
With today’s upward bias in the market and IYR, not responding in kind (remaining weak), a position has been opened in leveraged inverse, DRV @ 74.53 (not advice, not a recommendation).
Price action in IYR, could still pressure somewhat higher into the close; thus, DRV would decline but the anticipation is if so, not by much.
Trade is labeled as DRV-22-05; stop is TBD, to be provided after the close.
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’s hanging on … just ticks away from posting a new monthly low.
It hasn’t looked good for the bulls ever since the ‘changing of hands’, discussed over seven months ago, linked here.
From that update, we have a useful quote concerning the massive GLD, volume spike, posted on March 8th:
“Such volume spikes typically indicate the potential for a long-term, sustained reversal.”
How long, is long term?
Well, it’s been seven months and counting …
The weekly chart of GLD below, shows retrace, test and reversal, at a very weak Fibonacci 23.6%.
Since the GLD, high on August 6th, 2020, it’s been over two-years of sideways-to-down.
Gold (GLD), Weekly
The blue line is the 23.6%, retrace level.
Price action has oscillated around this area which in itself, provides confirmation of validity.
The chart below has a zoom of the retrace area.
Since the ‘changing of hands’, the analysis stance on gold (and silver) has not changed; we’re trending lower until price action indicates downside capitulation … at this point, nowhere in sight.
Summary
With GLD reversing at the axis line (23.6%, level), we can now use this area via the Fibonacci Tool, to project downside targets.
Target analysis is slated for the next GLD, update.
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.
After the last post, was released, looking at the after-hours action, there was one more possibility for SPBIO, to subdivide (higher) and still be in an overall downtrend.
It was the skinniest of margins, the eye of the needle but that’s what we got with yesterday’s price action.
While the rest of the market remains hypnotically fixated on bull or bear and who’s right, one is reminded of the old Ned Davis, trading adage; ‘Do you want to be right, or do you want to make money?’
The tape is always right.
Yesterday, biotech SPBIO, made one last subdivision to the only level it could go while still remaining in a downtrend.
Follow The Rules … Break The Rules
That title is borrowed from the interview with Ed Seykota in the book Market Wizards.
Late Monday night, looking at the after-hours, it was obvious price action might blow through the LABD stop at the next session.
With that in mind, a forecast of price action was drawn on the hourly chart of LABD.
That forecast (drawn on the broker’s platform) showed the conditions under which the rules would be broken, the position held, and the stop temporarily ignored.
Replicated on the Worden Brothers, platform (below), is a representation of that forecast.
SPBIO, Leveraged Inverse LABD, Hourly
Wednesday (today) Early Session
Judge for yourself. We’re interested in the form of the action and not necessarily the time required.
It was thought the reversal would be complete in a day; looks like it’s a day and an extra 30-minutes. 🙂
The Challenge
To those seriously addressing (working) the markets; Challenge yourself to draw the ‘excepted action’ of the market before and after taking a position.
If your forecast does not match, then obviously something else is happening. Is that ‘something’ in line with acceptable price action for your position … only you can decide.
Summary
The short position in biotech (LABD-22-08) has been maintained (not advice, not a recommendation). Now that it looks like a reversal, this sector could be in serious trouble.
All the while, the fundamentals continue to build.
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.
As we’ll see below, SPBIO, has oscillated itself into a decision point.
From a positioning standpoint, my firm has taken a bearish stance on biotech via LABD (not advice, not a recommendation).
Yesterday’s update anticipated more SPBIO, downside which did not happen.
Instead, we got a test of the latest SPBIO, high.
This testing action does not negate the short via LABD, but it’s now very close.
Once again, we’ll use an inverted chart of SPBIO to mimic the action of leveraged inverse fund LABD.
Biotech SPBIO, Hourly (Inverted)
The blue lines are subdivisions higher and the magenta, subdivisions lower.
The zoom chart below shows just how close we’re to short-set-up, exit. If SPBIO posts a new daily high, by definition it will push past the LABD, stop and the trade will close (not advice, not a recommendation).
Strictly speaking, in the chart above, the ‘risk’, is the distance between the latest hourly low for SPBIO (Inverted) and the stop location at the black arrow.
That’s approximately 50-pts on the SPBIO, chart which corresponds to about 0.43pts for LABD.
After hours action (5:57 p.m., EST) has LABD, trading lower -0.37pts, or -1.68%, @ 21.68, but still above the prior stop location @ LABD 21.23.
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® 