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.
Remember, markets typically move in the opposite direction first after the Fed, then resume their main trend.
On Friday, markets were generally higher on interest rate hopes. It’s called ‘hope’, as the Fed’s not actually done anything.
Let’s word that more accurately. The bond market has not (yet) told the Fed to lower rates. When it does (if it does), they will follow and present their case as if they are leading the market.
Decades ago, Robert Prechter Jr., in a research paper, proved this point. More recently, Ed Dowd repeats the fact, link here (time stamp: 37:48).
Markets were higher, including the SOXX, covered here, and in this update, airline sector Delta (DAL).
Delta Airlines, DAL, Daily
If there’s any one chart showing why this site primarily works the short side, this is it.
The last major move was an impulse downward, taking less than three-months.
The corrective move against the trend, has so far been nearly five months in choppy overlapping action.
DAL, finished on Friday at the Fibonacci 78.6%, retrace level (not shown). Unless the market decides otherwise, we’re in a terminating wedge.
Currently short DAL, as DAL-25-03, with stop just above Friday’s high (not advice, not a recommendation).
Weekend Wait
Now, the worrying starts … we can almost write the mainstream media script for the next few days.
Why will the Fed need to lower rates? Is unemployment going to continue higher? What about all the mass layoffs? How will the consumer be affected … and on and on.
As a reminder, ‘alternate’ (real) unemployment numbers are here. We’re already at 25%, Depression era 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.
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.
The Good: Only the Senior Miners, GDX, have managed to claw their way past the highs set nearly five years ago in August of 2020.
The Bad: Junior Miners GDXJ, remain below that August ’20, level.
The Ugly: Silver Miners SILJ, are the worst, having their peak a bit later in February of 2021; they remain over -35%, below their highs.
The Market Rolls Over
Yesterday, Friday, was a down day for the Dow, S&P, The Qs, Transports, Airlines, Semis, nearly everyone.
For some of these indices, their all-time highs were posted months, if not years ago.
There may be some (bidding) ‘defensive’ action with gold (GLD) continuing higher; as said in earlier posts, the rest of the monetary metals are far below their highs.
Let’s look at the weakest; the silver miners, as they are likely going to be the ones most affected by an economic decline (not advice, not a recommendation).
Silver Miners, SILJ, Daily
We’re at an interesting spot.
Friday was a down day that pushed below existing support, shown in zoom area.
We have simultaneous action.
Once resistance was penetrated on March 18th, it could not hold. After eight trading days, on Friday, it posted lower on heavy volume.
However, we can see that SILJ, is now in (a minor) Wyckoff ‘spring’ position. So, the question is, what happens next?
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.
Looking at United Airlines (UAL), with the precise set-up, four-year wedge, measured move, the top, timed exactly at an earnings release, you have to ask yourself …
Was it all part of a (secret) plan?
Wyckoff Writes on Manipulation
Way back in 1910, Wyckoff wrote the following concerning manipulation (emphasis added, quote used with permission).
“Manipulators are giant traders, wearing seven-leagued boots. The trained ear can detect the steady ‘clump clump’ as they progress, and the footprints are recognized in the fluctuations and quantities of stock appearing on the tape.”
United Airlines UAL, Weekly
When looking at the chart, it all makes sense … it just took over four years to play out.
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.
It’s a good thing we’re not listening to the financial press as the market’s ‘Call The Fed’s Bluff’; we would’ve missed the set-up.
Let’s bookmark this post (like the last one), come back in July or so, and see how the poker-hand with The Fed played out.
Three guesses on who’s going to win and the first two, don’t count. 🙂
With Delta, it’s not the Fed they have to worry about. A series of events were set in motion (i.e., pilot ‘shortage’) that may not get fixed for years to come.
Moving on, let’s take a look at what the price action of Delta (DAL), is telling us.
For brevity, we’ll go straight to a marked-up (and time compressed) weekly chart of DAL.
Delta Airlines DAL, Weekly
DAL spent nearly a year building a ‘terminating wedge’ before breaking down during February of 2020.
Hmmm, February of 2020, what was happening back then?
That breakdown, coupled with the terminating wedge, and it’s almost as if someone knew something; time enough to position massively short or buy put options.
Subsequent retrace off the 2020 lows, were at lower and lower Fibonacci levels … with the current retrace at 50%.
The Options Trade
Dr. Alexander Elder describes (Come Into My Trading Room) one way to trade options that few attempt.
That is, instead of buying long dated options and then waiting for the slow burn down of capital, the lesser-known method is exactly the opposite.
In his book, he describes buying short-dated OEX (S&P 100) Put options for 3/8ths … back in the day when the market traded in fractions.
Two days later, he sells the options for 17, a 4,433% gain.
Taking that method and applying it to the daily chart, we have the following.
Delta Airlines DAL, Daily
On Friday, there was a huge gap-lower, open.
Price action spent the rest of the session attempting to close the gap. Volume increased substantially from Thursday’s session (up +46%)
Yet, price action was not even able to touch the lows of that session; Friday’s high of 38.29, vs. Thursday’s low of 38.32.
It’s a nuance that may have meaning or not.
The Short Trade
As shown on the chart, a position was opened with a Put; strike at 35, and priced (at entry) at 0.09 (not advice, not a recommendation).
Following Elder’s method, the price and short expiration, says there’s no hope for this 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.
At this point, especially after witnessing the ‘lock-step’ positioning of major corporations over the past year, one thing is obvious:
They’re all operating in concert.
The coordinated message is that everything’s getting back on track. No need to worry.
See how ‘normal’ things are? Big companies are even ‘planning’ for the future. Stay calm and take no (preparatory) action.
Indian Summer:
The reality is, just as this link suggests, we’re in an Indian Summer. That is, we’re between two extremes.
The past year can be viewed as the summer heat. Then, we’ve just had a break (advent of fall/winter) with restrictions being lifted … but soon the figurative and literal winter will come.
Think that’s a bit much? Well, let’s just take a look at one item.
The video in the link above, mentions the need for ‘body bags’; that we’ll run out … sounds insane.
The long term, Quarterly chart shows the extent of the technical damage.
The 80% drop could be the beginning of a multi year (maybe decades long) decline.
If it was a crash (like lumber futures), it will have the typical crash-like structure.
That is: An initial swift, decisive decline; followed by retracement which then rolls over into a sustained and long term move lower.
Meanwhile, the S&P 500, is hovering at its all-time-highs.
Not only has UAL not made a new all time high (posted way back in December of 2018), the weekly chart shows it’s formed a terminating wedge.
At this point, it’s ‘rolling out’ of that wedge indicating sell or sell short; Not advice, not a recommendation.
Stay Tuned
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® 