If we look at it from the perspective of an up-thrust test, as we’ll do below, such tests if they don’t fail are the precursor to dynamic moves.
At the minimum, today’s action allows the stop to be moved on short position LABD-22-03 (not advice, not a recommendation).
It’s interesting, the biotech sector both IBB and SPBIO, with inverse funds BIS, and LABD, respectively are the only ones taking a major hit today.
Using a cue from Nicolas Darvas and his observations (as a dancer), the market will initially go opposite its main direction as if to get ready for the move; like a dancer crouching down before lifting the female partner.
That may or may not be the case now, as we’ll see below.
Biotech SPBIO, Weekly Chart
Next, we’re going to invert the chart (to mimic inverse LABD) and then label the up-thrust as a Wyckoff ‘Spring’.
Biotech SPBIO, Weekly Inverted
Next, we get closer to the action as shown.
Is the ??? area, a test or a failure of the set-up?
The short answer with about 90-minutes to go before the close, is unknown.
If SPBIO, closes down for the week, painting a red bar, probabilities are to the downside.
Closing higher for the week starts to bring a potential failure of the trade into question.
No matter what happens, the stop on the short position via LABD is going to be moved to the low of this session; currently LABD 49.90 (not advice, not a recommendation).
We may get into speculation later, on why biotech seems to be the only index in a major squeeze, preparing for downside.
Some who monitor this site, and those ‘awake’, may already have a good idea as to the potential why.
However as was done with real estate, changing from 2X inverse to 3X inverse, the same has happened with biotech; from BIS, to LABD.
Since the overall bearish assessment has not changed, this morning’s upward move in the markets was used to re-position to a higher (inverse) leverage vehicle … LABD (not advice, not a recommendation).
The hourly charts below show the exit of BIS and the entry of LABD.
Biotech 2X Inverse, BIS
Biotech 3X Inverse, LABD
As this post is being written 12:55 p.m., EST, price action’s at the danger point.
We’re at the extreme; the risk is least but price can go either way.
Watching that action in real time, it looks like LABD wants to go higher; currently trading at 57.20-ish.
If LABD is higher, that means SPBIO, is moving lower.
Unless price action of biotech (IBB, SPBIO) and the overall markets signal a change of behavior … the bear move is still in play.
If we get a significant break lower, ‘retail’ that’s not positioned properly, will provide the majority of downward thrust energy.
It’s no different than it was in Wyckoff’s time, over a century ago.
Looking over the updates of the past few weeks, you can see how the LABD channel (above) was formed.
The trend has repeated with successive moves higher and the right side channel line moved as a result of price action.
At this point, we may be there.
If LABD closes the day at its current location or higher, it’s a good sign of channel confirmation.
In addition, we have Moderna (MRNA) in the process of penetrating the trendline shown in yesterday’s update. If price action continues lower (as it’s doing in the early session), it could be on track to post a weekly reversal.
Separately, the IBB (ETF) index is already posting a weekly reversal. From a momentum standpoint, the new weekly high of IBB, has put that index in a potential bearish (MACD) divergence provided it closes lower from here for the week.
The bearish case has been building even back to David Stockman’s assessment of ‘2-Trillion Dollars of Bottled Air’, during the summer of 2015.
However, Stockman does not trade. So, to figure out if ‘this is it’, is not in his repertoire.
With current events as they are, one can intuitively conclude the fundamentals have not improved for the sector.
The backdrop is there for significant downside.
With that in mind my firm remains positioned max short (not advice, not a recommendation).
Any selling in LABD that’s occurred over the past month or so, was to adjust account(s) for maintenance (margin) requirements.
Once the index was finished with its adverse (SPBIO, higher, LABD lower) moves, we’re right back to establishing a full position.
This type of action has been going on for months.
It’s tedious and not exciting; exactly the opposite of what a typical YouTube viewer is looking for.
As a corollary, there’s no artificial (and profit limiting) requirement to show ‘Monthly’, Quarterly’ or whatever gains, to retail customers.
The financial press takes care of the retail side.
Some (very few) actually escape; finding themselves on sites like Van Metre’s, Weis’, and this one.
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.
A steady sustained decline of tracking index SPBIO, is the best environment for highly leveraged (3X-inverse) fund LABD.
Biotech continues to be one of, if not the downside leader.
There has been no major break lower (LABD higher) that would draw attention to the index. That’s good in a way; it allows one to open positions (not advice, not a recommendation) while price action is relatively quiet.
It’s still a while before the close. LABD could even finish slightly lower and remain in the trading channel shown above.
Self-Employment Is Key:
It’s stories like this that highlight one way (if not the only way) to avoid being sucked into the first round of injections is to generate your own income.
It seems that everyone jumps on the bandwagon and tells us ‘how bad it is’ … very few do the work and show what can be done about the current reality.
From a financial market perspective, shorting biotech looks like the highest probability set-up (not advice not a recommendation) until such time that price action says ‘get out’.
So, that’s this site’s approach to generating income and being separate from any large (mandate enforcing) corporation.
‘Knock and Talk’
One last note on taking action. This is an example; offering a perspective on what can be done if there is a knock at the door.
Narrow your focus of ‘influencers’ to those who actually provide a service. Reduce or eliminate exposure to those who continue to peddle the fear without any kind of plan.