Dollar Rally

Wasn’t the dollar supposed to crash … go to zero … implode?

This is the flip side of the hyperinflation narrative.

Dollar implosion like hyperinflation, not happening.

Way back in 1921, Livermore said to Wyckoff that his assessment of the markets was, ‘it’s all about deception’.

Nothing has changed.

It’s in the best interests of those controlling the narrative to have as many as possible (always) on the wrong side of the trade.

We haven’t posted this link in a while … the video keeps getting deleted but re-appears every so often. This is how it really works … Period.

Note the date stamp on the comments. The video’s at least 13-years old and it’s still relevant today.

So, the dollar’s in a rally.

Not only that, momentum indicators, MACD, on the monthly, weekly, daily, all point higher. It’s in a rally and a sustainable one.

It’s completely opposite the accepted narrative.

You can feel the tensions building.

Bonds could be reversing but have already pushed rates high enough (long enough) to choke-off critical sectors of the economy like here and here.

Now we see the dollar has bottomed as well.

It looks like a strong multi-month (or year?) rally. Correspondingly, gold is weak. The overall markets are stretched to ever-livin’ extremes; never before seen.

Whenever this baby pops, try logging on to chaos, or exit any position (except maybe for the long bond).

Our approach then (not advice, not a recommendation), is continue work on positioning short. So far, the ‘project’ is taking small hits in those attempts. We’ll see how basic materials (SMN) works out today.

Stay Tuned

Charts by StockCharts

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.

Sentiment Shift

There’s been a change in direction; a sentiment shift.

Not in any particular order:

The Fed will not, or does not want to control the long end of the curve (long bond).

Interest rates (mortgage rates) are now rising and have been there long enough to start affecting the real estate market.

As reported by Uneducated Economist, there’s been a shift in behavior of his lumber customers.

Instead of furiously attempting to secure lumber (as prices continue to rise), now, there’re backing off; Not wanting to be holding overpriced inventory if/when there’s a reversal.

Remember:

Sentiment first. Then volume. Then direction

From way across the pond, Bjorn Andreas Bull-Hansen gives his input that ‘Things are changing … the entire structure of society’.

He also sates, as this site has done many times … ‘it’s not coming back’.

Has all this fed into the markets?

Let’s take another look at the S&P 500 (SPY), analyzed on the 15th.

At that time, we stated the SPY’s at the danger point.

The original location of that analysis is the orange arrow. Indeed, the SPY continued a brief rise before reversing.

Downward pressure (thrust energy) has increased.

Unless it’s a flash-crash, markets do not go straight down.

The SPY shows a nascent reversal. Price could come back to test resistance (black line) or continue to decline from here.

It’s important to note the overall market position (of the large indices) as they affect everything else.

With that, our focus remains on biotech (IBB) as it appears to be the weakest of the major sectors (not advice, not a recommendation).

Sunday futures open in a few hours.

Stay Tuned

Charts by StockCharts

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.

Failed Rally Attempt: Real Estate

Nothing gets sharks in the water faster, than a failed move.

Last Friday, real estate IYR closed below support (black line). Doing so, put itself in Wyckoff spring position.

‘Spring position’ is a technical condition of instability where price can reverse dramatically.

At the open yesterday, that’s exactly what happened. IYR launched nearly instantly to a 50% retrace.

From there it was a long day of moderate price erosion all the way to the last hour; then it all went south.

IYR closed just 0.22 points higher or +0.25%, after being as high as +1.73 points (+1.98%), early in the session. In addition, that close was back below support on the heaviest volume since February 2nd. … another bearish sign.

We can see momentum, MACD has exhausted itself and posted numerous bearish divergences.

On the fundamental side, just in the past 24-hours, there’s been a raft of news articles posted showing commercial real estate’s in serious trouble.

A short list of what has been found is below:

Mortgage market.

Mall values crash.

Bond tipping point.

Bond market calls Fed’s bluff.

U.S. Spending plummets.

Rising yields are now good for the markets?

IYR could still rally from here. However, with the conditions described in this post, it’s not likely.

Summary:

We’ve been short this market in a big way (not advice, not a recommendation) via DRV. The plan is to increase position size as long as price action allows low risk entries.

Charts by StockCharts

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.

Changing Hands: Bonds

The financial press is rolling out the usual suspects; bonds yields are going stratospheric and hyperinflation’s just around the corner.

A more likely view, one that’s actually based on reality, the price action itself, bonds just changed hands; from weak to strong.

Those selling or going short bonds (weak hands) at this juncture are potentially left holding the bag in a big way.

Taking a trip back in time to Livermore’s day (Reminiscences), he stated time and again, the large speculators could not enter or exit their positions at will.

They needed to have some kind of ‘event’ with heavy volume so that it would mask their moves.

It looks like we just had such an event.

The weekly chart of TLT, shows two major volume spikes. One where bonds reversed lower and now … a potential reversal to the upside.

We’re dealing with probabilities and over two-hundred years of market activity (since the Buttonwood tree).

Huge volume spikes have significance. They typically signal a pivot or the start of one.

Using that reasoning, we may have seen confirmation of rotation not only in bonds but the markets themselves; The S&P, Dow, Nasdaq are pivoting lower, with bonds and the dollar reversing higher.

Summary:

The futures market opens in a few hours. It’s typically a light-volume affair for bonds.

At times, Steven Van Meter presents in his updates how bonds have been typically slammed lower in the overnight.

That type of action has been going on for months. We’ll be looking to see if there’s a change of character.

Stay Tuned

Charts by StockCharts

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.

Finally, Inflation Shows Up

Its been nearly twelve years exactly since the market bottom of March 9th, 2009.

At that time gold tracking fund GLD, was trading around 90.

Today, it’s at 167, a gain of about 85%.

Gold futures for April ’21, closed this past Friday at 1,777.4

Either way, it’s a far cry from the $10,000/oz. that has been bandied about for what seems like forever.

Prices for energy and food are rising because of reasons not discussed in the financial media.

That media is certainly not going to educate the public.

In turn, that public has shown there’re certainly not going to educate themselves. If they were awake, news channel ratings (in the link) would be at zero.

Unfortunately, this time around, the game’s up.

The ongoing collapse will decimate those who refuse to wake up and will probably take some of those who are, with them.

Which brings us to the so called inflation, at hand.

What can be said? We can call it lies, misinformation, propaganda but none of those really get to the root.

Input prices are rising not from inflation, but from supply constriction and disruption.

For example, the corporate (big-Ag) food supply chain as reported on many times, is intentionally being destroyed. The result of course, prices go higher.

We’re also in a quiet sun-cycle period that only serves to help with (cold) weather extremes. The only discussion from the media concerning the weather is that’s it’s getting warmer, right? Opposite of reality.

So we’re taking that ‘opposite of reality’ as a contrary indicator.

Whatever inflation we’ve got after nearly twelve years, is probably at or near a peak … ready to head lower.

That includes the market as well. The likely outcome:

Market down, bonds up.

The daily close of long bond TLT, has it in a support zone. One attempt has already been made to position long via TMF (not advice, not a recommendation) as detailed in this report.

Once again this past Friday, another TMF entry.

Both bonds and the markets (i.e. S&P 500) are at opposite extremes. The risk of loss in bonds may have reached its nadir.

Charts by StockCharts

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 Short Nets 8.2% Gain

At this juncture in the market, trades are only to the short side.

The one exception is the bond market.

With everything stretched to never-seen-before extremes and ready to break at any time, bonds are in position to rally.

This short-story of the biotech short actually begins with a bond loss.

Going back in time a bit; on Friday the 12th, a long position was opened in bonds via TMF. That action was documented in this post.

Then, we had the holiday weekend and the Texas freeze.

These posts are originating from a location near Ft. Worth Texas, where temperatures reached a low of -3 F.

At the office, we have backup power and physical (hard-wire) connection for internet. Both systems operated well as main power was cut repeatedly over a three-day period.

Those conditions are mentioned because at the open on Tuesday the 16th, transmission, execution and update times on trades were affected.

A potential harbinger of things to come.

Imagine a nation-wide outage where the market’s down 15-20% and still collapsing. All the while, trade platforms are locked-up with brokers inundated.

During that open on Tuesday, bonds (TLT) gapped-down which was unexpected. Inverse fund TMF was immediately down about -4.5%.

Overall, the bond market is still in position to rally. However, the open on Tuesday said ‘not yet’ and we’re not going to change the trading strategy to one of ‘hope’.

With trade execution times slow (minutes, not seconds), by the time a confirmation came in from the broker, exit on the position posted a -5.2% loss: A dent in the account for sure.

At the same time, we’re monitoring a large set of equities and markets.

So, the immediate task at hand was could that hit be mitigated quickly. Was there an opportunity in another market for gain?

The short answer was yes. It was in biotech to the downside.

Price action on the platform was slow to update. However, it was clear from what was available, shorting biotech via LABD was high probability.

That’s what happened. Entry was at LABD 14.73, about ten-minutes into the session.

Obviously, under the conditions, stress level during re-positioning was high. Temperatures in the trading office were about twenty-degrees below normal.

It’s hard to say exactly, but sometime as the last trade was being entered or confirmed, main power was cut again.

Subsequent price action on LABD was fast.

By the time we’re halfway into the session, not only has the loss been mitigated but the account is showing green. Good stuff.

The position and the account finished the trade in the green and the rest is history. Entry and exit are shown on the 15-minute chart below.

On the exit and in retrospect, the trade was held for a bit longer than it should have been as there was potential for additional upside.

When it became clear it was not to be, LABD was exited with an 8.21%, gain as noted:

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.

Bonds On An Island

If bonds (TLT) finishes the day essentially where it started, it will have printed an island bar on the weekly chart.

Bonds (TLT) are currently trading in the pre-market around 144.15 – 144.65.

If trading stays in that tight range, with the technical conditions shown below, TLT may set up for a Monday gap-up reversal.

The potential island gap is shown on the weekly chart:

The part that’s not so noticeable on the bar chart (above) is better displayed on the weekly close chart:

TLT is right at established support.

To borrow Steven Van Metre’s assessment, with all the selling and the extremes in short positions taking place over the past six months, bonds have only been able to retrace to well known support levels.

Trigger events have a nasty habit of happening over the weekends.

That’s when the largest number of participants can be trapped with no escape. It’s how the game is played.

The island-gap weekly bar may not happen. Bonds could reverse (or collapse) during the up-coming session.

However, successful participation in the markets requires awareness of what could, or what’s likely to happen … before it does.

Stay Tuned

Charts by StockCharts

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.

Shades of 1987

Wasn’t it August of 1987 when the markets were stretched to extremes?

Then bonds headed lower … with rates going higher?

We know what happened after that.

Back then, the market peaked, retraced and then tried to make a new high which failed.

It was the failed move that set things into motion.

Then it was fast and volatile in the days leading up to Monday, October 19th. Markets do not repeat exactly but they do alternate.

So maybe it’s not August now, but February, March or April?

Getting back to October 1987. The late Dr. Martin Zweig discussed the possibility of a Monday crash during Louis Rukeyser’s Wall Street Week: Time Stamp 6:50 – 9:00.

While his assessment was important, perhaps more important was the rosy market forecast by the sell-side (retail) analyst (time stamp 8:37, link above).

That response to Zweig didn’t age well did it?

Three days later at the open, the market vaporized

Is truth more important than fairy tales? This site is about presenting objective analysis along with potential outcomes.

It’s likely we’re an order of magnitude greater than ’87. There’s no argument markets are stretched to obscene levels.

Now, we have interest rates rising sharply.

Will the result be the same? In the markets, anything can happen. However, if enough time has passed to forget (or be ignorant) about the past, it’s possible that it’s time to repeat.

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.

Throw-Over, Or Not?

IYR’s in a terminating wedge … will it throw-over, or reverse from here?

American Tower (AMT), the largest cap in the ETF, bounced off a 23.6% projection during last Friday’s session.

That keeps a short term bullish possibility alive. Longer term, AMT still remains in a downward trading channel.

Bonds and the dollar continue at extremes. On the dollar side, it looks like a significant bottom is in the works.

Weekly UUP, MACD has posted a bullish divergence along with an MACD lines cross (to the upside) signal.

Bonds (TLT) remains at its near term lows; near support levels formed back in September, 2019.

IYR is right at the upper wedge boundary and volume (upside pressure) has dropped significantly.

It could still levitate higher … however, it seems that getting a significant ‘throw-over’ is going to require more energy than is currently available.

We’ll see what price action has in store for Tuesday’s session.

Stay Tuned

Charts by StockCharts

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.

Bonds: A Closer Look

The last report on bonds said to expect fireworks soon.

Price action has the final say. It’s saying not yet but close.

The weekly chart of TLT shows the area we’re going to look at a bit closer.

The chart has been expanded below:

In the past six weeks, there have been three decisive down weeks.

The black arrows on those weeks show each successive down week has less net travel.

Last week was the shortest net travel of the three. In addition, that week had higher volume than the week prior.

Less range, more volume.

The late David Weis in his Wykoff analysis video (link here) discussed a similar situation using Apache Oil (APA).

The short version of the story is: Less range, more volume … ‘somebody’s buying’.

Although not really a bond fan, the opportunity is there. Risk has been or is being removed (never entirely) and one way to participate in a reversal and bull move is using leveraged funds (not advice, not a recommendation).

This past Friday, I positioned the firm in TMF, a 3X leveraged bond fund.

Volume (liquidity) is acceptable at around 600,000 – 800,000 shares daily (allowing pre-market entries/exits).

It’s important to note, while TLT was making new daily lows, the high yield HYG, ticked just 0.01-point above its post recovery high. Since August of last year, TLT and HYG have been inversely correlated.

On way to read this, we’re at extremes.

We’re just one ‘incident’ away from sending things violently in the opposite direction; complete with down-gaps, trading halts, brokerage lock-ups … the whole nine yards.

Stay Tuned

Charts by StockCharts

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.