Closer to The Break

With the kids at the card-table, freaking about ‘plunge protection team‘, rigged markets and Bitcoin, grownups the next table over, are planning their moves.

Friday’s late session rebound higher was not uncommon for a typical short squeeze.

These gyrations are intended to make sure only a select few are aboard when we get the break.

This idea is not new. You’ll find statements to that effect over and over in most any trading book.

The big difference now, is the amazing level of complacency and learned helplessness of the overall population.

Just one example of such before we move on to the charts.

Texas has opened up. Schools are about to go without diapers. Perish the thought.

Yet, there’s still a contingent that’s near hysteria about ‘safety’.

With all the information available, yes one actually has to do real research to find out what’s going on, huge segments of the population adamantly remain (intentionally) ignorant.

Unfortunately, that segment has voluntarily (at least in the U.S.) lined themselves up to be taken out; financially as well as physically.

Just a few of the most recent links, here, here, and here.

At some point, those links are going to become common knowledge.

Hopefully, there will be long lasting and certain retribution for the perpetrators. However, for those who ‘volunteered’, it’s already too late.

Now, on to the markets.

Friday’s real estate rebound (IYR) looked like short-squeeze action.

In response to that and late in the session, short position DRV (3X inverse IYR) was increased at price 9.37 (not advice, not a recommendation).

Volatility is still low in IYR. Short positions can be increased with less risk.

The Big Break

When and if the break comes, it’s likely to be fast; no time to plan.

Whatever plans one has should’ve been laid out well ahead of time.

Two markets being watching closely are Peabody Energy (BTU) and Seabridge Gold (SA).

By now everyone’s aware that a certain far east country is going about its business and building their infrastructure … as if nothing had ever happened. Funny that.

Conversely, the coal market has bottomed out and so has Peabody.

On top of that, the Texas Freeze laid bare the farce that is climate change, global warming and green energy.

Quietly, without fanfare, coal is seeing increased demand.

The blue arrow is a gap in trading that could be filled.

To do that, there might have to be a massive market collapse, pushing BTU back to that level … if only temporarily.

Huge volume in the past six months shows that somebody’s buying.

The next market is Seabridge Gold (SA) which is being watched for essentially the same reasons. If Van Metre is right and we’re in a deflationary impulse, the entire public’s on the wrong side of the trade.

If SA can get itself below 13 – 14, it then enters free-fall territory.

If that happens, as with BTU, it too might be a short lived event.

Positioning:

Currently, the firm’s position (not advice, not a recommendation) is short biotech and real estate via LABD and DRV, respectively.

If BTU and SA get to extreme lows, both of them have potential for a ‘ten-bagger’, the possibility to gain over 1,000%.

Getting to such gains would necessitate a change in the current strategy of trading, to buy and hold.

Summary:

Pressure seems to be building for some unexpected event that would cause a market break; Possibly the devaluation of the Yuan as discussed by Steven Van Metre.

If that’s going to happen it’s likely to be soon.

Stay Tuned

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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.

Peabody Energy (BTU): Special Situation

Will BTU go bankrupt before or after December 31st? That seems to be the main question; at least from a SeekingAlpha perspective.

Peabody is in serious trouble, no doubt. It also represents an opportunity as detailed below.

Any stock, equity or index that’s declined throughout the year is subject to “tax loss” selling.

Selling that (typically) takes place during the last week in December and is negated somewhat during the first week of January.

Peabody is now in position to perform according to that scenario

BTU reached its all-time low at just 0.80, on November 10th.  If we get Wyckoff bottoming action, (Schematic #1) we’ll have an automatic reaction (happening now) and then a secondary test.

That test could be above or below the recent lows.  If the test occurs before December 31st and pushes below 0.80, we have a spring (reversal) set-up.

Once tax loss pressure is released at the beginning of the New Year, expectations would be for a pop to higher levels.

This is not a recommendation but a notification of potential, short term (very short term) opportunity.

On the longer term and even more speculative is what’s taking place from a world-wide perspective.  Specifically, we have increased seismic (earthquake) events as well as volcanic activity.

This activity is directly (and has been proven to be) related to grand solar minimum cycles.  The largest volcanic eruptions in recorded history occurred during solar minimums.

Mount Tambora erupted with a VEI (Volcanic Explosivity Index) of 7, Super Colossal, during the Maunder (solar) minimum.  That eruption was the largest ever recorded by humans.

This is just background information.  Certainly it’s unknown if we’ll get the same scenario.  However we do have a source that can reliably predict earthquakes and volcanic activity. 

His site is here. That is, until he is kicked off YouTube as many have been.

Dutchsinse is his YouTube handle and before anyone scoffs, his work is shaking it up at the USGS; they at one time, requested that he be arrested.

Conversely, he has offered his technique of earthquake forecasting to the USGS. The response was typical. ‘Not interested’. 

After watching some of his hour-long updates where he covers seismic and volcanic activity for the entire earth, judge for yourself.

Why is earthquake activity important to a coal mining operation?

If we get a massive VEI 7, type eruption, it will eject huge amounts of ash into the atmosphere.  That ash will block out the sun and render any ‘solar power’ ineffective immediately; for months-to-years.

Conversely, natural gas and coal prices could have an instantaneous jump with BTU (if they are still around) moving higher accordingly.

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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.

Get Right … Sit Tight

That was Livermore’s adage nearly a century ago.  Find conditions for a sustainable move and get in.  Then wait and wait some more.

Going on, he states that is was not the thinking that made him money … it was the ‘sitting’.

The short entry on GDX was initiated with DUST (2X Inverse, GDX) at DUST 18.86.

Initial stop (not advice, not a recommendation) was very tight at the session low, DUST 18.45. 

Price action the next session (yesterday) pulled away from entry levels and the stop was moved to 18.56.

Today’s pre-market session (8:54 a.m. EST) shows continued downside for GDX, with DUST up correspondingly. 

If there’s a higher close in DUST, we’ll move the stop again.

With the overall markets, S&P 500, Dow, NASDAQ, at or near all-time highs, the precious metals sector seems to be leading the way lower.

If the rest of the market reverses, downside action in the mining sector could be dramatic indeed.

In other markets, it appears that Peabody Energy (BTU) may have finally found its low; from top to bottom, a -98.33% decline. 

Analysis of BTU to be forthcoming before the end of the week.

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.

Peabody (BTU) Trending Higher

Those late to the game on BTU may have cashed out with losses on Friday, September 25th.

So-called ‘expert’ (buy) opinion came out on the 17th and since then BTU has declined anywhere from -8%, to -27%.

We exited our BTU long on the 18th, with a 15.5%, gain.

Now, we see BTU contacting a nascent trend-line.  There could be a trading channel formed as well.

If BTU maintains the trend, it’s rising approximately +3,000%, annualized.

At that rate, a 100% gain on a long position (not advice, not a recommendation) would take about six-weeks.

In other markets, biotech (IBB) pre-market action shows a higher open.  If that’s the case, we’ll exit (not advice, not a recommendation) the BIS position and stand aside.

Update: 9:54 a.m. EST: IBB is reversing immediately from its open. BIS position maintained (not advice, not a recommendation) at this point.

Update: 2:39 p.m. EST: BIS exit @ 31.591

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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.

Peabody in the NEWS

Back in late August, the nascent BTU reversal was identified when an entry would have been low risk.

The chart speaks for itself.

If there’s only one chart that shows the benefit of reading the tape (not advice, not a recommendation) as presented on this site, The Danger Point, BTU is the case in point.

Effective tape reading requires at least 10,000 hours of training and/or experience.

The author presenting on this site, has over 23,000 hours at the tape. However, that experience does not equal perfection.

Experience equates to probability.

The longer one is in the markets, through booms, busts, flash crashes, manic and panic, the more one is able to operate as the masters of old and be separate from the crowd.

Now after BTU has decisively launched higher, everybody’s an expert. Two examples below:

No. 1

No. 2

We indeed, have a position in BTU.

However, instead of looking to buy with the rest of the herd, we’re looking for the exit.

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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.

Prepping For The Downside

The more sophisticated market participants work the downside.  That’s where the biggest (and fastest) money is made.

shutterstock_242289160Trading books and specifically Reminisces of a Stock Operator, (first published in 1923) detail how the wealthiest traders in the world prefer downside action.

The markets are now stretched to obscene levels and could go higher, still.

Just this past week, we have interest rates breaking out to the up-side, a-la August, 1987.

Being long anything other than corn or wheat and the occasional down-trodden coal miner,  seems to be a high risk plan (not a recommendation).

Positioning for the downside in the appropriate market, might be a lower risk option than riding the insanity to the top … wherever that is.

Which brings us to inverse biotech fund, BIS.  The daily chart shows the well-heeled know something’s up.

2020-08-30_9-32-52-IBB-Daily-5-bar-lanscape-notesSpeculative volume for potential downside in biotech is increasing.  Last Friday’s volume in BIS was the highest in nearly four years.

BIS was trading higher throughout the entire session until the last few minutes.  It closed slightly lower for the day and thus colored the volume bar red.

That minor BIS downturn (up turn in IBB) can be traced directly to Amgen (AMGN) which is now part of the Dow 30, effective Monday the 31st.

It’s important to note that for the past four months, volume activity in IBB has remained relatively unchanged.  Not so with BIS.

We’re nearing the Labor Day Weekend during the next sessions.  The market will be closed on Monday, September 7th.

Back in the day of 1929, the market made its all time high on September 3rd, the Tuesday after the Labor Day Weekend.

 

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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.

Peabody Energy (BTU) Reversal

Way below the media radar, coal prices are reversing off a four-year low.  Peabody Energy (BTU) is reversing as well.

iStock-166215263-CoalWhy would coal, a supposed dead product be reversing now?

The list could be endless depending on one’s level of awareness.

Here are a couple of potential reasons.

No. 1

Were entering a 400-year solar minimum with decreased sun-spot activity and colder (much colder) earth temperatures.

The natural result of such activity is a decreased earth magnetosphere and increased cosmic ray activity.

Go outside during a sunny day … the sun’s rays are not warm anymore, there hot!  They feel like burning, searing energy on the skin.  The magnetosphere is weak, letting more radiation come in.

Under such conditions (more cosmic rays) volcanic activity picks up big time.  Scientists (those still honest) have not been able to figure this one out.  It just is.

So, we’re one major eruption away from the entire earth being covered with an ash cloud.  Bye, bye solar … instantly.

No. 2

Natural gas prices are rising dramatically.  Remember the Winter of Discontent update?  That update was spot-on.  It also included the level UNG could retrace (which it did) as a test, before moving higher.

UNG is up over 44%, from those levels.  One of many (now false) ideas for natural gas, was that it’s cheap.  Not any more.

Just two potential reasons for a coal reversal at this point.  Those with advance knowledge may be taking positions.  We see it in the price action.

As always, anything can happen and coal could resume a downward trajectory.  However, if BTU is able to hold above the 2.50-level, it may have already seen its all-time lows.

Keep in mind with BTU, we’re dealing with an equity in serious trouble.  It’s not hyperbole to say, the only thing that could save this company is a major reversal in coal prices.

2020-08-28_12-05-35-BTU-Daily-4-bar-landscape-notes

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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.