Random Notes

The usual suspects for the week.

No. 1

“Intermittent reinforcement, is a hook.”

That’s what the late David Weis told me during a mentoring session years ago.

Being told a half truth, fools the easily fooled into thinking that maybe someday, they’ll be told the whole truth.

It’s a psychological hook that never ends.

The so-called news organization at this link, likes to act like it’s part of the opposition; It feigns surprise as it ‘reports’ on carefully crafted, selected, intermittent reinforcement topics.

Nothing happens at this level that’s not planned.

Nothing.

No. 2

Cyber attack at largest meat packer.

Just one of many hits taking place in the cattle industry.

The cattle livestock/ranching sector continues to be under increasing (planned, intentional) attack.

As Ice Age Farmer reports, both Colorado and Oregon are working to outlaw cattle ranching; making it too expensive to raise beef and thus eliminating the practice.

Meanwhile, back at the ranch … literally, there’s an independent meat processor near Fort Worth.

Personal anecdote below (skip to No. 3, if desired)

There’s a ‘hole in the wall’ meat processor in a town near Fort Worth.

It’s located well off a main road and next to several nursing homes. Vacant, weed-overgrown lots, surround the building.

You have to navigate a giant pot-hole in the dirt parking lot to get to the metal barn-like entrance.

Once inside, you’re standing on a cement floor and facing a long refrigerated display case … probably, 20ft – 25ft, long.

It’s at that point, you realize you’re not ‘inside’ but actually underneath a metal overhang that was attached to the outside of the main building.

From the amount of rust visible and the worn paths in the concrete, it looks like this ‘addition’ took place at least twenty years ago.

While I was there, a man who had driven from Sachse (pronounced Sacks-see) was there to pick up his order.

Sachse is on the other side of the Dallas-Fort Worth metroplex. It’s over 60-miles away. Not far in Texas, but still.

This is the type of place that will process your typical deer or other game kill for the ‘Bubba’ type hunters.

That is, until now.

There’s a sign at the entrance that says because of the overwhelming increase in business, game processing will no longer be available.

That sign is right next to the “Help Wanted” sign.

So, that’s how it’s mapping out … at least on that day in this town next to Ft. Worth.

The infrastructure is fragmenting.

Extrapolating the example above, it looks like small independent ranchers and processors will attempt to pick up the slack … but it’s not likely to be enough.

The real constrictions to the food supply have not even started. This small hole in the wall, is already overwhelmed.

No. 3

One reported effect of speck injection is being termed “Jab Freeze“.

The link shows what that may look like. Source has not been vetted.

You be the judge.

No. 4

Nurse calls out her corrupt and cowardly co-workers.

At time stamp 6:53, she calls them “The Devil’s Little Helper”.

Taking money to knowingly inject people (and now, children) with a lethal concoction is betrayal.

I wonder if that extra pay amounts to ‘thirty pieces of sliver’.

No. 5

Don’t drink the Kool-Aide

Remember that?

Late Saturday night, an episode of “Corrupt Crimes” was aired that covered the Jim Jones massacre.

Did you know there were survivors? Want to know how many?

There were 33 survivors.

That puts the whole event in a different light doesn’t it?

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.

Biotech: Now, It Gets Interesting

1:39 p.m., EST

Retrace to 23.6%, rejected.

Shallow retrace indicates severe weakness.

Sustained downside potential.

The inverted chart of SPBIO above, shows price action has touched the 23.6%, level and is reversing.

The next chart has yet another Wyckoff spring set-up … equivalent to a Wyckoff ‘up-thrust’ on the regular, non-inverted chart.

Inverse fund LABD, is current trading at 22.77 – 22.83; far away from the session low at 21.77.

On a 4-Hour basis, the current bar has posted a new high.

The high for the morning session came at the open; 23.05

That high was exceeded when the next 4-hour bar posted at 23.10.

Why is that important?

It weights the probability to the upside for LABD.

That in turn weights probability we’ve seen the last of the downward corrective moves for LABD.

If so, we’re positioned for a major decline in biotech SPBIO.

If not, we’ve got an absolute hard-stop @ LABD 21.77 (not advice, not a recommendation)

At this point, it’s time to “Set the stop and walk away” as David Weis put it in his video.

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 ‘Gut Check’

9:09 a.m., EST

If there’s going to be a big move, the market will make sure you’re not along for the ride.

The proverbial ‘gut check’, as David Weis used to call it.

It’s an adverse move that’s intended to shake any (all, if possible) weak hands out of their positions.

How will we know if that’s what’s going on with biotech’s, SPBIO?

Yesterday, was an upside reversal bar on the daily SPBIO, chart. Will the market go higher (LABD, lower) from here?

The first clue will be the open.

If SPBIO opens lower, with inverse LABD opening higher, we’re on the right track for more biotech downside.

If LABD makes a new daily high … above yesterday’s LABD, 30.42, high, we have confirmation of a shake-out.

Right now, we’re still in the pre-market.

However, LABD is already trading up between +3.5% – +4.7%, which weighs probability to more upside … downside for SPBIO.

If SPBIO somehow makes a new daily high (LABD, new low), the bulls are gaining a foothold.

At this point, the Project Stimulus account remains unchanged (not advice, not a recommendation):

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.

Fear and Greed

12:31 p.m. EST

Of the two emotions, fear is easier to trade.

Trading professionals prefer down markets.

Even in his trading video, the late David Weis remarks … ‘I have a preference for down markets …’

Profits come nearly twice as fast and the bottom is easier to detect.

With that in mind, the daily chart of inverse biotech fund LABD, has been noted showing both emotions:

Extreme fear shows up as spikes at the trend line. Also noticeable, the spikes are widely spaced.

Greed on the other hand, is spaced closer and harder to detect. Remember, we’re looking at the inverse (LABD); fear and greed locations are swapped.

Moving on to the set-up, the Wyckoff spring:

Considering the current situation … i.e. valuations, margin debt, retail participation extremes, the above forecast is a modest one.

A potential doubling in value (measured move).

The expectation is for LABD to contact the upper trading range somewhere around 27.50 (not advice, not a recommendation).

If it does and then breaks to the upside, a standard measured move (trading range distance, magenta lines) would target the 40-area.

At this juncture, the market (SPBIO) is giving no overt indication of imminent collapse.

This is how markets work.

If we do get the expected wipeout, be prepared for the usual suspects to come out and say ‘No one saw it coming.’

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.

More & Less

Volume increases on IYR; range contracts even further.

In what’s beginning to look like its been taken straight out of David Weis’ training video on ‘trend reversals’, volume has surged and range has contracted drastically.

The last update had range contracting down to 1.83% (from 9.77%).

Now we’ve got yesterday’s range down to 0.60%; volume up to 18-million shares … the highest since October 2nd, last year.

One of two things is happening.

It could be absorption for a new leg upward to ever higher, highs.

Or

It could be distribution and ultimate reversal.

There’s certainly enough fundamental evidence to show commercial and residential real estate, may have gone off the cliff.

Still, we have headlines like this, from ZeroHedge.

The key is the “hottest real estate market since 2007”, part. Remember this magazine cover?

We’ve got what appears to be conflicting data. ‘Over the cliff’ on one side and ‘red-hot market’ on the other.

The answer’s in the price action. We’re at a potential (major) inflection point. The market leads the news and not the other way around.

If we’re at the pivot, about to head lower, bad news will be forthcoming after the reversal’s in place.

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.

Early or Late?

It may have been Robert Prechter Jr. that said years ago;

‘You’re either going to be early, or late’

He then went on to say his trading method usually puts him in a little early on the move.

That means there are times when the anticipated direction does not materialize.

So, your either suffering through the pain of anticipated reversal (for seconds, minutes, or days), or you’re chasing the market.

You make the call.

There really is no other choice.

Both methods involve psychological pain.

Referring back to Prechter, he also said some of the best traders he knew were former Marines. By definition, they are well trained to deal with pain.

My former mentor, the late David Weis would say after hit on a set-up, if conditions warranted, he would enter again; as he told me, he would ‘stick his chin out’ and effectively tell the market to ‘prove him wrong’.

It was an interesting choice of words for him as one can see from his training video …. he had a distinctive chin.

Trading Style:

The trading style presented on this site is a combination of Wyckoff tape reading coupled with anticipating price action.

As inferred above, that means there may (and will ) be times of draw-down while working to enter a market reversal.

That’s where we are now.

Trade Actions:

Yesterday’s upward action in basic materials forced the ‘project’ out of its short (SMN) position. That sector may attempt to make a new 52-week recovery high before it’s ready for reversal.

Analysis: Real Estate, IYR

One market that did make a new 52-week high, setting up technically for a short, is real estate:

The weekly close of IYR has been inverted (turned upside down) to show the unique technical condition.

IYR has created a large terminating wedge that’s in the process of a ‘throw-under’. At times a market will attempt to breakout of a wedge in the opposite direction of eventual reversal.

This type of breakout tends to fail. Based on the dashed line contacting a prior congestion, there’s’ potential to at least hesitate in this area.

The daily chart below provides additional nuance:

It’s clear price action has contacted two prior areas of support – resistance during ‘throw-under’.

Anything can happen but it seems that IYR’s at maximum extension.

On Friday, IYR price action closed just 0.05-points off its high for the day. That high was also a 52-week high.

We’re now in a support-resistance zone.

If IYR is to move significantly higher, it might need additional fuel (a retrace lower) to break through.

Positioning:

The action then (not advice, not a recommendation) was to short the market via DRV.

Once again, the market itself is telling us where to go for opportunity.

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.

Closing At Confluence: Biotech

On a closing basis, biotech’s hit three areas of resistance.

We’ll put all the lines up at one time (chart above) and then break it down.

First, there’s the underside of the trend break that’s already been discussed in prior updates.

Second, the resistance formed by the underside of the head and shoulders pattern identified in a prior update as well.

Last, we could have a trading channel in effect. If so, price action contacted and closed at the right side in yesterday’s session.

The following charts get a closer look at two resistance areas:

Using a ‘reverse trendline’ technique outlined by Weis in his DVD, we take contact on the left side and move it to the right.

The chart below shows the H&S resistance area (underside) contact:

Putting all lines together gets us the chart at the top of this post.

Long term MACD indicators are down; both monthly and weekly. Momentum is to the downside.

Probabilities favor a reversal

The potential downside is enormous. The markets are extended the most in history. Margin debt the most in history.

We’ve got kids running around with trading apps designed to make it look like a game. It’s no different from the Shoe Shine Boy at the steps of Wall St., giving out tips.

Positioning:

We’re short biotech via LABD (not advice, not a recommendation).

The highly leveraged inverse ETF, performs best when the direction of IBB is down in a steady and decisive move.

Otherwise as we saw near the close yesterday, IBB could be reversing to the downside while LABD is still eroding lower in value.

Inverse fund BIS does much better in this area but is not nearly as liquid. That makes pre and post market trades impossible.

We’ll be looking for IBB to post a new daily low as confirmation a reversal is underway.

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.

Set The Stop

“Set the stop and walk away”.

That was a phrase from the late David Weis, used during his training session video (link here).

That’s what we’re gong to do.

Biotech (IBB) is nearing support and it was thought the overnight would result in an obvious gap-down open, exit signal.

However, with just about a half-hour to go before the regular session, markets maintained their positions overnight keeping the door open for continued decline or counter-trend action.

All markets, the S&P, Dow, Nasdaq, (and biotech) are pivoting lower from insane valuations. We could be at the very beginning stages of a sustained deflationary move.

One example of how such moves behave, was the oil market in July of 2014. The tracking fund USO, had nine successive down months (declining over 60%), before a significant retrace.

With that in mind, we’re setting the LABD stop at the prior session low of 21.80 (not advice, not a recommendation).

With an LABD entry point at 18.08, being stopped out at 21.80, would yield a gain around 21%.

So, we’ll leave it there and move on to other opportunities.

The weekly has IBB, nearing support around 140 – 142 (dashed line). We can expect price action to hesitate as (or if) it encounters those levels.

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.

Edge of The Lake

The late David Weis, instructed his students during a 2007, trader’s camp sponsored by Dr. Elder, that ‘trades are found at the edge of the lake’.

Most of the training session was recorded and reproduced on DVD. That video is still available, linked here and is a wealth of knowledge.

Within the video, Weis analyzes what he calls ‘The Apache Spring’.

No, it’s not a history lesson of Chato’s raids in New Mexico Territory during the spring of 1882; it’s an analysis of Apache Oil, ticker APA.

That analysis alone, should be enough to convince any rational person, price action has absolutely nothing to do with any fundamentals.

Wyckoff repeated this assessment in his autobiography; ‘prices have an energy of their own.’

Prices are manipulated. They always have been; but it’s not important to know who’s doing the manipulating.

What’s important, is to discern (within probability) the objective of the manipulation.

Which brings us to Oil & Gas, XOP.

We’re at the edge of the lake.

Up-volume is declining and momentum (MACD) has bearishly diverged. If there’s to be a sustained reversal, this location is high probability.

Price action in XOP, is attempting to close the reversal gap. This morning’s pre-market shows it might do that in today’s session.

We’re already short the sector via DUG (not advice, not a recommendation) and watching carefully for gap closure with subsequent continuation of the nascent reversal.

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.