Empirical Evidence

Market tops and reversals tend to occur just before, during, or just after a holiday week.

Will this market be any different?

Empirical data collected over the years (linked here) shows a tendency of the markets to reverse during holidays.

The most famous reversal was September 3rd, 1929.  That was the day after the Labor Day Weekend.

Yesterday, the Dow 30, made a new all time high. Looking at the chart (expandable version here), it’s in a very narrow range and hitting the underside of a long-term trend line.

This is a low risk area. A DXD (2X inverse fund) push past 13.22, could be considered an entry signal; stop at DXD 12.96 (not advice, not a recommendation).

There’s bound to be a lot of chop if and when this market reverses; the firm is leaving this one alone … for now.

Reversal chop was clearly seen on the GDX.  It banged around for months before getting into position for a decisive move lower.

Trading inverse funds (for best profit) requires a steady, sustained directional move. 

Those moves typically do not appear right at a reversal transition.

If this is it … if this week is the high and reversal for the S&P, Dow and NASDAQ, then it’s likely the market will chop and set up conditions before a sustained move lower.

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.

Bond Reversal

In the past three days, bonds (TLT) penetrated support and stopped dead.

Anytime a market penetrates support or resistance and halts, it’s an indication that something’s up.

Either the market‘s absorbing transactions at that level to continue on, or it’s a reversal about to happen.

With all that’s known on the short position by the speculators as well as another Van Metre report, bank lending standards, probabilities point toward bond reversal.

The dollar is already reversing higher.  Gold has been viciously slammed lower and the overall market’s hovering at all time highs.

The Dow edged lower at the last session. This session in the pre-market (9:01 a.m., EST) it’s lower again at -1.94 points or -0.66%.

If the Dow (DIA) gets below the 290- area, it’s below resistance and another move higher may be difficult indeed.

We’re short the sector via DXD (not advice, not a recommendation). A new daily low for DIA will allow our position’s stop to be moved to DXD 13.49.

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.

Mind The Gap

For the past past five years, the Dow 30 has filled every gap … except two.

The ‘election’ gap of 2016 and the ‘election’ gap of 2020.

Looking at the technical condition of the Dow, it’s at an extreme. 

Testing the underside of a trend break while at the same time in a reversal (Wyckoff up-thrust) condition.

A ‘reversal condition’ does not guarantee the market heads immediately lower.

It points out the probabilities that some type retrace may happen before a move higher.

In the current situation, a significant retrace would put the Dow well below resistance; adding to the bearish assessment.

Pulling out to the larger time-frame, the weekly chart puts the current pre-market moves (as of 8:51 a.m. EST), DIA up 0.51%, in perspective. 

The market may oscillate attempting to move higher.

At least three conditions are working against such a move: 

Underside trend line test

Up-thrust (reversal) condition

Lower gap area yet to be filled.

We’re short the Dow via DXD (not advice, not a recommendation) with hard stop, currently set at DXD: 13.13

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.

Market Top?

Was that it?.  Did we see the all time high in the markets, Monday?

The short answer of course, it’s not known. 

The longer answer is, to go short the market at this point (Monday’s session) was a low risk entry; not advice, not a recommendation.

The inverse chart of the Dow, DXD (above) shows our initial entry.  We’re green at the end of the day and have hard stop, GTC, at 13.32.

Tomorrow’s open could be a gap-lower for the Dow, that spends the rest of the session attempting to retrace higher.  If so and depending on the behavior of that price action, it may provide an opportunity to add to the position.

Separately, the gold and related GDXJ, JDST had such sharp moves during Monday’s session that JDST was exited completely and yielded a gain of about 12%.

Gold is likely to retrace higher and possibly offer another low risk (short) position in the miners via JDST.

The trading actions are being directed by the market. It would be nice to have a slower more well behaved situation. However, that’s not the case and the trading response matches the market (price action) dictates.

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.

June 5th, 2008.

That was the day where the bear market began in earnest.  After that day, it never looked back. 

The final posted low was 666, on March 6th

Let that sink in for a while:   Six-six-six, on the sixth.  There is much more going on than the general public realizes.

We wrestle not with flesh and blood …

Getting back to that day on June 5th, those old enough will remember the market had been trending lower for about three weeks.

Then, on Thursday the fifth, there was a huge rally.  The S&P moved up over 2% on the day.

This rally as it turned out was just short covering.  The next day, price opened gap-lower and moved swiftly lower to new daily lows.

The move down was about -3.5% on the day.  There was no denying at that point, it’s a bear market, potentially a crash (which it was).

Is that same scenario what just happened today, Friday?

Looking at the analysis that Sajad put out on August 15th   He showed “there’s one final move to go”: Time stamp, 5:20

His quote is shown on the chart.  Indeed, the Dow 30, the DIA, had one more move to go before reversal.

If the coming Monday, opens gap lower and posts a new daily low, the market is performing in a way that’s similar to June 5th of 2008.

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.

Dow 30: Measured Move

It’s thirty-minutes before the open. Dow tracking ETF, DIA is trading lower about one-point or -0.43%.

The inverted chart of DIA, has a wedge breakout.

Using traditional techniques for a ‘measured move’, we can project to the 235-area for DIA.

When and if that happens, the Dow will have pushed below significant sepport levels that would then become resistance.

Inverse fund typically used for the downside (not advice, not a recommendation) would be DXD at 2X Inverse.

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.

All But One

Of the nine market indices listed below, only one has a bearish weekly MACD cross-over:  Biotech

IYM:  Basic Materials

IBB:  Biotech

DIA:  Dow 30

IYT:  Dow transports

QQQ:  NASDAQ 100

IYR:  Real Estate

IWM:  Russell 2000

SOXX:  Semiconductors

SPY:  S&P 500

Yesterday, the indices were are at all time highs except for real estate (IYR), biotech (IBB), and Russell 2000 (IWM). 

Looking at IYR and IWM, we can see, although they are below the high, there’s still a persistent up-trend.

Even with today’s on-going reversal (three-hours before close), only biotech has posted a bearish, weekly MACD cross-over.

Of course, it won’t be known until after the fact why biotech is unique.  A hint at what might be the reason, is here (if it’s still available).

A gallery of the weekly index charts, listed above (as of 9/2/20) can be found here.

The focus of this firm, since June 3rd, exactly three months ago, has been biotech and its impending reversal.

A significant short position has been established over those three months via BIS, the 2X, inverse fund. Current Stop: 32.18

So, just what is ‘significant’?  How big is that?

To be transparent, without giving specifics, avoiding the usual internet keyboard warrior, and/or hater, the position is as follows:

We’re short what amounts to a full year’s wage for the typical American worker.  Fair enough?

When the position is closed out, results will be posted on the company site, located 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.

Upwards, Sideways & Down

Fotosearch_k8916628-1That’s the direction of the Dow Jones 30, the S&P 500 and the Russell 2000.

Intermediate and advanced trading professionals understand what this means.

When a market has experienced a long, sustained advance that may cover months and years … near the end of that advance and just prior to the ultimate top, the market thins out.

That’s the process whereby fewer and fewer stocks are participating in the advance.  Essentially, the bear market has already started as more and more stocks fall away from the uptrend.

In fact, ZeroHedge just reported the S&P 500 in its narrowest (11-day) closing range in history:  An unprecedented event.

Now that we appear to be at the upward extreme, what happens next may be unprecedented as well.

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For technical analysis on individual stocks, markets or indices, please visit our parent site at www.ten-trading.com