Empirical data gathered over the years has shown markets tend to reverse just before, during, or just after a holiday week.
Will that apply this time around?
At least three things will happen on Tuesday, September 7th.
‘Relief assistance‘ runs out. It will be a Fibonacci 13-days from the S&P August 19th low. Tuesday the 7th, is the first market open following a holiday:
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 Russell 2000 (IWM as proxy) has been congesting sideways for about five months.
While the overall markets, S&P, Dow, SOXX, IYR and the QQQs, have been moving on to new highs … the Russell has stagnated.
Taking a cue from Steven Van Metre’s reports on ‘who goes first’ in a downturn, it’s the small caps.
At this juncture, it looks like the Russell’s ready.
The six month daily chart of IWM below, shows choppy action.
Pulling back somewhat and labeling the bearish wedge, puts it into perspective (second chart):
Pulling out and labeling the wedge:
One item of note (not shown) at the top of the wedge, where price action pivoted lower (August 6th), is a Fibonacci 62%, retrace level.
So, we have a bearish wedge retracing 62% … along with non-confirmation of the overall highs; S&P, Dow, SOXX, etc.
Major reversals take a long time to form. However, once they get underway, it’s like a juggernaut to the bottom.
Harkening back to the oil (USO) bear market of 2014, nearly all (if not all) the YouTuber’s at the time, completely missed the bearish set-up.
What they did instead, once the downdraft started, was pump out update after update about ‘catching the bottom and setting up for the new bull market in oil’.
It never happened.
Oil continued lower for a year and a half before getting into a sideways range.
The big money’s in the big move. Monitoring the Russell provides confirmation a significant reversal’s in the works (not advice, not a recommendation).
As with biotech (SPBIO), already in a bear market, the IWM could break lower while the overall markets continue to thin-out and even make new highs.
Recall, we’re getting close to an up-coming holiday: Labor Day
The 1929, high was on the Tuesday just after Labor Day weekend.
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.
Three markets with key reversals and the biotech sector (SPBIO) posting an inside day.
One other (less followed) market of note with outside down, was basic materials (DJUSBM).
Gold’s (GLD) upward thrust from Thursday the 29th, continues to erode.
One gets the sense that it’s slipping away for the bulls.
SPBIO price action shows the most probable direction is lower.
Expectation for the next session, is for some kind of downside follow-through along with lower market action overall.
Positions:
Current positioning remains unchanged (not advice, not a recommendation) being short the biotech sector via LABD.
Market updates for the week will be limited (as the result of travel) and will resume with technical discussions by the week-end.
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.
Inverse biotech, LABD above, is confirming a pivot.
The magenta arrows show contact points morphing into a pivot that has two more contacts.
The new trendline was copied, then pasted to the far left of the chart.
It’s clear the new (pivot) trend is identical to the one created when LABD bottomed out this past February.
While the overall markets (S&P, Dow, COMPX) are still showing green, biotech looks like it has started the next leg down.
The original short position via LABD, has remained intact (not advice, not a recommendation) and has been increased five times (including today) since the beginning of this month.
In our view, biotech’s signaling the potential for a very dangerous situation.
Biotech’s headed down and we’re already short; not advice, not a recommendation..
As Livermore said a hundred years ago, ‘surprises tend to happen in the direction of trend.’
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.
In fact on June 9th, the day the above ‘penetration’ report was posted, gold (GLD) had already reached its peak and was in a reversal.
Five days later (before the major down-move), this report was published on gold.
Therefore, at this juncture, we’re still inversely correlated.
So, what does that mean?
The updates on the dollar have proposed, since the bullish divergence (now turned rally) is on a longer, weekly time frame, the ensuing move could have the potential to carry the index UUP, to the top of the trading range shown here.
Then, what happens to gold?
If the negative correlation remains intact, gold gets whacked.
The weekly chart of GLD (above) has the index closing right at the Fibonacci 38.2%, projected level.
Wide bars tend to get tested. There could be some kind of rally in the coming week but it’s not required.
The Fibonacci projections highlighted as the orange bars, go all the way down to 161.8%. That’s equivalent to GLD at ~ 118.65, or the futures market somewhere around $1,300 – $1,350.
With the Dow 30, (DIA) penetrating and closing below the 336, support levels on Friday, we have a Dow Theory Sell Signal (not advice, not a recommendation).
The markets appear to be rolling over.
The last market reversal in February – March, of last year, had GLD dropping over – 14.5%, in two weeks.
Fast forward to now; GLD, is already down over – 15.2%, from its August 2020, highs.
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.
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.
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.
While the markets grab headlines of all time highs, biotech’s at the crossroads of collapse.
This site has zeroed in on the most likely candidate to head decisively lower once the bubble has burst.
In fact, if we look at the table of tracked markets below, biotech’s SPBIO, has taken over downside leadership.
Next to last is GDX; the senior mining index.
Repeated many times before, this sector is overcrowded with delusion on both sides. From a trading standpoint, no thank you.
Daily and monthly charts of biotech SPBIO are below. Both charts are inverted and have Fibonacci projections.
The charts are essentially clean so they don’t clutter the data.
Daily SPBIO (inverted):
Monthly SPBIO (inverted):
If SPBIO gets to the extreme Fibonacci projection of 261.8%, it will represent a sector decline of just over -92%.
Sounds about right; not advice, not a recommendation.
Recall, from the 1929 highs to the lows in 1932, was around -84% (depending on the source).
Under those extreme circumstances, -92% decline is not unreasonable.
Of course, if a collapse does happen, it’s not likely to go straight down. The entire ’29 crash did not go straight down either. There were many false rallies on the trip to the bottom.
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 table lists well known index ETF’s; along with most recent highs and current (Friday) close:
All the usual suspects are there:
S&P 500, SPY, The Dow 30, DIA, Nasdaq, QQQ, and on.
What’s also listed is how far each index (ETF) is from its most recent all time high or ‘recovery’ high (in percentage terms).
Obviously, one of these is completely out of bed: Biotech, IBB
We’ll be discussing the technical condition of biotech tomorrow. For now, the updated ‘project’ chart’s included below:
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 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.
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.
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