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.
Those ready (positioning) for this potential historic reversal in the major indices, are at long last getting the sense, ‘The jig is up’.
As Dr. Elder has said, ‘the markets will hypnotize you’. They will lull you to sleep and then reverse with a vengeance.
So, it may be with our example of the day, Merck (MRK).
No-Brainer … To Brain-Dead
Back in the day when posting on SeekingAlpha, Merck was a no-brainer amongst the grifter crowd.
Since fundamentals don’t move markets, and Merck continued to grind higher week after week, month after month, one could publish any amount of ‘research’ and look like a genius.
Oh, how times have changed.
As we’ll see below, Merck has been in a massive topping pattern, or Wyckoff Up-Thrust.
Merck, MRK, Weekly
There’s a lot going on with this chart.
It’s been about seven-months of grinding at the highs, only to break down on heavy volume the week of August 6th.
Then, it was five weeks of ratcheting higher in a test, reversing this week.
Note the testing action was in response to the wide high-volume bar.
As David Weis said in his video, wide high-volume bars tend to be tested; here we see evidence of that action.
As always, anything can happen and Merck could levitate higher. However, we can see just from the chart alone, that prospect looks like a low probability (not advice, not a recommendation)
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 Cliff Notes version of what’s happening with the SOXX, is this:
NVDA, has not posted a new daily high.
However, the SOXX, pushed to a marginal new daily high, stopped out the short position and now appears to be in collapse (not advice, not a recommendation).
The new daily high for the SOXX, counts as a Wyckoff Up-Thrust and reversal to the downside.
That’s where we are now.
Positioning:
The amateur never gets back in once stopped out (per Dr. Elder). I have long since passed that mental block; repositioned short again (not advice, not a recommendation).
Trade is labeled as SOXS-23-14 … charts to follow.
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.
Developing a trading plan that accounts for broker outages, blow-ups, and platform lockups, was presented on this site, as early as December of 2020.
Back then, we had this:
“Built into that [system] approach is recognition there will be market outages, trading halts, communication interruptions and natural disasters.“
“The one thing that may separate this site from others, these (potential) events are taken into account.“
Fast forward to now.
Those events are not ‘potential’ anymore, but a reality.
Note: Before leaving that post, from December 2020, let’s not forget, the dollar reversal (and rally) discussed, is still going, nearly four years later!
That’s what’s meant by ‘a strategic, engineering perspective’ (see About).
Moving on to the topic at hand.
The last update showed potential trendlines in biotech, XBI.
As a result of today’s action, we’re revisiting the post with new information.
Biotech XBI, Weekly
As Dr. Elder said years ago, ‘trendlines are not made of glass’. Trendlines are more like a wire fence; the market can attempt a breakout that may ultimately get negated.
With the weekly XBI, that may be the case.
We’re about one hour before the close, only one day into the trading week; it’s pre-mature to say XBI, will finish the week (or even the day) inside the trendline shown above.
However, if we do end the week lower, it may be a serious bellwether; XBI could be in deep kimchi (not advice, not a recommendation).
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.
When the ‘forecasts’ don’t work out, the complaining comes out.
As Dr. Elder said (paraphrasing), ‘Mistakes in the market are to be expected. Repeating mistakes is a sign of neurosis’.
Typical responses from a YouTube site, forever expecting the ‘hyperinflation’ launch, the usual suspects:
Silver is beyond pathetic
Uggggh premature [launch] AGAIN!
… negative sentiment … a little overdone
Actually, if we’re in a full-blown economic depression, negative sentiment has not even started (not advice, not a recommendation).
Silver, along with copper (and lumber) are good indicators for the health of the economy. So far, lumber has crashed outright; down ~70% from its 2021, peak.
For copper bellwether, Freeport McMoRan (FCX),it has not looked back since this report.
Let’s move on to silver. What’s the market telling us about the next likely direction?
Silver SLV, Weekly Close
As Yogi Berra said … ‘It’s Deja Vu all over again’ 🙂
The last time there was a similar upside volume crescendo, it marked the pivot point for a 30%, decline.
That decline took two-years to (fully) recover. Hardly ‘hyperinflation’.
Now, we’re at The Danger Point®, anything can happen.
If it’s another downside pivot, just the looks suggest a deeper decline than last time.
If, however, this time really is different, one would expect the upside to get started … and soon.
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.
From the outset, the premise for biotech XBI, was this:
We’re in a huge up-thrust, several years in the making (not advice, not a recommendation).
With a set-up that big, downside potential was projected to be just as big, link here.
Then came the hard part, validating the premise and getting into position.
Nural Plasticity
So, it’s been on again, off again; a total of seven short trades; LABD-24-06 – LABD-24-12, with an eighth, LABD-24-13 opened, as of today.
The entire (closed) series has been profitable.
However, during that time, assessment of (major) downside potential shifted from confidence to caution, and now back to confidence.
‘Sticking to one’s guns’, no matter what the market (the tape) is saying, is a sign of real trouble.
The market itself directed the entering/exiting.
With that, let’s move on.
The ‘New’ Paradigm
Reviewing the host of ‘experts’ in the press and YouTube alike, (except for UE), everybody has their reason on why nothing (bad) will happen until after the ‘election’.
The last go-round should have broken that paradigm completely; but no, we’re still hanging on.
The ‘new’ paradigm is probably, ‘no’ paradigm. 🙂
From a Wyckoff perspective, the financial press is to be ignored except for when data releases are scheduled.
What’s in the release is not important; it’s the time and date itself, warning of potential volatility.
Biotech XBI, Daily (inverted)
Once again, inverting the chart to show the short-side (LABD) potential (not advice, not a recommendation).
Note: The dashed blue lines, an extension of the support level shows we’re also in a potential spring set-up at one higher timeframe, the weekly; more background, link here.
Positioning
As noted above, a new short position was opened via LABD, during this session (not advice, not a recommendation).
Typically, discussion of open trades within the trading community is (or should be) taboo. As Elder said years ago, there’s the real risk of ‘ego’ causing errors in discernment.
With that said, I might exit this trade at any time, without notice, without explanation.
Veteran traders will agree with that statement; when something’s ‘off’ with a trade (only known to them), it’s time to get out.
Nonetheless, a hard stop for today’s position would be yesterday’s LABD, low of 6.97 (not advice, not a recommendation).
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.
There are plenty of horror stories selling options. A typical example, is this one.
However, when buying options (to open), as Dr. Elder has said, you have to jump through ‘three hoops at once‘; get it right on the stock, direction, and time.
He goes on to say, working the options market is counter intuitive. Traders naturally gravitate to long-dated, in-the-money options so the trade has time ‘work out’.
His method’s the opposite; short-dated, out-of-the-money.
So, what exactly does that look like?
The XBI, Short-Dated, Put
The situation on biotech, its reversal, first covered here, is a well-known topic on this site.
Using that information, especially this update and this one, probabilities were high for downside the next session.
With that, we have the following.
Biotech XBI, 1-minute
Time stamp on the entry from the broker states: 15:35:10, shown on the chart.
Time stamp on the exit is: 09:31:43, also shown.
Note: Entry was executed as the price of XBI was rising (for nine-minutes), with option value declining.
That rise does not look like much but we’re one day before expiration; option value is fluctuating significantly.
Perfection vs. Effectiveness
After the entry, we see later, there’s a 1-minute ‘blip’ higher before that blip was reversed.
Waiting for entry could have been better from a lower price standpoint.
That blip could have easily gone the other way, option value rising rapidly, low-risk (entry) opportunity gone.
Looking at the chart, one could say that ‘it’s not perfect’ and that’s true.
However, for being in the market just 29-trading minutes, gain of +160%, one could say, it was highly effective.
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.
Those familiar with the David Weis trading video, know that phrase well.
The entry analysis is done, the trade entered and now, the management of that trade (not advice, not a recommendation).
The SOXX & The Stop
We’re only part way through today’s session; it’s already been a very busy day for the SOXX.
A gap-up open that was quickly retraced. Now, we’re trading lower, hovering around 231.50
Elder said years ago, ‘when the market is at a reversal point, there’s a lot of turbulence’.
We have that for sure in this case.
Moving on to the chart
Semiconductors SOXX, Daily
Stated in a prior update, a short position on the SOXX would have an initial stop of 243.63.
As a result of this morning’s action, it’s reasonable to move that stop lower (not advice, not a recommendation).
The reason to move lower so quickly, has been defined by the market itself.
We’ve already had a sharp opening gap-higher where the bulls (may) have given it all they have.
That level was quickly retraced, inferring the bears are (now) in control.
If that level is threatened, SOXX moving higher, then bulls have regained control, likely to move higher, still.
There’s nothing else but ‘set the stop and walk away’. 🙂
Of course, if one is using the leveraged inverse fund SOXS for a short position, the stop level chosen would correspond to the SOXX, above (not advice, not a recommendation).
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 past five ‘Silver Top’ updates have looked at recent action, as a potential top and downside reversal.
The ‘Part V’, update (link here), included a ‘measured move’ target.
In the markets, an infinite number of events can be true simultaneously. Dr. Elder covers this in his book, with individual traders working multiple timeframes.
All of which brings us to the chart below.
Silver SLV, Monthly
From previous updates, we’re hovering around the support resistance zone.
Now, we can see price action’s also hitting the top of a trading channel.
The question of course is, what’s the next likely outcome?
Even without considering what else is going on in other markets, a pause, sideways congestion, or downward testing seems to be the highest probability (not advice, not a recommendation).
Did The ‘Bubble’ Just Pop?
When we do take other events into account, wide swings in the SOXX on Friday, Nvidia posting a narrow range weekly bar, a potential top indicator, Ed Dowd said, when this all implodes, there’ll be margin calls aplenty.
The technical situation of the SOXX, is planned for tomorrow’s update.
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 Danger Point® 