Biotech … Ready To Reverse

Highly leveraged (3X Inverse of SPBIO), LABD, looks ready for upside reversal.

The next chart shows trendline contacts.

Volume increased on Friday while the trading range narrowed significantly.

The next chart’s a little busy but zooms in on the volume and the daily range in question.

The overall markets have rebounded during the past two trading days.

Inverse funds have declined correspondingly.

Interestingly, LABD seems to have maintained its upward bias (down for SPBIO) better than other inverse funds like SDS, DXD, SOXS, QID and TZA.

Summary:

For downside action, one wants to look for the weakest sector.

Look for a new daily LABD high on Monday, (new low for SPBIO).

This is a typical entry signal with stops at the last session’s low; currently LABD, 40.08 (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.

The Danger Point®, trade mark: No. 6,505,279

Basic Materials, Building Blocks

Infrastructure … Not Going To Happen

The infrastructure bill, right along with any kind of sustainable ‘recovery’ is just not in the charts.

Sure, the bill passed into ‘law’, if you can call it that; however, law and action are two different things.

We’ll get into more fundamentals behind why it’s not happening in tomorrow’s Random Notes … to be released later in the day.

One hint on why we’re not getting a major U.S. wide building program, there won’t be the manpower or supplies available … each for their own reasons.

That brings us to the chart of the sector.

DJUSBM

The weekly chart shows how it looks going all the way back to early 2008.

If you did not immediately pick up on the right side’s message, it’s highlighted below … a massive bearish MACD divergence.

The divergence proposes that upside momentum for the sector is all but spent.

Let’s take a look at previous downside action and the current possibility.

Anybody that’s awake will not argue the current situation’s worse than 2007 – 2008.

If that’s the case, and if the market’s still alive at the bottom, DJUSBM could get as low, or lower than 2008 – 2009, levels.

A decline over 80%, is not uncommon for a bear/depression market. The Dow Jones 30, from top-to-bottom, during the Great Depression was around – 84%.

Inverse Fund, SMN

SMN is -2X inverse the DJSUBM.

However, this fund is not like inverse ETFs; SDS, DXD, SOXS, QID, DUST, and so on.

Basic Materials is not ‘popular’. At least, not yet.

That means the fund is illiquid with larger spreads (bid/ask). In addition, it takes a good few minutes after each open for those spreads to calm down and narrow up.

It’s not for the inexperienced.

Summary:

As we’ll get into tomorrow, ‘normal’, is gone.

There’s not going to be ‘normal’ (a personal opinion) in the lifetimes of anyone reading these updates.

That doesn’t mean there are no opportunities.

Basic Materials, DJUSBM, is about to, or already has (potentially) started its downside reversal.

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.

The Danger Point®, trade mark: No. 6,505,279

Gold Rally Failing

At this juncture (2:40 p.m. EST), price action in GLD has verified the down trend and is pulling away; confirming that last week’s action was a major trap for the bulls.

Although not required by this site as there are no recommendations or advice, as a courtesy housekeeping notes are provided:

The DXD trade was exited at about break-even. Price action is moving too low (DIA higher) for continued maintenance on this trade.

A short position in the mining index GDX (Major Miners), was opened at DUST 18.86, when it bacame obvious that GLD was pulling away from the trend as shown.

Hard stop DUST, 18.45 (not a recommendation, not advice)

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.

Miners (GDXJ): What’s Next?

It’s possible during the last session gold (GLD) received a final mortal wound to the hyperinflation argument.

Price action in the December contract (GCZ20) dropped over 100 points in a matter of hours.

A retrace is expected … it’s just part of market behavior. 

However, even as gold edges higher, the Junior Miner’s, don’t seem too eager to follow suit. 

Price action in GDXJ has risen just slightly with JDST down 0.50% in pre-market.

The dollar (UUP) has reversed as expected.  It’s got a long way to go higher for any kind of test on wide, high volume action.  Dollar higher, gold typically, lower.

The short position in the Dow (DXD) has retraced somewhat in the early hours. 

As it stands now, the retrace is about 1/3rd of the overall gain thus far; perfectly acceptable.

The focus for the firm’s trading at this point is on the Dow and related markets.  If the position is increased at these levels (and the analysis proves to be incorrect), it could be stopped out the same day.

So we’ll wait to add … for now.

Separately, it should be noted that every single market assessment in the previous update was correct:

GDXJ in up-thrust reversal condition … check

GDXJ finished at high on Friday, Monday’s typically down … check

Gold retraced to 50%, lower price action expected … check

Dollar in its own reversal set-up … check

Dollar up, gold down … check

All that list means, is at this juncture the markets are being correctly interpreted. 

Those interpretations are being done intuitively and without indicators.

Intuition can be skewed by events unrelated to the markets.  For now, it’s operating correctly and we’re going to focus on the Dow.

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.

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.