China, FXI, YINN & YANG

Reposition The Short

‘Once stopped out, the amateur never comes back.’

That’s the assessment from Dr. Alexander Elder, years ago.

The amateur thinks he has special analysis powers and has to be correct on the trade immediately.

On the other, hand, the professional may attempt up to three entries (or more) to get the position they want.

So, it is with Emerging Markets (EEM) and the correlated trade, China (FXI).

Yesterday’s jump higher in both the EEM, and FXI, did not invalidate the work already done, linked here.

Instead, that move told us where to look.

As shown below, the FXI had the least net upward movement. The percentage gains have reduced substantially

FXI, Daily Chart

Using that information, FXI appears at, or near the end of its short squeeze move.

The Emerging Markets trade (once stopped out) was re-positioned to be short the FIX via YANG (not advice, not a recommendation).

YANG, Daily Chart

Upon initial glance, it appears to be a lot of (short) positioning activity. That may be true for now.

However, the objective is to identify a sustainable move (before it’s obvious) and then continue to build on the trade.

Summary

Note how there’s a huge downward slash in YANG, that corresponds to the sharp short squeeze move in FXI.

From a risk standpoint, one way to look at this event, it’s not likely to happen exactly this way again (rule of alternation).

We’re about 20-minutes before the open.

YANG, is trading higher in the pre-market by + 0.25-pts, or about + 1.61%.

Stay Tuned

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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

Digging In … Emerging Markets

Uncovering More Evidence

The case continues to build for significant downside in the Emerging Markets, EEM.

This post addressed the shallow 23.6%, Fibonacci retrace; what appears to be completion of short covering.

‘Short covering’ because we’re coming from the view it’s a bear market. A potential slow-motion, train-wreck collapse.

Looking at the chart of EEM, in a different light, the Weekly Close, yet another piece of (reversal) evidence is uncovered.

Weekly Close, EEM

The unmarked chart is below.

For long time users of this site, you already know the drill. Do you ‘see’ the (short) opportunity, the evidence?

Yes, price action’s been in a downtrend for a while and rebounded but there’s more.

The next chart makes it obvious. Long term down-trend support has been broken … and now tested.

Digging deeper with the next chart; to find similar up-side volume, we have to go all the way back to the week of November 30th, 2018.

So, last week’s volume is significant.

However, that volume and price action was only able to get back to the underside of the trend … now turned resistance.

We can include all of the above analysis with previous work.

That work is linked here, here, here and here; adding up to a high probability downside event.

But wait, there’s more.

Digging Up A YouTube, Nugget

Searching YouTube for Emerging Markets, turns up essentially nothing. No surprise, there.

That is, except for this nugget.

The analysis used in the video is different from what’s on this site … and that’s ok.

The probability conclusion is the same, i.e., EEM down.

The takeaway from the video, is the timeframe. If the cycles in the analysis are in-effect (time stamp 8:04), then EEM potentially bottoms-out, in late June or early July.

Summary

The initial short trade via EDZ (EDZ-22-01) was exited, with profit on March 16th.

Another attempt made, on the 17th – 18th (EDZ-22-02) but exited on the 18th, with a moderate loss (-6.5%).

From the 22nd – 24th, another position was opened.

EDZ-22-03, currently in the green at +1.9%.

Stop is set at EDZ: 10.55 (not advice, not a recommendation).

Parting Shot

A quick check of ZeroHedge, has the usual suspects out fomenting falsehoods; attempting induce more fear and misdirection of the masses.

Just as Charles Mackay said back in 1841:

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.”

By the time this (delusional) crowd recovers their senses, the obvious market opportunities will be long gone.

Stay Tuned

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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

The Taiwan Connection

Eyes On The Prize

Huge truth bombs from a just released Stew Peters broadcast, linked here.

At time stamp 15:25, one of the major truths is Taiwan; specifically, Taiwan Semiconductor, TSM.

Why Taiwan?

Why focus on Taiwan Semi and its connection to the Emerging Markets, EEM, ETF?

We’re focused on it because that’s what the tape itself is telling us to do. The EEM, has already been in a sustained downtrend since mid-February, last year.

It’s been three successive (chart) quarters of lower lows and lower highs.

Looking at semiconductors in general, out of the top ten market cap equities in the SOXX, only TSM, is at or below its 23.6% retrace level. All others have rebounded much higher.

As Wyckoff said a hundred years ago … ‘somebody always knows something.’

Meaning, those really in charge (time stamp 2:53, above) already know the plan; their actions show up on the tape.

We’ll look at those tape actions with TSM below

Taiwan Semi TSM, Daily Bar

Moving closer in on the daily, we have the following.

It’s clear, at this juncture, price action has stalled.

Two sessions ago (Wednesday, 23rd) there was an outside down (reversal) bar.

This session and yesterday’s, have been inside action so far.

There has been no new high or low, posted.

Although today’s action posted below yesterday’s low, it has not posted (currently, at mid-session) below the reversal low.

Summary

Anything can happen.

Price action, TSM could launch upward past the resistance and continue to a 38.2%, retrace.

At this point, it seems to be low probability; all the good news (i.e., the short squeeze), may be out.

We’re heading into the weekend and we’ve seen over and again, that’s when things go sideways.

As Livermore said, ‘surprises tend to happen in the direction of trend’.

TSM, is and has been, testing the underside of its breakdown; it now appears poised to continue lower.

Stay Tuned

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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

Emerging Markets, Bounce Top ?

At The Danger Point

Emerging Markets (EEM) price action has stopped dead.

As we’ll see below on the Weekly Close chart of EEM, there was a huge run-up last week.

This week’s different as the upward move has (at this juncture), come to a halt.

Emerging Market, EEM Weekly Close

It may be tongue-in-cheek, but the arrow shows that so far, there’s been essentially no upward progress this week.

Looking at the un-marked daily close, we have this.

Expanding the last several trading sessions, the upward net moves have become shorter.

Today, price action failed to close at a new (bounce) high.

Volume also contracted -32.5%, from the previous session and gives clues we may be at or near a top.

Summary

If EEM’s price action is slowing down on the upside, then leveraged inverse EDZ, is slowing down on the downside.

Compared to last week, this week has been very quiet.

As said in other posts, a 23.6% retrace is rare.

However, if EEM reverses from this point, confirming the top, then downside opportunity is likely to be significant (not advice, not a recommendation).

Stay Tuned

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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

Taiwan Semi … Reverses

The Market Leads The News

Price action leads the news, not the other way around.

The last update on TSM had this:

“A reversal away from this area confirms the channel and weights probability to more downside …”

As seen in the chart of TSM, a reversal is what we’ve got.

TSM, Daily Close

Note that volume increased on the reversal; helping to confirm the channel.

If this reversal ‘sticks’ and TSM continues lower, the downside potential is significant.

Summary

It’s a no-brainer to assess the world situation as unstable.

It’s exactly during these (once in several generation) events where international borders (for example) like Taiwan and China could potentially change.

Several links of interest on China/Taiwan are below.

China ‘There by tomorrow

Tencent shares plunge

Hong Kong … mandatory tests

China mandates ‘zero policy

China lockdowns to disrupt supply chains

What could go wrong ?

As Livermore said nearly a century ago … ‘surprises tend to happen in the direction of trend’.

Stay Tuned

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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

Taiwan Semi … At Resistance

Testing The Underside

Trading Channel

Weekly Close, TSM

Starting with the weekly close of TSM below, we can see the recent top, breakdown and now test.

Closer-in on the next chart, the market’s testing resistance.

Looking at the daily close, it gets more intriguing.

Daily Close, TSM

Looks like TSM’s at the right edge of a downward channel.

Zoom-in

A reversal away from this area confirms the channel and weights probability to more downside (not advice, not a recommendation).

Summary

Taiwan Semi (TSM) is the largest cap in the Emerging Markets, EEM.

Leveraged inverse of the fund is EDZ.

If we get a reversal in TSM this session or possibly next, it may affect the overall emerging markets sector, dragging the EEM down as well.

Unless the tone changes (U.S. and world), meaning that volatility would have to subside, price action behavior at this juncture, suggests it’s a bear market.

Stay Tuned

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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

Emerging Markets, Pivot Ready ?

Hovering At Resistance

After Wednesday’s huge run-up, Emerging Markets (EEM) is now hovering at resistance.

Reportedly, there’s a Xi ‘Put’, in place to make sure China and related markets don’t go down.

Never mind that Wednesday’s massive EEM, launch had all the looks of a bear market short squeeze.

From a technical standpoint, several items stand out.

First: Price action’s at support (now resistance) that was determined this past February 24th, on (supposed) news of a Russian invasion.

Second: That resistance level (as shown below) is at a Fibonacci 23.6%, retrace. A 23.6%, retrace that ‘sticks’ is rare; markets tend to go at least to 38.2%, or 50%, before resuming their main trend.

Emerging Markets EEM, Weekly

We’ll start first, with the un-marked weekly chart.

The entire leg lower with 23.6%, retrace.

Now, on to the daily timeframe.

It’s important to note, the first hour of trading, EEM posted a new recovery high just 0.03-pts above Wednesday’s high.

Analysis Tip

The market goes where there are orders.

At this point (mid session), there’re not enough orders for EEM to continue significantly upward.

Summary

Risk may have been reduced for a short position via EDZ (not advice, not a recommendation).

If we get an EEM reversal, the shallow Fibonacci retrace indicates extreme weakness and therefore, downside opportunity is significant.

Stay Tuned

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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

Emerging Markets, After Squeeze

Has Risk Been Removed ?

The short answer is yes if you look at the EEM (daily) chart above (not advice, not a recommendation).

If this was a squeeze, and it has all the hallmarks, then price action will begin to erode …. quickly or not.

The good part, now it’s happened, it’s not likely to happen (exactly) this way again.

Prechter’s ‘rule of alternation’, effectively sates that what happened last time, will not happen this time.

Summary

EEM even now, is beginning to pull away from the resistance area.

It could still attempt to test. However, if it was short covering, those (stop) orders have likely been filled.

Stay Tuned

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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

Short-Squeeze: Emerging Markets

Bear Market Behavior

Two ways to look at the action.

First: Those late to shorting the Emerging Markets (EEM) are going to get whacked.

Second: Those shorts properly positioned, are going to take a hit but will have an excellent opportunity to move stops after the smoke clears.

Not addressed, are those who think this is an opportunity to go long.

It’s about 25-minutes after the open. The daily chart of EEM, below shows current action.

Emerging Markets, EEM Daily

It’s clear that price action is attempting to break through the trend.

This type of action is typical bear market behavior.

Bear markets are all about price destruction along with an overall downward direction.

The market’s objective is to make sure as many as possible are thrown off the main trend (stopped out, busted out) and not able to participate.

Summary

If the downtrend is still in-effect, EEM price action will stall and then ‘hurry itself’ to get back into the trend … after the shorts have been cleared out.

That short clearing could be just hours or even days.

At this juncture, the current stop for EDZ-22-01, remains at 11.96, as detailed in this post (not advice, not a recommendation).

Update: 10:32 a.m., EST. Position stopped out at 11.96 and posted an overall gain of 8.33%

Stay Tuned

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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

TSM Collapse, Dead Ahead ?

Sell-Off, Has Been Orderly … So Far

Taiwan Semi (TSM) is the largest cap in the Emerging Markets, EEM (ETF) Index.

As we’ll see from a technical standpoint, TSM’s posted a massive bearish divergence.

That divergence is now being confirmed with price action breaking lower.

As shown below, price action’s launch from a low of 5.83, in November 2008, to a high of 145.00, on January 13th, this year, has been stratospheric; over 2,595%.

However, for about eleven months, the last part of that action was sideways. Then, a Wyckoff up-thrust during the middle of January and reversal lower.

That’s where we are now.

Taiwan Semi (TSM) Weekly Chart

Highlighting the divergence.

The problem or the benefit (depending on long/short), such reversals take much longer to play-out, than anyone expects.

Moving closer in, on the weekly.

At this juncture, TSM’s following a trendline lower that’s declining at approximately – 95%, annualized.

Volume for the week increased from the week prior, which increased from the week before that, also increasing from the week before.

Downward pressure continues; TSM’s down -30%, from its all-time highs.

Emerging Markets, EEM

When looking at the weekly chart of EEM, we can see the downward effect of TSM on this index.

Drilling down into the daily chart of leveraged inverse fund EDZ and compressing the vertical scale, one gets a sense for the potential of this move.

EDZ Daily (vert. scale compressed)

As a courtesy, entry dates, prices and current stop are listed (not advice, not a recommendation).

TSM & EEM, (EDZ-22-01) Targets

Coming up in another update, more specific (Fibonacci) targets for potential exit of the EEM short via EDZ.

At this juncture, an obvious (capital preservation) exit would be decisive penetration of the trendline shown or hitting the current stop; not advice, not a recommendation.

Summary

One of the hardest things to do for amateur and professional alike, is nothing.

That may be where we are with TSM, EEM and EDZ. The short position has been opened; stops and trend identified.

Now, the waiting.

As Livermore said nearly a century ago, it’s the waiting (not the thinking) that made him the money.

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