A brief list of changes:
Exit as planned on DUST. Stop was hit
Trader’s discretionary exit on DUG: Gain ~ 4.80%
Entered short IBB via LABD (3X inverse) and BIS (2X inverse). Not advice, not a recommendation.
The biotech sector has lost momentum.
Weekly MACD has diverged and is now flat. Additional analysis to come.
Position table is shown below:
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When compared to two weeks ago, Force Index (thrust energy) to the upside in XOP, has declined over 60%.
The pre-market shows that XOP may open higher. If so, it will be into dissipating bullish demand combined with confluence of resistance discussed in the last report.
The first hour of trade may let us know if XOP has run its upward course.
As always, price action is the final arbiter.
The anticipation is for a reversal … soon. If not, then it’s time to wait (as is being done with Biotech, IBB) until price action confirms the change.
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Inverse Oil ETF, DUG volume went off the scale today; the highest in at least four years.
The short-squeeze top in the sector, using XOP as the proxy was identified before today’s open in this report.
At that time, there was nothing significant about either XOP, or the inverse DUG other than being at opposite price extremes.
Today’s action changed that view.
Apparently the juncture was significant enough; Today’s transaction volume in DUG, amounted to approximately $23-million.
That’s a huge number. Typical action is around $4-million.
Oil is inversely related to the dollar at this point. The dollar proxy, UUP reached a new trend low last week but seems to have found support the past three sessions.
Being short the oil and gas sector via DUG (not advice, not a recommendation) is essentially a leveraged bet on a dollar rally.
In other markets, after weeks of analysis and planning, biotech had its reversal but we’re not in it (on the short side) having exited yesterday.
Not to worry; the massive volume inflow to DUG suggests that we’re on the right track with who (or what) is going to be most vulnerable to a market reversal.
Biotech (IBB) price action may retrace upwards to test. If and when it does, we’ll re-evaluate.
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Huge volume is moving into inverse oil fund DUG.
Potentially the highest daily volume since 2016.
Indicates changing of hands.
Separately, (as of 1:18 p.m. EST), looks like everything is reversing.
Missed the IBB reversal by one day. Price action is down hard.
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The stars at night are big and bright …
But all is not as it seems of course.
It’s great that Texas has brought suit for ‘illegal’ voting.
However, with eyes wide open, there could be more going on than just contesting an international vote-rigging scheme that has entrenched corruption on a grand scale.
The oligarch controlled medial of course puts their spin on it and plies its evil trade.
Despite the way it looks, lawsuit and all, this could really be the first salvo on U.S. Balkanization. Plenty of information exists on the topic; here’s one source.
Texas of course would have to establish ground rules or structure for such action …. If that was to happen at the current pace of events … five years? Maybe faster.
A complete collapse and mass unemployment (with civil unrest … oh wait) would of course help things along from a public acceptance perspective.
Outlandish you say … complete insanity. Really?
How outlandish is an entire population running around with a piece of toilet paper across their face … afraid of something (the speck) that’s not even there. Even the CDC admits ‘no isolates [of the virus] are currently available [because it does not exist]’.
Go ahead … take a trip to your local graveyard. Where are the bodies?
By now, a real world-wide pandemic would have municipalities passing special measures (and taxes) to annex additional land to keep up with the dead. Back-hoe operators would be in short supply and a booming business.
Not happening; because it’s not there. The real story is here.
So, what about the markets?
Yesterday, the short positions in biotech were closed out as we got a higher open (not expected) instead of lower; even though bid/ask right up to the opening bell indicated a lower open..
IBB has now pushed past the 150-target area. There are no more forecasts for this sector. We’re at the target and no reversal … yet.
Moving on and giving credit where it’s due, Steven Van Metre, is the situation in oil.
With a huge economic slowdown (another collapse) coming, demand for oil is likely to vaporize yet again. Recall when the futures market went negative just eight months ago?
Oil prices may have been bid up on expected demand from a “re-opened” economy. That’s the current narrative.
What’s really going on looks like a short-squeeze that may have played itself out. The Weekly chart of XOP (oil/gas production ETF) shows upside progress has stopped dead.
Positions:
Based on the weekly price action of XOP shown below, we’re short oil and gas via DUG; a position established late yesterday.
At this juncture there’s no hard stop (not advice, not a recommendation) but we’ll wait during the fist hour of the coming session to see how the hourly bar posts.
Last week’s high in XOP was 61.06. If price action pushes beyond that by any appreciable amount, we’ll exit inverse DUG.
Stay Tuned
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Bid/Ask spreads on Biotech (IBB) indicate a lower open.
From last night’s update, this was the expectation if we’re in the early stages of reversal.
Empirical observation over many months shows IBB, tends to move counter-trend for the first 90-minutes of trade … then resumes its original direction.
If that holds true for today (and we’re in a reversal), expect IBB to open lower and then attempt a move higher during the first hour and a half; right up to about 10:30 a.m. to 11:00 a.m. EST.
Note: That’s empirical observation; typical market action for IBB.
However, each day is different and price action itself has the final say.
Both accounts being managed already have significant positions (BIS & LABD) with a BIS stop @ 24.64 and LABD stop @ 27.63 in the market (not advice, not a recommendation).
Following Livermore’s approach (get in big … and do it early) the plan is to monitor price action for another opportunity.
If somehow there’s a higher open for IBB, then we’ll wait for a lower daily low (to increase position) or be stopped out … whichever comes first.
It’s still quiet in the markets. No one expects a major reversal. Retail is all in (although insiders are selling en masse).
There are fundamental reasons why biotech may be about to crack (big time) but those reasons are for another report. Here’s a preview.
Culmination of probabilities; That’s what appears in Biotech, IBB
First: The 150 target identified in this post has subsequent price action reaching a 149.31, high … could be close enough
Second: The daily chart has a small terminating wedge pattern created over the last five sessions. A wedge is usually the last stop before reversal.
Third: The amount of upward energy (Force Index) available to push prices higher has evaporated. Today’s session, while closing marginally higher, had near zero energy.
Fourth: Today’s price bar was a reversal; A higher open, higher high, followed by lower low and lower close.
Fifth: The last reversal bar was five trading sessions ago. That bar was negated by subsequent price action; leading up to today.
Markets alternate. What happened the last time (negation of reversal) is not likely to happen this time.
Sixth … sort of. The gold market and the miners (GDX) could have received a ‘safe-haven’ bid in advance of an overall market decline. Did today’s rally in gold just signal the market top?
As of this post (8:02 p.m. EST) the overnight session (S&P) is trading lower -8.50-pts or -0.23%. So, we’ll see.
With the above five items listed and the probable sixth, expectations are for a lower open on tomorrow’s IBB session, then adding weight to the reversal.
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If IBB is able to finish below resistance at 148, it will post a daily reversal bar.
Original upside target was the 150-area. Looks like at this juncture, 149.31 may be all there is.
Hourly chart of IBB with notes, below.
Positioned short (not advice, not a recommendation), via BIS and LABD (separate accounts).
Stop: BIS 24.64, LABD 27.63
The final arbiter is price action itself. We can analyze all we want but if the position does not cooperate, it’s time to leave.
Similar to closing nat-gas positions on November 3rd, as detailed here, it’s time to move on from Biotech; let it play out without us.
Biotech’s not working on the short side. So, we’ll come back when it is.
It’s important to note, after leaving UNG, it’s -21.2%, lower than November 3rd.
What’s working (for shorting), is gold and the miners (GDX) via DUST (not advice, not a recommendation). The GDX chart below shows the resistance level which is also the 23.6%, retrace.
A Fibonacci 23.6%, retrace is rare.
If that level is not challenged and GDX continues lower, the shallow retrace (to the upside) indicates significant weakness.
Recap: Markets (S&P, Dow, NASDAQ) at all time highs. The 30-yr Bond and Dollar, at short level extremes; the most in history.
Gold and GDX appear to be out in front, leading the way lower.
Managed Accounts
Number Detail Position Stop
6XXX-XXXX Short GDX DUST 21.81
5XXX-XXXX Short GDX DUST 21.81
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In the pre-market (8:52 a.m. EST) action continues to grind higher. Both the Dow and S&P have posted new highs thus negating the Holiday Turns scenario … but not by much.
Important to note is each market continues to post on the underside of a long-term trend-line. The Dow chart (DIA) is farther down this post.
Also added to the chart is the dashed trend-line underneath the recent price action. A wedge is being formed; typically last stop before reversal.
In other markets, looks like Biotech may continue higher but along with the others, action appears labored.
The short position could be stopped out at the open.
This area of price action is where cost of being wrong is least. We’re at The Danger Point.
Update: 9:04 a.m. EST: Both AMGN and MRNA have now posted lower in pre-market.
Stopped out does not mean there’s no opportunity. The bearish MACD divergence is still there.
If IBB continues higher, the original ‘150’ target is back in play.
The market extremes are still there: Bonds and the Dollar are short the most in history. Stretched all around.
It’s not unreasonable to expect several attempts to position short.
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The Danger Point® 