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.
Unfortunately, the (mad scientist) graphic at left, is not too far removed from what’s really going on in biotech.
While the S&P, Nasdaq Qs, Gold Miners, Semiconductors, Financials, The HOOD, ORCL, and others, continue to make all-time highs, conspicuously absent is biotech, XBI and IBB.
Now, it appears that quietly, in the background, XBI is reversing to the downside.
Biotech XBI, Daily Close
The up-thrust is there, but is a weak penetration of resistance.
Even so, on the ‘test’, volume contracted by -49.24%, when compared to volume on the upside penetration.
Until proven otherwise, this set-up appears to (currently) be the best short opportunity.
With that said, all other short positions have been closed to focus on biotech.
Leveraged inverse fund LABD is being used at this juncture: Trade LABD-25-10, with stop at the session low (not advice, not a reocmmendiaton).
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 sure to be plenty of post-mortems over the weekend; usual suspects giving us their assessment on what’s already happened. 🙂
Sometimes the question, is not ‘what’s happened’, but ‘what has not happened’.
That’s where the opportunity may lie.
Market Implosion
Over the past week, there were wide price bars, with action unstable in all major indices (ETFs): DIA, IBB, IWM, IYM, IYR, QQQ, SOXX, SPBIO, SPY, XLF, and XOP.
However, what did not implode (completely), are the car dealerships; specifically, CarMax and Carvana.
For this update, we’ll look at CarMax.
CarMax, KMX, Weekly Close
On a close basis, KMX, has bounced off the lower wedge boundary and is near the resistance area (magenta line).
Price action could be positively biased in the coming week as a result of ‘tax refund’ car buying (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.
Over and again, this sector (IBB, XBI) is not participating in tandem with the other major indices.
Today’s pre-market mayhem higher over supposed slower outlays of possible trade tariffs to happen some-time, some-day, caused the major indices to launch upward. 🙂
Well, everybody seemed to be blasting higher except one sector, biotech.
Wyckoff Directed Action
No matter what the ‘narrative’ may be, Wyckoff analysis directs us to look at what the market is actually doing, then interpret the action.
Early after the open, trade TZA-25-01, was exited, +8.9% gain, short position opened in biotech via LABD, Trade: LABD-25-01 (not advice, not a recommendation).
Biotech XBI, Daily
Today posted outside down, taking out both the high and low of the prior session.
Note the trading channel and width, Fibonacci 13-Days.
Also note the two ‘breakaway gaps’. The second one on January 10th, much wider than November 12th, last year.
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.
For a clue to the (potential) answer, we can look at what’s happening to Pfizer, link here and here.
However, let’s not get ourselves wrapped around the axle on events, forecast years ago.
Rather, let’s go straight to the truth, the price action and see what it’s telling us.
Moderna MRNA, Weekly
The entire move from low to highs is shown. Included on the chart, are two Fibonacci indicators.
One is the standard ‘retrace’ indicator; the other, is a ‘projection’ indicator.
The ‘projection’ is based off the ‘a-b-c’ move from the lows of November 2nd, 2023, to the highs on May 24, 2024.
The retrace and projections are hard to see, so the ‘Detail‘, arrow is where we’re headed next on the daily.
Moderna MRNA, Daily
If there ever was a chart to once-and-for-all, refute, dismiss, trash, the whole ‘Fundamentals’ argument, that earnings, interest rates or some other ‘Voodoo economics’, moves prices, this is it:
MRNA, price action hit the 23.6% retrace level (exactly) for two days before moving on to hit the 161.8%, projection (exactly) before reversing.
Note the ‘100%‘ level as well; price action confirmed this area (exactly) three times! Once on the way up and two times on the way down (third time, not shown).
A century ago, Livermore said, ‘It’s all about the numbers’.
Strategy, First
Just as Livermore was primary a strategist, so is this site’s method of analyzing the markets, i.e., Strategy, Tactics, Focus, in that order (not advice, not a recommendation).
The news has been replete with reports like this one and this one.
Another panic ahead?
Sounds like it but at least in the case of Moderna, the chart itself says (effectively):
‘There’s no money in it’.
That means, another wave like we saw several years ago, is not the most likely future event (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.
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.
Was that the day where irrefutable evidence like this is going to stick?
Price action of Biotech Sector IBB, has posted a long awaited and anticipated reversal signal (not advice, not a recommendation).
We’ll look at that below.
The IBB, Up-Thrust & Reversal
As a reminder, in Wyckoff terms, an ‘up-thrust’ is where price action struggles above known resistance for some period of time and then reverses to the downside.
In the case of IBB, that ‘struggle’ lasted an incredible seven-weeks.
Biotech IBB, Weekly
Price action attempted to break above resistance for nearly two-months, before reversing lower.
Then we had an initial test during the week of 12/23/22 (on the daily for three days), and a secondary test last week.
Biotech IBB, Daily
The daily shows more detail on the struggle.
Point No. 1, was the initial test. Point No. 2, was the secondary test which appears to have decisively failed.
Pre-market action shows IBB, set to open slightly lower.
If it does, then expectation is for some (brief) attempt to rally as a test of the breakdown.
The Driving Force
For years, this site has not wavered in the assessment, what’s happening in this sector, will be the driving force for the entire market on a go-forward basis (not advice, not a recommendation).
Anything can happen.
It’s unknown if yesterday was ‘the day’.
What is known however, evidence is building on a massive scale. Every day, sometimes multiple times a day, we see the effects.
Positioning
This site presents the data, the insight and price action nuances. It does not give recommendations.
With that said, going short this sector is not as straightforward as the other major indices.
IBB, may be shorted directly but will likely result in a maintenance fee from the broker.
Of course, that puts one on the hook for the sector’s dividend payment (currently yielding 0.31%).
The other option is 2X leveraged inverse fund BIS.
However, this fund’s volume is thin … meaning it’s not nearly as liquid as the other inverse funds such as SDS, DXD, QID, SOXS and so on.
It’s up to the trader/speculator to participate or not.
We’re about fifteen-minutes before the open. Let’s see what happens next.
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 majority of the indices are at their right-side channel lines.
We’ll cover semiconductor SOXX, and QQQs, below. However, biotech IBB, and SPBIO, are in similar positions.
From a calendar and data standpoint, there’ll be plenty that could be used as an ‘excuse’ for market moves but let’s ignore the (intended) distractions and take a look at what the market is saying about itself.
First up, is the semiconductor index, the SOXX.
Semiconductor’s, SOXX, Daily
The chart has Fibonacci retrace levels shown. Price action has retraced to 38.2% and stalled.
But wait, there’s more.
Putting in a trading channel, we could be at a reversal point.
Note the upward thrust energy (‘Force’) has dissipated.
the NASDAQ is in a similar situation but weaker from a retrace standpoint.
NASDAQ, QQQ, Daily
Looking at the monthly chart for the Q’s (not shown), it’s been a Fibonacci 13-months since all-time highs.
Force dissipation and ‘Contact Points’ are near identical to the SOXX.
Summary
Biotech IBB and SPBIO, are in similar positions. In fact, the overall markets appear poised for downside reversal.
As discussed in the last update, the bond market could be signaling danger ahead with its sharp upward reversal; now (potentially) entering its sixth week.
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 last update, posted late in the session, said with the upward bias provided by the sizable Op-Ex event, we can look for the weakest (or one of the weakest) sectors.
The chart below summarizes yesterday’s action:
Friday 10/21/22, Single Day Gains
Gold miners GDX, is the outlier at the top and real estate IYR, the outlier at the bottom.
Before anybody gets excited about ‘hyperinflation’, just a reminder; silver SLV’s, action has retraced to a weak 38.2% (chart not shown), as it was forecasted to do from last week’s update:
“Silver (SLV) is currently at support levels; therefore, some upward action (staying below SLV: 18.5) is normal behavior.”
Price action is the final arbiter; we’ll see what happens next.
Back to real estate.
Professional Wisdom: ‘The Crash’
We’re going to use the experience and insight provided by Scott Walters concerning the potential for real estate; that is, we’re in a world-wide event the scale of which, no one alive (and possibly, ever) has seen before.
The Economic Ninja has just seconded that opinion (time stamp 3:45) with his quote:
“Right now, we are in the greatest collapse since The Great Depression; and I believe it will be as severe, if not worse, sharper, faster, than what people experienced in 1929”.
So, what would that ‘collapse’ look like on a chart of real estate, IYR?
Ah, yes. That’s the hard part.
To take useful wisdom like that above, and somehow map it into potential market behavior.
For that, we’re going to use the Quarterly chart of IYR.
Real Estate IYR, Quarterly
There are still two months and one week left to go in the 4th, Quarter.
We’re at a confluence of price action as we’ll cover in the Hourly chart farther down; first, what’s the potential?
Here is one artist’s rendition (not advice, not a recommendation).
That puts it into perspective.
We may know at the very next open, if we’re pivoting higher or continuing the decline.
Butterfly In The Amazon
Of course, the market’s not going to tell anyone its next move. We have to decipher that (read the tape) ourselves.
Sometimes, as Wyckoff said a century ago … ‘It’s as if the weight of a feather is all that’s needed, to push the market further or to reverse.’
So, let’s look at that feather (the butterfly) on the hourly chart.
Since we’re positioned short (DRV-22-05), the chart’s inverted to mimic leveraged inverse fund DRV.
Real Estate IYR, Hourly (Inverted)
The important part is we see a repeating pattern of trendlines.
Moving in closer, we have this. The blue arrow is ‘expected’ action based on the analysis up to this point (not advice, not a recommendation).
Moving even closer, the zoom shows IYR, finished the day in Wyckoff spring position; having pushed past minor support (resistance on non-inverted).
Summary
If IYR opens lower or gap-lower, we’ll have to wait and see if it posts a new daily low (below IYR ,77.24).
If that happens, we have some confirmation lower prices are ahead and can then set a definitive stop for DRV-22-05.
Obviously, a higher open (pushing past IYR 78.91), negates the trade.
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® 