Selling At The Top

Late Session

If The Fed’s Doing It, Shouldn’t We?

You don’t want to be left holding the bag.

David at The Money GPS has an excellent update, linked here.

Looks like they really do ring a bell at the top.

However, does this news story (The Fed selling everything) corroborate with price action?

In the case of the Russell 2000 (IWM) above, the answer appears to be yes.

Price action got itself into and up-thrust condition, rolled over, then tested and is now continuing lower.

A short position was opened in IWM (via TZA) during this session with a stop at the TZA day’s low (not advice, not a recommendation).

Yesterday’s short on IYR (via DRV) continues to post green and is confirming the overall markets may be peaking and reversing simultaneously.

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.


Russell … Rolling Over

Bearish Wedge Poised To Break Down

The Russell 2000 (IWM as proxy) has been congesting sideways for about five months.

While the overall markets, S&P, Dow, SOXX, IYR and the QQQs, have been moving on to new highs … the Russell has stagnated.

Taking a cue from Steven Van Metre’s reports on ‘who goes first’ in a downturn, it’s the small caps.

At this juncture, it looks like the Russell’s ready.

The six month daily chart of IWM below, shows choppy action.

Pulling back somewhat and labeling the bearish wedge, puts it into perspective (second chart):

Pulling out and labeling the wedge:

One item of note (not shown) at the top of the wedge, where price action pivoted lower (August 6th), is a Fibonacci 62%, retrace level.

So, we have a bearish wedge retracing 62% … along with non-confirmation of the overall highs; S&P, Dow, SOXX, etc.

Major reversals take a long time to form. However, once they get underway, it’s like a juggernaut to the bottom.

Harkening back to the oil (USO) bear market of 2014, nearly all (if not all) the YouTuber’s at the time, completely missed the bearish set-up.

What they did instead, once the downdraft started, was pump out update after update about ‘catching the bottom and setting up for the new bull market in oil’.

It never happened.

Oil continued lower for a year and a half before getting into a sideways range.

The big money’s in the big move. Monitoring the Russell provides confirmation a significant reversal’s in the works (not advice, not a recommendation).

As with biotech (SPBIO), already in a bear market, the IWM could break lower while the overall markets continue to thin-out and even make new highs.

Recall, we’re getting close to an up-coming holiday: Labor Day

The 1929, high was on the Tuesday just after Labor Day weekend.

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.

Market Summary

Dow, S&P, Russell … all outside down

Three markets with key reversals and the biotech sector (SPBIO) posting an inside day.

One other (less followed) market of note with outside down, was basic materials (DJUSBM).

Gold’s (GLD) upward thrust from Thursday the 29th, continues to erode.

One gets the sense that it’s slipping away for the bulls.

SPBIO price action shows the most probable direction is lower.

Expectation for the next session, is for some kind of downside follow-through along with lower market action overall.

Positions:

Current positioning remains unchanged (not advice, not a recommendation) being short the biotech sector via LABD.

Market updates for the week will be limited (as the result of travel) and will resume with technical discussions by the week-end.

Stay Tuned

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.

SOXX: Textbook Top?

11:48 a.m., EST

By The Book?

SOXX chart: Like something from a book on trading

Price action’s struggling at new highs. MACD’s posting a bearish divergence. Can it get any better for the shorts?

(not advice, not a recommendation)

At least one thing missing (as of this post) is a new daily low. If we get that, it helps provide confirmation of a SOXX, top.

The S&P (SPY ) and the Dow (DIA), have both posted new daily lows as has the Russell 2000 (IWM).

We can also throw in Basic Materials DJUSBM (IYM), making a new daily low.

Recall in a previous update, empirical observation over the years; market tops tend to occur before, during, or just after a holiday week.

Looks like we may be there.

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.

Print High & Close

The table lists well known index ETF’s; along with most recent highs and current (Friday) close:

All the usual suspects are there:

S&P 500, SPY, The Dow 30, DIA, Nasdaq, QQQ, and on.

What’s also listed is how far each index (ETF) is from its most recent all time high or ‘recovery’ high (in percentage terms).

Obviously, one of these is completely out of bed: Biotech, IBB

We’ll be discussing the technical condition of biotech tomorrow. For now, the updated ‘project’ chart’s included below:

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.

Not Sustainable

The Russell 2000 (IWM) puts it into perspective.

Trending higher at nearly 1,000% annualized, it’s obvious a break is coming.

Exactly how or when of course, is not known.

However, it has been proposed by this site (for years), when the final bubble-break comes, it’s likely to be an over-the-weekend event that results in a severe gap down open.

A gap down of say, 20% – 50%.

Can’t happen? After the events of 2020, we should all know that anything can happen.

Theoretically, a gap down of -25% from current levels, puts IWM right at long-time support around ~170.

Under such conditions when a severe disconnect is possible, one approach is to prepare on the short side (not advice, not a recommendation).

Using Wyckoff analysis techniques (for bear markets), that means to look for sectors not participating in the mania. When the downdraft hits, those markets will (potentially) move lower farther and faster.

That brings us to real estate, IYR

Using the same time-scale and trend line notations, we get the chart below:

From a purely visual perspective, the struggle to move higher is obvious. The past two sessions have made no net progress.

Looking more closely at recent action, IYR is following a Fibonacci time sequence.

From the low on January 12th, to the most recent high on Wednesday the 10th, is a Fibonacci 21 days.

The added bonus is the inflection point on Day 13.

Bid/Ask spreads on inverse fund DRV, in the pre-market are not that reliable; at this juncture, 8:10 a.m., EST) they indicate a higher open.

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.

All Markets Down

Pre-market action has all major indexes trading lower; SPY, DIA, QQQ, SOXX and IWM; all down.

Real estate, IYR has no real pre-market volume (20-shares) so its open is unknown. However, inverse fund DRV, does have volume (3,700 shares) and its action is up about 4%.

The daily close chart of IYR (above), has price action contacting an established axis line.

That was yesterday. Over the past two-weeks, as price ratcheted higher volume has declined (circled area enlarged).

That decline indicates lack of commitment at these levels.

Yesterday’s close also put IYR firmly in up-thrust position (ready for reversal).

Over the past week, short positions were opened using DRV (not advice, not a recommendation)

Average price of the short equates to DRV @ 9.92; not far from current pre-market trading.

If IYR posts a new daily low (below 86.62), it’s another data point the anticipated reversal may be at hand.

The rising action has changed the P&F forecast reported a few days back. Updates will be forthcoming.

If this is the start of a sustained reversal, the plan is to build the short position as price action dictates.

The downside of the entire market (S&P, Dow, etc.) is immense. Commercial real estate is especially vulnerable. Price action itself tells us that.

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.