The Dominos Fall …

Cash Crunch, Layoffs & Bankruptcy

So, here we are.

Crypto FTX implodes, Amazon to lay-off 10,000, Health system(s) in cash crunch, solar farm Toucan Energy, goes bankrupt.

But wait, it gets better; Pfizer and Moderna, are going to investigate themselves.

All of this, just within the past few days.

At this point, it should be clear to all paying attention, we’re accelerating to the downside … at least in economic terms.

Market Disconnect

Yet, the markets appear to never-mind … going about their (manipulated) business as if nothing’s happening.

Walmart has even announced they are going to buy-back their own stock to the tune of $20-Billion.

Maybe, they’ll do it. Maybe, they won’t.

They fully admit (in the press release), the buy-back announcement, was to make sure the earnings report was ‘well received’.

The Next ‘Shoe’

Those of us ‘awake’, are collectively attempting to plan and position for the next shoe to drop.

We’ve got the usual suspects such as real estate and biotech; however, this link to The Burning Platform, could provide more potential catalysts.

Either way, disconnected market or not, one has the feeling it’s just a matter of time.

Life After The ‘Short Squeeze’

‘The shorts were carried out on stretchers’.

Well, yes and no.

As said in this update, the historic short-squeeze, while damaging to account P/L, was a huge public service.

This chart confirms the majority of short-positions have evaporated. Meaning, the potential fuel for relentless upside (from those shorts), is no longer there.

That fact is being mirrored in price action as we speak.

As covered above, two markets are hanging by a thread: biotech and real estate.

Both are bubbles on a world-wide scale, but biotech is the one that may affect all others.

Biotech SPBIO, Inverse LABD

As this post was being created, biotech leveraged inverse fund LABD, has just printed (as of 12:40 p.m., EST) outside-up; also known as a ‘key reversal’.

The daily chart is below.

LABD, Daily

To make it an official outside up, price action will need to close above yesterday’s close (LABD: 17.87).

We’ve already shown that SPBIO, price action has formed a huge bear flag lasting more than eight weeks.

Action from the past three days can be considered a Wyckoff up-thrust as well.

Now, we have a potential key reversal.

If so, this market may be in serious downside trouble.

Positions: (courtesy only, not advice).

Yesterday, JDST-22-05, was exited at 9.0341, with a loss of – 1.45%, so that focus (and capital) could be directed to biotech, SPBIO and inverse LABD (not advice, not a recommendation).

LABD-22-10:

Entry @ 18.1398, 17.565***, 17.65***: Stop @ 16.29***

***, Indicates change

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

The Market Set-Up … This Week

What To Watch … Crypto Collapse, Biotech, Gold, Telsa

JPMorgan … says sell

Goldman … says buy.

Wyckoff says … Don’t listen to either.

In fact, Wyckoff’s stock market training course, first published in 1934, (still available), says that until you can ignore the financial press completely, ‘You will never be successful in the markets’.

Price action itself, properly interpreted, will tell you where to look for the opportunity.

The Ponzi Implosion, Cometh

The market is littered with Ponzi schemes. Some have already imploded, CVNA, HOOD, Crypto; some have not.

Concerning Crypto, here’s an excellent update from Michael Cowan. Buried in that update, at time stamp 4:58, looks like HOOD, may be in even more trouble.

Biotech is in a class of its own and was discussed in yesterday’s update.

For gold, we’re going to look at the Junior Miners GDXJ, and last week’s action.

Junior Miners GDXJ, Daily Close

The Junior’s are the weakest in the sector; therefore, that’s where we look for a short opportunity (not advice, not a recommendation).

To move higher, above resistance, normal market behavior, is to come back to the lower blue line (i.e., support) to gain enough energy to move higher for a breakout.

To move lower, normal market behavior, is to come down to the lower blue line as a test which subsequently fails; the move continues lower.

Either way, normal behavior at this juncture, is to move lower. We’ll see.

Now on to the chief cook and bottle washer … Tesla.

Tesla (TSLA), At The Edge

For starters, let’s recognize there’re a lot of moving parts; U.S. ‘parts’ and China ‘parts’.

If one’s going short, another task is to forecast under what conditions a short would have enough risk removed.

For that answer, oddly enough, we go to gold, GLD.

Gold GLD, Weekly: 2015 – 2017

GLD posted a massive upthrust above the blue line lasting over fourteen weeks before breaking decisively lower.

Then, it labored four weeks to come back up for a test.

After that, collapse; lower weekly closes for seven consecutive weeks.

In the chart above, the area identified as ‘Short’, has as much upside risk removed as possible, right at resistance.

Now on to Tesla.

Tesla TLSA, Weekly

Two scenarios are presented where risk may be reduced.

Chart 1

Chart 2

One of these may happen or neither of them.

Either way, for risk to be reduced, a short entry is needed to be at a known resistance level (not advice, not a recommendation).

Let’s move on to the current positioning.

Positions: (courtesy only, not advice).

One of three events will happen at the next session.

1: Both positions stopped out

2: One position stopped out

3: No positions stopped out

Each outcome will provide a data-point where to focus (or not) in the current environment.

LABD-22-10:

Entry @ 18.1398: Stop @ 16.83

JDST-22-05

Entry @ 9.1666: Stop @ 8.79

Note: Positions may be increased, decreased, entered, or exited at any time.

***, Indicates change

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

The Largest ‘Squeeze’, Ever

A Market Of Extremes

So, this is how it’s going to be.

The market itself is telling us it’s not going to be ‘well behaved’, possibly for years to come.

According to Goldman, link here, we’ve just had the largest short squeeze on record.

Friday, must have pushed it over the edge from the previously reported, ‘third largest‘.

The ‘Pontificators’

Everybody think’s they’ve got it figured out; We’re going to have stagflation, no wait, hyperinflation, no wait, inflation/deflation simultaneously, no wait, dollar collapse, no wait, gold to the moon, no wait, and on it goes.

What we really have, which is obvious to those ‘awake‘, is something that’s never happened before.

That ‘something‘ is here every day, multiple times a day.

Flash Crash, 2010

Every so often just as a reminder, this event is posted as an example; until that day, it never happened before either.

“Paper comes in, a big seller!!!”

 ‘Paper’ is essentially anyone (banks, hedge-funds, institutions, and/or retail) outside the pit.  Those in the pit are called ‘locals’.

Positioned At The Extreme

The largest short squeeze in history has actually performed a public service; the markets are at extremes.

With that, the short position in Junior Miners GDXJ, has already been discussed, link here.

We’re going to move on and talk about the elephant; more specifically, biotech SPBIO.

Biotech SPBIO

The table shows last week’s action when compared to the week prior. All major sectors had solid gains but it’s the right-most column that’s of interest.

The right-side column shows how far price action closed above the prior week’s high.

Once again, biotech shows overall weakness. It gets more interesting when looking at the weekly chart.

Biotech SPBIO, Weekly

It’s been three successive weeks of apparent up-thrust reversals that were negated each time.

Looking at the weekly below, what we have, is a huge bear flag that just so happens to be, Fibonacci 8-Weeks wide.

It’s possible, this congestion area is the mid-point of the overall move from the highs set during the week of February, 2021.

Compressing the chart and putting in a measured move target gives us the following.

If we have an actual Head & Shoulders top, that target is shown as well.

Either way, the downside potential is enormous; thus, requiring intense focus from a Wyckoff standpoint, i.e., during a bear market, identify the weakest sector for short opportunities (not advice, not a recommendation).

All of which brings us to positioning.

Positioning

On Friday, a discretionary exit was made from the entire LABD-22-09 position as (LABD) price action continued to decline with no end in sight.

Loss on the LABD-22-09, series was a drubbing of -12.2%

Then again, last week was the largest squeeze in history; taking that into account, the loss wasn’t -30% or -50%.

As the trading day progressed, LABD price action continued lower until low-and-behold, it reversed.

Once again, a position was entered (not advice, not a recommendation) but this time was different. Frist off, initial position size is smaller; about 60% smaller.

Secondly, the stop is an actual order that’s in the market (shown below).

Sounds obvious but we’re dealing with unprecedented times and market disruptions. Recall during the Flash-Crash of 2010, Kimberly Clark, or Colgate (if memory serves) went ‘no-bid’ and printed i.e., sold for 0.01.

That low print remained on the charts for years until it was ultimately removed.

If it can happen on the downside (i.e. when long), it can happen on the upside as well (when short).

Positions: (courtesy only, not advice).

LABD-22-10***:

Entry @ 18.1398***: Stop @ 16.83***

JDST-22-05***

Entry @ 9.1666***: Stop @ 8.79***

Note: Positions may be increased, decreased, entered, or exited at any time.

***, Indicates change

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

The Day After

Marginal New Highs

The day after the third largest short squeeze in market history, we have marginal new daily highs.

Gold was one of the markets that made news this week with it ‘leaving the station’. 🙂

Let’s take a look at gold (GLD) and how I used its message to position short (not advice, not a recommendation).

Gold (GLD) Daily

First, we’re going to re-print the original analysis below from November 4th.

And now, the result

We’re right at the edge. Any higher and it could be bona fide breakout.

The miners rallied in kind.

Senior Miners, GDX, is in an up-thrust of its own (not shown) along with the Juniors GDXJ; being a weaker sector it’s extended but not able to push as high as GDX.

Junior Miners GDXJ, Daily

Note the black line and arrow.

Seniors, GDX, was able to penetrate this area on its own chart but GDXJ, has not (so far).

This gives us an extra layer of resistance for a short position (not advice, not a recommendation).

We can add to that as noted, it was the third largest squeeze in history and today was slightly higher … so what else is there? Risk has (nearly) been squeezed out.

About an hour after the open, a short was opened using GDXJ leveraged inverse fund JDST; JDST-22-05.

Position details and stop locations are to be provided in the next update.

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