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.
Right along with the current narrative, ‘The Fed’s going to cut rates’, is another narrative, ‘The Fed’s in charge, a leader, and sets rates’.
Is either one, actually true?
Years ago, Robert Prechter Jr. pointed out very convincingly, the Fed’s a follower, not a leader.
His research showed, over many years, the Fed consistently follows the market.
Along with that, was his premise, ‘The market leads the news, not the other way around’.
Using that, we’ll look at what the Fed’s likely to do next; let’s use the long-term view, the 10-Year Treasury.
What’s it telling us?
Macrotrends Historical Chart: Ten Year Treasury
As posted in the prior update, the 40-yr bond bull market, i.e., lower rates, is over (not advice, not a recommendation).
We see the upside reversal in rates (downside for bonds) took over 10-years to set up.
Rates pushed below established support into a Wyckoff spring condition, then reversed higher, then into an outright breakout.
Currently, we’re hovering around in ‘no-man’s land’.
Could rates dip lower (bonds higher) and we get a token rate cut in response from the Fed?
Well, as David Weis used to say, ‘Anything can happen’.
Strategy First
However, from a strategic standpoint and for the long-term, higher rates are more probable.
The market has already responded with interest rate sensitive sectors and stocks (IYR, KMX, CVNA, etc.), having peaked long ago, in 2021.
A Dangerous Game
Depending on one’s perspective, what’s going on here with interest rates, is a dangerous game of ‘chicken’.
As Uneducated Economist puts it, the Fed’s a ‘credible threat’; all they have to do is ‘talk’ and propose (i.e., threaten) to move rates and the market responds without the Fed actually doing anything.
It’s working, for now.
The Emperor Has No Clothes
The problem is, as Prechter has already shown with research done years ago, ‘the emperor has no clothes’.
The Fed does not control rates at all; it’s a follower, only doing what the bond market’s telling it to do.
For some reading this, it’s old news.
For others, it’s a shock to find out, yet another institution is not what you thought it was.
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.
Sales down, earnings down, car prices down, demand collapsing and yet, KMX, goes higher.
Frist off, let’s address the ‘clown show’ that bandies about ‘crash’ this, and ‘crash’ that … ad infinitum.
After you’ve said crash fifteen, thirty times or more on your YouTube channel, nobody’s listening when it really happens.
How about we all (myself included) take a cue from the late Dr. Martin Zweig as seen here, (time stamp 6:40) where he’s reluctant to say ‘crash’ even when it’s on the eve of Black Monday 1987.
Now, back to our update.
CarMax … Strategy
So, let’s review the CarMax situation from a calm but focused perspective.
Strategically, KMX has met the price target identified last October (link here), and has apparently reversed.
The ‘Dead Cat’ Has Bounced
So, was last Friday’s earnings release high of 87.06, close enough to the ’85-area’ as forecasted?
“As the magenta arrow shows, there could be small blip up to resistance in the 85-area before potentially rolling over into a descent that projects to the 4.00, level.”
It took over eight months to get back to the ’85-level’.
What happens next?
Fundamental Forces
It’s been the premise of this site, we’re at the beginning stages of the largest financial, social, and population collapse ever seen (not advice, not a recommendation).
From a CarMax perspective, we have this just out yesterday.
Car lots are overflowing and we’re playing musical chairs with inventory to make it look like something’s happening.
Next, we have a Ford employee writing in, to Jeremiah Babe, saying the Electrical Vehicle Plant is a “ghost town”.
What does that ‘clean energy’ ghost town mean for silver demand? Ah, but I digress. 🙂
We’re most likely just getting started. For a snapshot into what may come our way, take a look at this.
Now, on to the chart
CarMax (KMX) Quarterly Bar
The original chart from October 2022, is repeated below.
Now, the update.
CarMax, KMX, Daily Bar
When looking at the daily, we see we’re in Wyckoff Up-Thrust (reversal) condition.
We’re at The Danger Point®
Just so we’re not one-sided, here’s a bullish forecast for KMX (not advice, not a recommendation).
At this juncture, there’re no plans to go short (not advice, not a recommendation) … although it may not be a bad spot considering all the forces lining up.
An obvious stop level (for a short) would be last Friday’s high of KMX 87.06 (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.
With today’s heavy downward action, as we head into the close, any number of scenarios could play out.
Work has already been done on INTC, KMX, MRNA, Biotech Leveraged Inverse LABD, and others.
With such a decisive push lower, there could be some kind of short covering late in the session.
For example, as of this post 2:15 p.m. EST, KMX (detailed below) appears to be coming off the day’s lows.
CarMax Weakness
The daily chart has KMX, right a the bottom of a trading channel.
Price action may continue to rebound from this area heading into the close or not.
If there’s a rebound, naturally Put options will begin to decay in value … a desired outcome if one is looking to enter short (at the cheapest price possible).
The bottom of the channel line could be all there is for this week or we could be heading to much lower levels.
It’s up to the trader/speculator to decide (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.
With that understood, we’ll present three potential scenarios for Moderna (MRNA) price action for the upcoming days, or week(s).
When we last left our chief cook and spike-protein injector, price action was in a downtrend but also in Wyckoff spring position; indicating at least a chance for upside.
As with the CarMax (KMX) analysis, still playing out with Scenario No. 2, and/or No. 3, at this link as the forecasted price action, we’ll show potential Scenario No. 1 – No. 3, for MRNA, below.
Moderna MRNA, Daily, Forecasted Action
Scenario No. 1
Upside wedge breakout
Scenario No. 2
Downside wedge breakout with no test
And now, the most probable, ‘If there’s a downside breakout.
From a short-dated options standpoint, Scenario No. 3, is the most desirable (not advice, not a recommendation).
If there’s a downside breakout with no test, there’s always the possibility at some point, there will be a test, which in turn completely wipes out any potential gain in the (put) trade; time would run out and the option expires.
Re-Visiting, Elder
Recall, in the example that Dr. Elder gave, he bought OEX Put Options at 3/8-ths, back in the day when the markets traded in fractions.
Three-eighths is 0.375, which gives a target value on which option to select (not advice, not a recommendation).
To get to that small of a fraction, the option’s either way out of the money, short on time, or both.
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 about our chief cook and bottle washer of gene ‘modification’ had this to say about price action.
“We’re about forty minutes into the session; Moderna (MRNA) has just confirmed the up-thrust reversal discussed in the last update“.
From that point Moderna (MRNA) declined for seven weeks for a total of around – 31.5%.
However, that’s not the most important part.
In that update, a trading channel was shown which at the time, was declining at – 93.7%, on an annualized basis.
Well, the channel is back.
Only this time, probabilities and price action have come together to set up for a potential sustained decline.
Moderna MRNA, Weekly
Above, we have a Wyckoff ‘Up-Thrust’ and a test that has since turned lower.
Next, we have a series of repeating trend or channel lines.
Additional data has modified the downward slope to be declining at approximately – 90%, annualized.
From a fundamental standpoint, the data set is enormous on the events of the past three years.
At some point that data could provide a huge tailwind for downside action.
For now however, let’s stick with what price action is telling us and go to the Summary & Strategy
Summary & Strategy
The past week has identified two areas of position or trade execution and two areas for possible short-term options execution (not advice, not a recommendation):
Position or Trade: Real Estate IYR, and Biotech SPBIO
Options: Carmax KMX, and Moderna MRNA
As a reminder, most if not all trade analysis is for the short side (not advice, not a recommendation).
Final Thoughts
Since we have possibly the largest bull trap in market history with huge numbers of VIX Call options, the following week may be subdued by going modestly up, sideways or down, slowly.
With that said, options positioning (if any) could be slated for the week of 2/17/23.
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.
Back in October last year, the update on CarMax, said this:
“… there could be small blip up to resistance in the 85-area before potentially rolling over into a descent that projects to the 4.00, level.
If and when that happens, CarMax rival Carvana, may be long gone; its disruptive vending machines possibly being used as homeless shelters or insect farms.”
Even with the short-squeeze mania last week, rival Carvana, remains down a blistering – 96.2%, from its all-time highs; having reached an interim low of – 99.1%, in December.
Insect farms, dead-ahead. 🙂
The ‘Bounce’
So, does getting to a high of KMX 80.92, meet the forecast of “the 85-area” ?
It looks close enough, but the real story is the bearish trade set-up.
I’ve lost track of the number of Wyckoff ‘Spring to Up-Thrust’, set-ups that have been covered since this post, over sixteen months ago; we now have another.
CarMax KMX, Weekly
Unmarked chart.
Long time users should be able to spot the set-up immediately.
For those new to the site or if more clarification is needed, here it is:
Getting down to the daily, is where a trading plan is created.
KMX, Daily
Several scenarios.
Three potential scenarios are below.
Remember, we’re in possibly the largest bull-trap in market history.
Those in control of the markets need to bleed-off the VIX Call options values by having the market go up, sideways, or down slowly (at first).
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.
During 2022, we’ve had one short squeeze after another.
For 2023, it could be forced liquidation in the relentless squeeze for cash.
One corporate example of the squeeze is the announcement from CarMax; they’ve suspended their stock buybacks.
This ‘buy-back halt’, theme, needs to be added to the market strategy for the coming year.
We can put that on the list right along with skipped dividends, power outages, market outages, internet cyber-attack and supply chain disruptions.
A comment below, posted in yesterday’s update from Jerrimiah Babe, opines the typical consumer’s going to carry on unabated, until the very last minute.
“I don’t believe most people will stop spending until all access to credit is exhausted. Whether it be cards, after-pay, family, theft most will continue to keep up appearances. I honestly think most could be 2 months behind on their mortgage or rent and still be spending on crap. There’s no financial responsibility or discipline anymore.”
How that may translate to the mainstream is, they continue to report ‘the consumer is strong’ until instantly, overnight, they’re not.
Possible timing for that event may be late January, or mid-February (not advice, not a recommendation).
With all that in mind, the last post identified Netflix and Target, as potential candidates for significant downside opportunity.
‘Significant’, meaning a 50% to 90% decline from current levels (not advice, not a recommendation).
Target TGT, Yearly
The year is just about over so let’s start with a very long-term view.
Two things have happened over the past three-years.
Price action has met a measured move out of the wedge as shown; then, a massive downward thrust.
It’s important to note, this year’s down-thrust, dwarfs the previous one during the -64.7%, decline of ’07 – ’09.
There’s a band of support that’s at least nine-years wide, in the vicinity of 50 – 75.
We’ll discuss that in another update.
Netflix NFLX, Yearly
Technically, Netflix is worse than target. That is, it has the potential to decline farther and faster.
NFLX, has support as well but comparatively minor in the area of 50.
It does not become significant until the wedge (blue lines) in the vicinity of 5 – 10.
With Netflix’s ‘product’ being completely discretionary, it’s ultimate downside potential, from a fundamental standpoint, surpasses that of Target.
Summary
Time permitting, shorter timeframes will be presented.
However, since the primary focus of this site, is first on ‘strategy’ (think dollar rally), we’re interested in the larger timeframes.
That in turn, provides background to drill down further for any trade decisions (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.
“As the economy (if you can call it that) falls off the cliff, one of these two (KMX, CVNA), is not likely to survive.”
It looks like Carvana is swirling down its ‘disruptive’ vending machine wormhole, leaving CarMax to pick up whatever’s left of the car ‘consumer’.
The latest earnings release of KMX, confirms what’s left of the typical consumer’s purchasing power, is evaporating if not completely gone.
Still Clueless …
It’s not necessarily the linked earnings report on KMX that’s important, but the comments.
We’ll not call out any specific one but after reading them, there’s an uneasy sense, the typical American is still wandering around in a type of hypnotic, delusional state, namely, mass psychosis.
They’re stunned … ‘looking for the bottom’.
Everyone has their own timeframe but let’s see where an ultimate bottom for KMX, might be on the charts below.
CarMax, KMX, Yearly Chart
The big … big picture
There are three-months left in the year but already the thrust energy lower (magenta arrow) for KMX, is the highest in nearly 26-years of data presented.
Not even the ’08 – ’09, meltdown had downside energy anywhere close to what’s happening now.
That’s a clue in itself, we’ve got a long way to go.
How long, is long?
The quarterly chart of KMX gives us a clue where we might see a ‘bottom’.
CarMax, KMX, Quarterly Chart
Above, we’ve got a terminating wedge (blue lines) that’s been decades in the making.
As the magenta arrow shows, there could be small blip up to resistance in the 85-area before potentially rolling over into a descent that projects to the 4.00, level.
If and when that happens, CarMax rival Carvana, may be long gone; its disruptive vending machines possibly being used as homeless shelters or insect farms.
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® 