Retail Investor … The Apocalypse

Mass Psychosis, At The Edge

Even before we had gone around the room to introduce ourselves, the instructor at Online Trading Academy, Dallas, said he had a important topic to cover.

He wanted to make sure everyone understood the concept. The rest of the seven-day course hinged on the understanding and acceptance of the idea.

What was it?

You may have already guessed: ‘Short Selling’.

The big money is made on the downside … not after, when the bottom is in, although that may happen as well. No, it’s the downside that has the greatest opportunity for profit.

Fear is a much easier emotion to gauge than greed; in that sense, down is easier than up.

Short Selling: Market Trading 101

You would think it’s a no-brainer; that everyone knows this.

Not so.

Years ago, while discussing the markets with a former broker, he asked me, and I quote: “What’s an inverse fund?”

During a business lunch, I asked another broker if he worked the downside for his clients. The response was “They can’t handle the volatility”.

In his case, he knows the vehicles are there (inverse funds) but he doesn’t use them; only working the upside.

Shorting The Market

My first short sale was back around 1995.

I shorted ‘against the box‘, when you could still do so. The short trade was Alcide.

In the May 1993, edition of my newsletter (see About) ‘Market Order Letter’, published by my firm, Equity Research Corporation, Alcide received initial coverage.

Prior to that edition, I managed to get a phone interview with Mr. John Richards, Vice President, and Chief Financial Officer of the company.

Remember that I was simultaneously employed as Engineering Technical Manager, for an avionics company. So, the interview was performed on my lunch hour.

During the call, I had made it past the receptionist, then secretary, and then to Mr. Richards, specifically.

Initially, the interview was not going well.

I could tell he considered me an annoyance and rightly so. That was, until I mentioned the competition and how they were going to deal with that.

At the time, Isomedix, had a plan to irradiate chicken (carcasses) to prevent salmonella. Conversely, Alcide had a product that was sprayed on (i.e. low-tech) and biodegradable.

When I mentioned Isomedix, the tone of the conversation changed instantly. I had done my work; I knew the market and wasn’t some newbie (even in ’93).

Mr. Richards opened up and gave me a fantastic interview discussing all manner of things. I did not tell him I was on my lunch hour and in the end, had to politely say, ‘You must be busy, so I’ll let you go’; thank you for your input.

Alcide (ALCD) was a ten-bagger that ultimately went from about $3/share to above $60/share (actually, a twenty-bagger) before being acquired by Ecolab.

Which brings us back to the ‘Retail Investor’

Still Buying The Dip

One more thing about the trading class mentioned above.

After the short-selling topic was covered, the instructor went on to say, the fact we were sitting in that room, separated us out from the massive herd of ‘investors’.

At that time, there were about 40,000 – 60,000 professional traders in the U.S. Although still neophytes, we were considered in that group.

That’s 60,000 out of 240-million adults, putting the ratio at around 0.03%

Now, on to ‘the dip’.

This article out from ZeroHedge has the data saying, ‘Retail’, is still buying the dips although the average portfolio is down a whopping -34%, for the year.

Without getting into specifics, the most conservative account managed by my firm is up over 30%, for the year, which includes the LABD, whack from this past Friday.

Note: An updated analysis of Biotech SPBIO, inverse LABD, and LABD-22-03, is scheduled for tomorrow.

Fuel, For The Downside

Over a century ago, Wyckoff wrote about the behavior of those on the wrong side of the trade.

That is, they are the ones who provide the fuel for the next move. In our case, that would be fuel for the downside.

Investors are buying the dip, because that’s all they know how to do.

It’s a sign of desperation.

Hoping that somehow, the markets will pull them out and return things to ‘normal’.

If you’ve read this far, you already know, ‘normal’ is gone.

Whatever happens next, (except for the starvation) will be completely new.

Stay Tuned

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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

Biotech … Squeeze or Test

Maybe, Both

If we look at it from the perspective of an up-thrust test, as we’ll do below, such tests if they don’t fail are the precursor to dynamic moves.

At the minimum, today’s action allows the stop to be moved on short position LABD-22-03 (not advice, not a recommendation).

It’s interesting, the biotech sector both IBB and SPBIO, with inverse funds BIS, and LABD, respectively are the only ones taking a major hit today.

Using a cue from Nicolas Darvas and his observations (as a dancer), the market will initially go opposite its main direction as if to get ready for the move; like a dancer crouching down before lifting the female partner.

That may or may not be the case now, as we’ll see below.

Biotech SPBIO, Weekly Chart

Next, we’re going to invert the chart (to mimic inverse LABD) and then label the up-thrust as a Wyckoff ‘Spring’.

Biotech SPBIO, Weekly Inverted

Next, we get closer to the action as shown.

Is the ??? area, a test or a failure of the set-up?

The short answer with about 90-minutes to go before the close, is unknown.

If SPBIO, closes down for the week, painting a red bar, probabilities are to the downside.

Closing higher for the week starts to bring a potential failure of the trade into question.

Summary

No matter what happens, the stop on the short position via LABD is going to be moved to the low of this session; currently LABD 49.90 (not advice, not a recommendation).

We may get into speculation later, on why biotech seems to be the only index in a major squeeze, preparing for downside.

Some who monitor this site, and those ‘awake’, may already have a good idea as to the potential why.

Stay Tuned

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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

Biotech … The Big (Short) Test

Price Action Follows The Plan

Biotech index SPBIO, has come back to test the underside of resistance.

Leveraged inverse fund LABD, has performed as expected.

That leaves us at the danger point.

It’s no mystery this site’s coming from a bearish perspective … that we may be about to experience an unprecedented decline.

However, the markets are designed to frustrate all except those in control; the ones implementing the ‘agenda’.

With that, biotech can do any number of things, but the most likely action is a downside reversal from these levels.

Biotech SPBIO, Forecast Update

The previous update linked here identified an ‘accumulation zone’ for inverse fund LABD.

Meaning, we’re expecting biotech to test (temporarily) and in so doing, allow opportunity to ‘accumulate’ the LABD position (not advice, not a recommendation).

The original forecast chart is below:

Biotech 3X Inverse Fund, LABD

Back then

And now.

Pointing to where LABD price action is going to go, could be the equivalent of ‘Porter‘ pointing to the outfield, where he is going to hit his home run; agreed?

The Danger Point

For all the major indices, not just biotech, we really are at the danger point.

The Fed has made its announcement.

Somehow, the mass psychosis continues; that the Fed is obligated to ‘help’ the economy.

Let’s review what the Fed is really all about. That link is here.

One has to wonder, if the typical 30-something (or older) has any idea the above link (and associated book) exists?

Summary

Tomorrow’s price action will let us know if we’ve reached some kind of bottom or if the bottom’s going to fall out.

At this juncture, from a probability standpoint, the trend remains down.

Therefore, remaining short the biotech sector via LABD, LABD-22-03 (not advice, note a recommendation).

Stay Tuned

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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

Seabridge Gold … Strategy Update

Lying In Wait … For Opportunity

As the ‘About‘ section says, this site provides one leader’s view on the market; what can best be termed as ‘Strategic Leadership’.

So, just what is that, exactly.

A good example is the current biotech analysis and action.

Biotech strategy, thus far.

No. 1:

Recognize biotech (SPBIO), as bear market leader.

No. 2:

Wait for opportunity to position short via LABD, on an upside reversal; A Wyckoff, up-thrust.

No. 3:

Monitor and increase the short position as the market allows. Continue until targets are met or stopped out (not advice, not a recommendation).

As can be seen, hereherehere, and here, the trade LABD-22-03, is progressing well.

It should be noted, this trade could be over in minutes, or go on for months. The price action itself, will decide when it’s complete (not advice, not a recommendation).

Now, on to gold in general and Seabridge, specifically.

The Gold Reversal

We’ve had several updates that show gold (GLD) has changed hands; from strong to weak.

Quite obviously, this assessment is completely opposite the narrative and the crowd consensus.

However, price action itself, has told us there’s been a reversal.

Recent posts here, here, here, here and here, successively build on themselves showing at this juncture, the gold direction, is down.

Leading Edge Chaos

Evidence continues to build, we’re just on the leading edge of chaos; likely to last for years, if not decades.

Go to time stamp 1:12 at this link and observe one of many efforts already in place to take down the current system.

Chaos, Opportunity, and Seabridge

All of the above brings us to Seabridge Gold (SA).

Going way back, 20-months, to the first post on SA, and taking the following from that report:

“If and when the markets (S&P, Dow, NASDAQ) reverse in earnest, there’s likely to be widespread panic. Just like last time [2007 – 2008] and probably worse.

As a side note: If and when we get there (panic selling), and if SA pushes below well-established support (6-area), the initial plan is to open a major long position … but with a significant caveat.

That caveat is:  We’ll take possession of the actual physical shares (not advice, not a recommendation).  The broker could put up a fuss and charge a fee.  So be it.”

Now, that’s a strategy.

Back then, nearly two years ago, it was not so obvious why having the physical shares was important. I think the reasons for doing so now, are clear.

Let’s move on to the actual chart of SA and look at probabilities.

Seabridge Gold (SA), Quarterly Chart

One thing is obvious just looking at the un-marked chart:

The bull market for SA, ended years ago; October of 2007, to be exact.

The actual price of gold (GLD) went on higher for over three-more years. Yet, SA languished.

Now, gold (GLD) has potentially reversed and there’s possibility for significant downside.

How significant? Well, somewhere in the range of $1,300/oz, or even lower.

Which brings us to the same chart of SA but adding Fibonacci projections.

SA, Quarterly Chart, Fibonacci Projection(s)

Getting closer-in with the zoom, we see the market itself has already validated those projections; especially the 38.2, level.

The 50% projection is near 5.00, and the 61.8%, is all the way down to 0.49 – 0.51.

Seabridge down to 50-cents, is that possible?

The Great Depression, 2.0

Those attempting to equate current events with the Great Depression, are at least doing the good work of recognizing the similarities and possibilities.

In the case of Neil McCoy-Ward, (linked above), he recognizes this time, is a whole other animal.

So, the answer is yes … SA could go to 50-cents. If and when it does, nobody will want to buy.

Stay Tuned

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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

A War of Attrition

To Survive, Prosper, You Need To Have The ‘Stomach’

There’s nothing like the Vietnam war to remind us, the enemy on their home turf has the advantage and can exercise a war of attrition.

Similar to the Soviets in Afghanistan; the natives, the Mujahideen, wearing down the invading army month after month and year after year.

The Oligarchs and The Proletariat

Day after day, another food processing plant burns down; another fertilizer train mysteriously derails, a natural gas facility unexpectedly blows up.

‘So it goes’, as Vonnegut wrote.

Americans, except for a few, don’t have the stomach for discomfort. The Depression-era generation is long gone.

However, this site, is for that small few.

As can be seen with the above ‘events’, we’re in a long-term chess game. Adding a potential twist is this video at time stamp 12:50; seeds may now be dead-on-arrival.

Is the typical money management firm, or market analysis YouTuber, taking all of this into account?

Or are they still talking about ‘due diligence’, ‘fundamentals’ and what The Fed ‘has to do’?

A good number, if not the vast majority of these firms, may be on a course for self-destruction.

More chaos to come as that industry gets crushed.

With that, let’s review why there’s been so much focus on biotech and specifically, SPBIO.

The Major Indices or ETFs

As of yesterday, Friday, this is where the major indices stood in relation to all-time highs or ‘recovery’ highs.

Listed from smallest percentage loss to the largest.

Biotech SPBIO, has been down five quarters in a row and is working on the sixth.

Because of last week’s action, the sector may be poised for its most dramatic part of the decline (not advice, not a recommendation).

We’ve had an on-going analysis of the sector with recent links provided here, here, here, and here.

Positioning

If we’re about to have a market implosion in the coming week(s), SPBIO, has already set itself up to be the downside leader (not advice, not a recommendation).

That doesn’t mean ‘straight-down’, although it’s always a possibility.

The most likely price action is more SPBIO downside (LABD, higher), with some oscillation in the accumulation area shown on leveraged inverse LABD, below.

SPBIO, 3X Leveraged Inverse, LABD

Un-marked chart

Potential zone for oscillating price action.

Now, adding the trading channel, we see the possibilities.

In the coming week, there’s also the potential for a ‘test’ where SPBIO, rises and LABD, declines.

However, from an empirical standpoint, when a Friday has a violent down move that closes near the low, it increases the odds for downside follow-through the coming Monday.

Positioning

The data below is taken from one of the accounts trading this market. It’s provided as a courtesy; showing entries and exits as the trade, LABD-22-03, unfolds (not advice, not a recommendation).

The expectation is for price action to allow the position to be increased based on more biotech downside.

With the Fed meeting due up this week, it’s going to be interesting.

Stay Tuned

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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


Biotech … ‘Brace for Impact’

Downside Leader

From the outset of the bull market’s end, biotech has been the downside leader.

Of the two indices being tracked, IBB and SPBIO, the latter of the two, is the weakest.

Over the past several weeks, it’s been like a terrier on a mailman’s leg concerning positioning short this index (not advice, not a recommendation).

In the end (as we’ll see below), it turns out that waiting for an actual penetration, print, and close above resistance, was the best approach.

Now, it’s obvious, we’re in a reversal.

The unfortunate part from an economic standpoint, this could be the next big leg lower.

Biotech SPBIO, Daily Close

Penetration and close above resistance (blue line).

Then, price action retreats below resistance and back into the trading range; Wyckoff, Up-Thrust (reversal).

It’s important to note, if SPBIO closes at this level or lower, the prior analysis of ‘grinding to a halt‘ on a weekly close basis, remains valid.

Positioning

Right or wrong, the short position LABD-22-03, was never fully exited (not advice, not a recommendation).

Everyone has their own style.

From a personal standpoint, I despise ‘chasing’ the market. Chasing is for the lazy or frightened who are too afraid to pull the trigger. No thank you.

In fact, the LABD-22-03, position was increased near the end of yesterday’s session.

The intuition, the gut feel, if you will, was ‘This sector’s going to reverse. When it does, it’s going to reverse hard’.

With today’s pre-market action (about fifteen minutes before the open), LABD, trading higher by 3.10-points, or +6.35%, that intuitive assessment is proving correct.

At this point, an obvious stop level would be yesterday’s LABD, low @ 45.77

Stay Tuned

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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

Biotech Strategy … Going Forward

SPBIO, Correction Complete

This morning’s action in biotech SPBIO, indicates we’re done with the upward corrective move.

The prior short position LABD-22-02, was reduced throughout the downward push over the past week and then exited completely in this morning’s pre-market session.

Within minutes after the open, as LABD pushed lower (SPBIO higher), it became obvious, a significant reversal was at hand.

It took LABD, just a little over two minutes to clear out stops and then begin an upside reversal.

Amateur vs. Professional

Dr. Alexander Elder covers the amateur/professional difference in his book Come Into My Trading Room.

That is, if an amateur gets stopped out or exits with a loss, they never come back.

Even if the trade reverses to go their direction, they refuse to re-position … having been ‘spanked’ by the market.

Breaking free of the (engineering) perfectionist mindset, is just one challenge during the journey to professional.

It must be overcome to achieve sucess in the markets.

Re-Positioned, Short

All of the above to say, the short in biotech has been re-established: LABD-22-03 (not advice, not a recommendation).

The difference at this point is, there’s a high level of expectation on what’s likely to happen next.

As Wyckoff put it a century ago, the reversal and re-position, enables us to be ‘in tune’ with price action.

Biotech SPBIO, Weekly

We’re going to invert the chart and mark it up.

First off, we can see the rule of alternation at work.

Next, we have at least two potential trading channels.

This one …

And this one …

We’ll let price action itself define which one (or none) is in-effect.

When we get a corrective move that resolves itself, at times, it creates a pivot point with a different rate of advance or decline.

That means, there’s more than a good possibility, the second (more aggressive) channel, is now dominant.

Summary

As this trade progresses, we’ll cover potential areas where the existing position can be increased with as low risk as possible.

As this juncture, LABD is trading in the area of 55.25.

The early (pre-market) loss has been more than recovered and we’re now well in the green for the day.

Stay Tuned

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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

Biotech … The Case For Collapse

Down 90%, Before October ?

If all the “Ifs”, come true.

First off, biotech (SPBIO), may already be in a collapse.

Of all the major sectors, it’s leading the way lower; down -61%, from all-time highs, set in February of 2021.

With SPBIO, lower by that much, are there still downside opportunities?

Only you can be the final judge of that.

However, for my firm, I’m not waiting around to see what happens next; we’re already short (not advice, not a recommendation)

SPBIO, Summary

As we’ll show below, SPBIO’s maintaining price action in a downside channel, declining at approximately -97.8%, on an annualized basis.

If that channel is held for the next three months (a big if) and if there’s no ban on short sales (as happened last time in 2008), and if the vehicle itself (LABD) remains viable, we can look for a -90%, decline from all-time highs, by October at the latest.

Why -90% ?

We’re using our chief, cook, and oh so, ‘disruptive’ bottle-washer, Carvana (CVNA) as the example.

The last report on Carvana, highlighted the possibility that it’s ripe for implosion.

The very next session, that implosion started in earnest.

Currently trading at 26.53, CVNA is down -92.96%, from all-time highs.

So, -90% (or more), for biotech seems reasonable 🙂

Throwing in a couple of anecdotal comments from J.B., Dan, and Patera, and voila! ‘This sucker could go down.’

Moving on to the main topic.

Biotech SPBIO, Weekly

Here’s where we are with the un-marked chart.

We’re going to compress the chart and put in the channel lines. The lower horizontal line marks a decline of -90%, from all-time highs.

If price action maintains the right-side trend line, a 90% decline, targets right around October this year.

Summary

This analysis could be blown away, rendered invalid, at the very next session.

That’s the way of the markets.

As sated, current positioning is to be short the sector via LABD, with trade LABD-22-02 (not advice, not a recommendation).

As a result of today’s action thus far, we’ve got a hard stop for LABD, currently @ 55.73.

Even as this post is being created, SPBIO action continues to grind down; threatening to post a new weekly low.

Stay Tuned

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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

Biotech … Stall & Reverse

Heading Off The Cliff ?

We’re about to find out.

The last update presented that whatever happens with biotech (SPBIO), it’s likely to be decided quickly.

That conclusion was based on the ‘rule of alternation’ and the fact, the whole short squeeze event from last week, did not result in a new weekly high.

That, Was Then

What we have now so far in today’s session, is an attempt to move higher by SPBIO, which appears to have stalled and now, looking to reverse.

The reversal part won’t be confirmed unless, and until a new daily low is posted.

For today, posting a new low is somewhat of a tall order because of Friday’s wide trading range … but we’ll see.

Instead of going to the actual index, SPBIO, we’ll look at the 3X leveraged inverse fund LABD

SPBIO, 3X, Leveraged Inverse, LABD

Note:

The chart below, is a 3-Day chart with Friday, completing the last ‘third’ day.

As price action has moved lower, energy behind that move is weakening; seen in the thrust divergence

Why a 3-Day Chart?

When’s the last time you saw a 3-Day, 2-Day, or 6-Day, or any other non-conventional chart in anyone’s analysis?

Anybody? … Bueller? Bueller?

It’s not different, just to be different.

Shown below, we have the same 3-Day LABD, compressed and marked up with a trading channel.

At this juncture, the 3-Day shows the nuances more clearly.

If this trading channel is in-effect, that is, if it’s active, potential exit points for an LABD position at this point in time, would be 105, or 240 (not advice, not a recommendation).

For LABD, to get anywhere close to those points, especially the second (240-level), biotech would need to collapse.

Summary

There’s plenty of chaos to go around. We have those who are still arguing whether or not ‘it’s the bottom’.

Such arguments are potentially (and likely) from those completely unprepared.

As Jerimiah Babe said in one of his latest videos, ‘something’s going to break’.

When or if that break happens, it won’t be to the upside.

Stay Tuned

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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

‘Investors’ Buy Dip Over & Over

“Fuel” For The Downside

Once this next level gives way, carnage will (likely) reach all-time records.

Over a centry ago, Wyckoff said in his writings, it’s those on the wrong side of the bull trade, who provide the fuel on the way down.

As reported by Reuters, that downside fuel appears to be building on a massive scale.

The Fed This … The Fed That

What a colossal waste of time … that is, trying to figure out what The Fed is, or is not, going to do.

As The Maverick reports in this update, The Fed has a higher authority. It should be no surprise to any of us at this point … they’re ‘just following orders’.

Mirroring that sentiment is Dan from i-Allegedly, saying ‘This is not the bottom‘.

Part of the reason there’s so much focus on earnings, financials and The Fed, is that it’s a whole lot easier to do that, than actually getting down to work and learning price action.

That my friends, as Wyckoff said in his text Studies In Tape Reading, ‘takes many years and many losses’.

So, let’s take a look at what that ‘tape’ is telling us concerning the biotech market.

Biotech Inverse BIS and LABD

The prior analysis on IBB, is still valid.

However as was done with real estate, changing from 2X inverse to 3X inverse, the same has happened with biotech; from BIS, to LABD.

Since the overall bearish assessment has not changed, this morning’s upward move in the markets was used to re-position to a higher (inverse) leverage vehicle … LABD (not advice, not a recommendation).

The hourly charts below show the exit of BIS and the entry of LABD.

Biotech 2X Inverse, BIS

Biotech 3X Inverse, LABD

As this post is being written 12:55 p.m., EST, price action’s at the danger point.

We’re at the extreme; the risk is least but price can go either way.

Summary

Watching that action in real time, it looks like LABD wants to go higher; currently trading at 57.20-ish.

If LABD is higher, that means SPBIO, is moving lower.

Unless price action of biotech (IBB, SPBIO) and the overall markets signal a change of behavior … the bear move is still in play.

If we get a significant break lower, ‘retail’ that’s not positioned properly, will provide the majority of downward thrust energy.

It’s no different than it was in Wyckoff’s time, over a century ago.

Stay Tuned

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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