The inverted chart puts it into perspective. Biotech has already reversed.
It would seem fitting as truth is hard to put down forever.
One can only hope the whole fake ‘speck’ narrative will be blown wide open … taking the entire sector down with it.
It may already be happening but in such slow (long term) motion that we’re not noticing it.
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.
Yesterday’s swift move lower in IBB looks like the start of the next leg down.
Update 10:34 a.m. EST in red below:
Closer inspection however, shows biotech could pivot and move to higher levels … if only temporarily.
We’re looking at the 30-minute chart of IBB. Yesterday’s action penetrated minor support and stopped dead.
When price action behaves in that manner, it puts the index in what Wyckoff called ‘spring position’ ready to move higher.
Then we have the wide 30-minute (red) bar from the session; likely to be tested. To do that, action needs to move higher.
The target area is near a 62% retrace of the entire down move from the high on February 10th, to the low on March 5th.
Note, yesterday was a Fibonacci Day 13, from that March low.
Even though IBB’s likely to move higher, we’re leaving it alone.
If action gets to the target, we’ll be ready to short (via LABD) if there’s opportunity.
Update:
It’s not called “The Danger Point” for nothing.
Price action penetrates deep below (minor) support effectively negating the ‘spring’ scenario discussed.
We’ve now penetrated below another support level
Price action can still spring upward from here … although probabilities appear to be fading.
Either way, we’re not interested in going long at historic valuations.
Separately, our ‘project’ has maintained short real estate via DRV (not advice not a recommendation), to be covered in a later update.
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.
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 Market Makers don’t know you are there; they’re not interested in your tiny little stop order.
If your order does get taken out, it’s because too many small traders put their stops at the same location.
There’s an order imbalance. The market’s response is essentially automatic … take out the stops.’
While the original LABD 18.96, stop may not have been a popular location for the small (and maybe big) traders, price action throughout the day could have ‘pumped’ the stops to that location.
Case in point is the huge block trade just at the 1:00 p.m. EST, mark.
At that point, 31,500 shares went by (on the tape) at price 19.10 … which equates to over $600,000 in one transaction.
So, where are you going to put your stop for that position. Below the market, right? Maybe at 18.95 let’s say? Especially so ,when price action instantly rallies away from that entry; all the way to 19.78, intra-session.
The stop would appear to be tight but well positioned.
However, if there was a stop for that huge block and it was too close to the market (with other stops accumulating), it would act as a magnet for price action; drawing it back to that level to get the transaction (hit the stop).
Of course, it’s all conjecture and we won’t ever know for sure.
If the LABD market opens significantly higher (IBB lower) on Monday, then our assessment looks correct.
A lower or unchanged open, signals us to get out. If that happens, then IBB is likely to be heading higher.
As you may have guessed by now, the response to all this kabuki was to re-position the stopped-out order.
The table below has the summary:
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 first objective on the newly announced ‘Project Stimulus’, is protect the position.
As yesterday’s announcement stated, we’re taking the stimulus payment and trading a separate account.
The trading techniques to be used are presented on this site.
The magenta bar shows the entry at LABD 18.835 (not advice, not a recommendation) opened during the Fed speech this past Wednesday.
The reason for the entry at that time was two-fold.
First:
Biotech IBB was already at 50% retrace and had rejected that level once.
Monthly and weekly momentum MACD, indicators were (and are) pointing down; giving extra weight to a potential reversal.
Second:
Empirical data (i.e. experience) gathered over a thirty year period had shown, whatever direction the market took during a Fed speech, was quickly reversed in the coming days:
I’ve labeled such events as “Fed-Fake”.
At this point, the position is well in the green, closing at $1,552, yesterday. We’ll be putting in a hard stop at 18.96, shown above.
If we’re in a sustained reversal, it’s not unreasonable to expect price action to get back to previous near-term highs (lows for IBB).
Using highly leveraged LABD (not advice, not a recommendation) that would equate to about a 50% gain.
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.
A check for $1,400, figuratively just came in the mail
We’re going to take that, trade a separate account, see where it goes.
Six-percent of those surveyed at this link say they’ll ‘invest’ their stimulus in the markets
So, we’ll join them. Mater of fact, yesterday was the start.
With 74 shares of LABD, entry point @ 18.835, we start the project; not advice, not a recommendation.
74 shares at 18.835 equals $1,393.79 … good enough.
Details such as account targets, objectives, equity curve and trade execution process, to be announced.
As of this post (2:21 p.m. EST) today, the balance is up to $1,465 … so, it’s off to a good start.
More later.
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.
Price action pushed past yesterday’s analysis to fill a price gap from February.
What’s next is the question.
The answer may be in the pre-market, where AMGN is down -1.25% and inverse fund LABD is up +4.7%
If biotech IBB pushes below yesterday’s low of 154.45, we’ve got tentative confirmation the reversal (which tested its highs yesterday) is going to continue.
We remain short this sector via LABD (not advice, not a recommendation) with a hard stop @ 17.80
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.
The 15-minute chart of inverse fund LABD shows how successive moves lower (higher for IBB) have covered less distance.
It’s very early in the session and price action at this moment is fighting it out at LABD 18.00, area.
We’ve maintained our short position (not advice, not a recommendation) but have the sense, if there’s not a reversal at this point, IBB could be working up for new all time highs.
This is the danger point.
Current LABD low for the early session is 17.91 … a good place for a stop.
LABD pushed down to 17.80, early in the session before reversing.
It has just passed 18.28, a new hourly high. AMGN to be covered later, at important inflection point (down).
Short position via LABD maintained (not advice, not a recommendation), hard stop at 17.80
With markets at record prices, Fed announcement tomorrow, no more stimulus (likely), forbearance to end, possibility of the ‘speck’ blowing wide open, one gets the sense this may be an important reversal.
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.
A quick review of longer term momentum indicators on the major indices (or ETFs), below:
Technology based indices all have significant downside momentum.
The financial press may have pawned this off as ‘rotation’. Of course, that remains to be seen.
Our view, high yield tells us something much larger than a sector rotation’s occurring.
It’s possible, the most debt (interest rate) sensitive indices are reversing first which could be a sustained, long term reversal.
The HYG weekly chart pattern is similar to the prior reversal (magenta ovals). This time however, MACD has spent over nine-months in a divergence and has crossed to the downside.
There could be a new high … low probability but it could happen (after all, it’s at support). If it does, weekly MACD may post an even larger divergence.
In response to the HYG reversal, we’re watching (and are short) the biotech sector, IBB (not advice, not a recommendation)
Of the three noted above with negative momentum, IBB is the weakest. Last Friday’s action has tentatively confirmed the resistance areas and trading channel reviewed in this update.
Friday’s IBB lower action was nearly imperceptible but it was there. Major reversals can happen this way … a little at first.
Wyckoff said it in 1910, ‘It’s as if the weight of a feather can determine the next direction’.
We’ll see if there’s follow-through to the downside on Monday.
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.
