SOXX, Ready To Drop

All The Good News Is Out

Liquidity Risk?

It’s been long enough; most have forgotten the ‘Flash Crash‘ of 2010.

That crash happened in May of that year.

May of this year, would make it 12-years and interestingly, a Fibonacci 144, months.

Normalcy Bias:

As Nissam Taleb said in his book, ‘The Black Swan’, every day is like every other day on the farm, for Mr. Turkey … that is, until Thanksgiving Day.

Let’s take a look at the historical chart of Semiconductor ETF SOXX, and see the effect of a Flash Crash.

Easy to spot … prices did recover by the end of the day.

What about the next time?

This report just out on ZeroHedge, shows liquidity is drying up in the bond market. Actually, liquidity has been drying up ever since Dodd-Frank of 2010.

All of this is working (to increase risk) in the background.

Let’s take a look at another unprecedented event … the downthrust and apparent recovery in the semiconductor index, SOXX.

SOXX, ETF, Daily Chart

First up, is the unmarked chart of the index.

Next, we’ll show the recovery higher is on diminishing volume.

There’s no real commitment to the higher prices …. they are just drifting upward.

We’ve already shown the Elliott Wave assessment of the current structure. Now, let’s look at it from a Wyckoff standpoint; Up-Thrust and Test.

Price action posted an Up-Thrust, declined and now has come back for an apparent test.

Confirmation Bias

At this juncture, both Elliott Wave and Wyckoff Analysis present a price action structure that’s set for downside reversal.

In a way, we’re at the danger point for both methods.

Summary

From a personal and corporate standpoint, going long in this market and all markets for that matter, was abandoned long ago (not advice, not a recommendation).

To borrow a phrase from Dan at i-Allegedly, he repeats over and over in his videos, ‘We’ve had warning, after warning’.

So, we have.

The SOXX, is telling us, it’s ready to resume action to the downside. After-hours, already has the index trading lower.

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

p.s. The insight of 2010 Flash Crash, anniversary of Fibonacci 144 months in May of this year, is exclusive to this site.

‘Ripple Effect’

12:23 p.m., EST

Wells Fargo: Just the start?

The short answer is probably yes; but that’s only one problem.

Everyone’s subject to ‘normalcy bias‘ as Nissam Taleb puts it; Today’s like yesterday and tomorrow will be like today.

The news on Wells Fargo shows how quickly that can change.

Here’s a YouTube link; one man’s assessment on what happens now.

He proposes a ‘ripple effect’.

Events have been set in motion; not necessarily immediately but it has started nonetheless.

Market Positioning:

So, here we are going into the weekend.

Does anyone want to be long the market at this point (not advice, not a recommendation)?

There must be some that do as we’re still at elevated levels.

The trade approach implemented on this site (i.e., positioning short), takes into account and actually plans for a ‘disconnect’.

Only the inexperienced or naïve think (at this time in market history) they can get out as easily as they got in; i.e. day and swing trading.

Analysis: SPBIO (LABD):

We’ll start close in first and look at the hourly LABD:

Price action has come back to test the boundary (blue line).

As frustrating as it might seem (and it is), this is normal market behavior. The market itself has to define who is in control; bulls or bears.

It’s never ending.

That’s why a case has been built on the fundamental side; why biotech is subject to a massive implosion.

That backdrop, is being supported (little by little) with price action and thus, helps keep the mind focused.

If we pull out to the daily, we see the familiar trend-line(s):

We’re at another danger point. Price action can go either way.

If LABD pivots higher from here, it’s one more confirmation that we’re trending higher (SPBIO, lower) into our October-exit timeframe (not advice, not a recommendation).

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.