That was Jesse Livermore’s assessment of the market just before The Panic of 1907.
That Was, Then
Back then, it was money spent on The Boer War, tight financial conditions and extreme overvaluations.
Looks more and more, like today
It’s been this site’s opinion for about a year (now supported by data), that we’ve gone straight past recession, into economic collapse and depression.
And Now, This
Another data point confirming the ‘depression’ scenario is this, just out from ZeroHedge: The Baltic Dry Index had its largest one-day collapse on record.
As if to drive it home; demand is in free-fall as Amazon, just announced plans to fire 18,000 workers.
From a strategic standpoint, collapsing shipping demand means collapsing fuel demand.
Which brings us to the sector of the day, Oil & Gas
Oil & Gas Sector XOP, Weekly
The last update, showed the weekly chart has reversed down and stayed down.
XOP is penetrating support, now at The Danger Point®.
The daily chart has more detail; we’re hovering at support, testing the right side trendline (again).
Providing some (minor) upward bias for the day is this report on WTI (West Texas Intermediate).
Oil & Gas Sector XOP, Daily
It’s 1:31 p.m., EST and XOP, has not posted a new daily high (it’s very close).
Doing so, would weaken the downtrend case and point probabilities to a Wyckoff spring move higher.
Summary
Demand is rapidly collapsing on many fronts and the WTI report linked above uses the word ‘tepid’.
That may be completely inaccurate or misleading when considering the demand for shipping has seen its worst down-day, on record.
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.
If we use the S&P as the proxy, it hardly even lasted that long.
Going back to just four days ago, we had this (emphasis added):
“It’s well known, stocks tend to rise in the first weeks of January. Tax loss selling is over and there’s typically some type of ‘relief’.
Don’t count on it this time (not advice, not a recommendation).”
Market Meets Expectations
It was expected on the first trading day of the year, the market would continue its downtrend.
After this morning’s 15-minute blip, that’s exactly what’s happening.
We’ve already discussed real estate IYR, (here, here and here) as well as the Q’s (here).
Now, there appears to be another sign of impending price collapse … the oil sector; specifically, Oil & Gas Index XOP.
As is typical, we’ll begin the analysis with the longer time frame, the weekly.
Oil & Gas Sector XOP, Weekly
There’s no secret to the chart below other than Livermore’s admonition for going short; that is, he finds a market that ‘goes down and stays down’ (not advice, not a recommendation).
The prior two down-drafts were quickly retraced; one in mid-July last year and one in September.
Not so, this time.
If we go to the daily, we have an ominous look where a downtrend could be validated.
Oil & Gas Sector XOP, Daily
The right-side trend is drawn as a dashed line, revealing the attempted breakout on the last two sessions in December.
Attempted trend line and channel breakouts are normal market behavior.
It’s clear in the case above, price action has quickly got itself back into the trading channel.
Summary
Of course, oil prices are not supposed to go down, right?
At this juncture, look at all the conflict and potential supply disruptions that are possible.
However, the price of oil and the price of the exploration/production equities are two separate things.
The price of oil could skyrocket further, and yet, the equites still collapse. Bear markets are all about price, wealth, and credit destruction.
Typical short positioning trade vehicles for this sector are DRIP (-2X) and DUG (-2X), or to short the XOP directly (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.
From the date of the second link above in April, this year, gold (GLD) is down about -8.5%.
Not exactly a crash but definitely not a ‘paradigm shift the world has yet to fully process’.
Just from a contrary standpoint, if ‘everybody’s doing it’, there must be something else going on.
Let’s take a look at the actual facts, the price action, and see what it’s telling us.
Gold (GLD), Quarterly
Looking at the big picture first; the quarterly chart.
Elder’s Force Index (shown in the middle section) has been expanded to detail the thrust energy behind the move(s).
It’s important to note, for at least the past 10-Quarters, two and a half years, the upward thrusts have been successively declining in energy.
That decline is highlighted below.
Next, we’ll drill down to the monthly chart.
It shows GLD, trended (slightly) higher for at least sixteen-months, before breaking down.
GLD, Monthly
Now, as the right-most magenta arrow shows, we’re at the test of underside resistance.
Tests may pass or fail; obviously, what happens next is important.
Also note, as with the quarterly, upward Force Index on the monthly, is declining.
We’ll take it one step further and go the weekly … it too, has declining and also diverging upward thrust.
GLD, Weekly
Ok, you talked me into it. 🙂
Let’s go to the daily and see the same thing.
GLD, Daily
Does all this mean gold will immediately go lower at the next open?
The short answer … it’s not known. However, from a probability standpoint, lower is more likely than higher.
No ‘Capitulation’
There’s nothing to indicate downside capitulation.
Nothing like the ‘changing of hands’ that took place this past March 8th, here and here.
It appears we’re still in the initial stages of a long-term downside reversal.
Downside? … How’s downside, even possible?
‘What kind of idiot comes up with that type of analysis?’
Moving Parts, A-Plenty
Every day, we see things going on in the background that could not be known or fathomed; like missing $80 Trillion?
All it takes, is for some kind of sovereign debt or derivatives blow-up, requiring that country to sell its assets like gold, silver, oil, grains and so on.
A huge dump on the gold market, would of course trigger stops and that in itself, could result in a contagion of selling.
If or when it happens, the downside might be temporary like the Flash Crash of 2010, or oil going negative, or it could be longer.
The ‘powers’ don’t seem to be too concerned with precious metals demand, prices, and low stock of physical at the commodities exchange(s).
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.
Will Demand Collapse Faster Than Supply Contracts ?
Is There A Biotech Connection ?
The Next Chess Move
Everyone’s good at telling you what the problem is; it’s a financial collapse !!!
No, Duh!
The hard part is, how to position for the unknown at least for those of us in the serfdom.
The so-called elites, the oligarchs know (or think they know) exactly what’s happening.
They move their chess players and we move ours. The goal is to position for (potential) profit with the caveat we all make it out on the other side.
Personal Anecdote (skip to XOP Analysis if not interested):
I have a close family member that’s been a school teacher for about twenty years. He/She is well known in the local town and has a significant number of connections.
Because the children being taught are typically small, ranging from kindergarten to fourth grade, those kids tend to reveal all that’s happening at home.
Their revelations include financial status (or lack of), political leanings as well as abuse that’s happening physically and sexually. It’s the real deal.
As an aside, any potential crimes are fully documented and reported.
The point here is, this contact has revealed that children, family members and extended family members are severely ill or dropping dead after receiving an ‘injection’.
However, the surviving family members are just too stupid (or afraid) to put it together; the injections are causing the deaths.
It’s some kind of mental block and/or mass hypnosis.
It’s wrenching and heartbreaking.
However, at the same time and this is where it gets harsh, for those of us in the faith, we know Biblical scripture tells us the Lord delights in hiding the truth.
One has to diligently seek out truth. It takes work and a prayerful form of neural plasticity; the ability to be mentally flexible.
Truth is not for the lazy, the incompetent, the coward.
Why should immutable truth come to a coward or idiot that does not diligently seek it?
New ‘Variant’:
The rapidly increasing deaths may be passed off by the mainstream media as some kind of new ‘variant’.
That ‘variant’ brings us to the market at hand; oil and oil exploration XOP and possible biotech connection.
XOP Analysis:
As with biotech SPBIO, and its leveraged inverse fund LABD, so too we have Oil & Gas Exploration XOP, and leveraged inverse fund DUG.
The long term un-marked, weekly chart of XOP:
Next, we have price action contacting a multi-year trendline:
Moving closer on the weekly, we have a terminating wedge:
Terminating wedge(s) typically result in price action moving opposite of wedge formation.
In the case above, that would be a reversal to the downside.
This past week’s bar was a reversal. It’s a potential signal the formation is complete and XOP is ready for the downside.
Of course, if XOP is about to head lower, inverse DUG is about to head higher (not advice, not a recommendation).
Daily chart of DUG.
The Biotech (SPBIO) Connection:
The weekly chart of SPBIO, shows momentum on downward thrusts has slowed. The black dashed arrow’s trajectory is becoming more shallow:
If biotech is going to retrace, the solid blue line is a Fibonacci 38%, as well as potential location for an up-thrust (downside reversal).
A new variant (which is likely injection injury) may be used by the media to drive biotech higher to the retrace level.
We’ll have to wait and see if there’s a reduction of the population as we head into the end of the year. It’s a known fact, the injection destroys the immune system … so far, permanently.
That would be a factor in the up-coming flu season.
Remember that?
We used to have a regular flu season … but that all disappeared (re-branded, actually) with our current situation.
Summary:
Nearly all recessions have started with rising oil prices.
However, we’re not in a recession but an all out collapse. The economy is contracting at the fastest rate in U.S. history.
Our current position is demand will collapse faster than supply restriction (not advice, not a recommendation).
Or, we could still have rising oil prices but it won’t be enough to offset the cost of drilling and production; lack of demand may be overwhelming.
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 Russell 2000 (IWM as proxy) has been congesting sideways for about five months.
While the overall markets, S&P, Dow, SOXX, IYR and the QQQs, have been moving on to new highs … the Russell has stagnated.
Taking a cue from Steven Van Metre’s reports on ‘who goes first’ in a downturn, it’s the small caps.
At this juncture, it looks like the Russell’s ready.
The six month daily chart of IWM below, shows choppy action.
Pulling back somewhat and labeling the bearish wedge, puts it into perspective (second chart):
Pulling out and labeling the wedge:
One item of note (not shown) at the top of the wedge, where price action pivoted lower (August 6th), is a Fibonacci 62%, retrace level.
So, we have a bearish wedge retracing 62% … along with non-confirmation of the overall highs; S&P, Dow, SOXX, etc.
Major reversals take a long time to form. However, once they get underway, it’s like a juggernaut to the bottom.
Harkening back to the oil (USO) bear market of 2014, nearly all (if not all) the YouTuber’s at the time, completely missed the bearish set-up.
What they did instead, once the downdraft started, was pump out update after update about ‘catching the bottom and setting up for the new bull market in oil’.
It never happened.
Oil continued lower for a year and a half before getting into a sideways range.
The big money’s in the big move. Monitoring the Russell provides confirmation a significant reversal’s in the works (not advice, not a recommendation).
As with biotech (SPBIO), already in a bear market, the IWM could break lower while the overall markets continue to thin-out and even make new highs.
Recall, we’re getting close to an up-coming holiday: Labor Day
The 1929, high was on the Tuesday just after Labor Day weekend.
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.
Sentiment can’t be seen on the chart. One can guess but it can’t be measured directly.
Sentiment change comes first.
That change in turn, results in a change of volume, i.e. ‘commitment’.
Then, after commitment dissipates, price is next.
That looks like the current situation with biotech and specifically inverse fund, LABD.
In what may be an idiot or genius move (depending on outcome), the short in biotech SPBIO (via LABD) has been maintained throughout the current down thrust; not advice, not a recommendation.
The reasons for that decision have as many layers as the proverbial onion. Not the least of which, is a market break anywhere from 20% to 50% (in our view) can happen at any moment.
‘Never happened before’, one might say.
Oil futures in their entire history have never gone negative before, either.
Bonds, in their entire history have never been shorted by four-standard deviations before, either.
A world-wide coordinated push to euthanize the entire population has never happened before, either.
Margin debt and valuations have never been higher before, either.
Underlying liquidity has never before been removed to the current extent, either.
So, we each have our own reasons.
The firm’s main account (not the Project Stimulus account) has drawn down about – 13%, on the current short position.
A core position has been maintained but small amounts have been removed and added based on price action.
When the anticipated gain, is high hundreds of percent and maybe above 1,000%, the draw down above, looks acceptable considering the (potential) opportunity.
On to the chart:
The daily chart of LABD, shows both net downward price action and thrust energy are dissipating.
Note the ‘Force Index’ scale has been accentuated to better show the divergence.
We’re looking for price to move back higher to test support/resistance areas.
If or when it does, the plan (as has been from the beginning) is to continue to add LABD until volatility makes it prohibitive.
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.
Yesterday, was an upward push that wound up being an ‘out-side-down’ bar (GLD, GDXJ, SLV) … a reversal in itself.
That’s not in the script. Or, is it?
At this point, the public’s literally redirected, manipulated, at will. It’s a sick game being played by all who control the media.
From a personal standpoint, I’d rather make some popcorn, take my red wagon full of fiat, go camp down around $800/oz., and wait.
The gold ice cream man may never show up. If he does, great.
If not, there’re other opportunities; at least I’ll not be one of the manipulated masses screaming inflation hyperbole if/as/when gold ratchets all the way down.
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.
The Danger Point® 