Biotech, Test-In-Progress

By The Book

With about 40-minutes left in the session, biotech SPBIO, appears to be completing a test of its downside reversal.

Prior updates have shown the potential for a massive trading range; right along with a very weak reversal at Fibonacci 23.6%.

We’ve happened to locate a short video from the Wyckoff Stock Market Institute, detailing the nuances of Wyckoff spring action.

That video is linked here.

Watch the video and then look at the chart of leveraged inverse fund LABD, below.

SPBIO, 3X Leveraged Inverse LABD, Hourly Chart

If the test has competed, we can expect a swift LABD rally (spring) to the upside (down for SPBIO).

Summary

The potential for a significant down-move in SPBIO, has already been covered.

Reference updates linked here, here, and here.

If this is a move of major significance, we’re still in the very early stages.

Positions have already been established; LABD-22-05, TDA-LABD-22-02 (not advice, not a recommendation).

SPBIO itself, will define the next course of action.

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: Before The Open

Last Session’s Record Volume

Depending on today’s action, yesterday may have been a ‘changing of hands’ for biotech; specifically, the leveraged inverse fund LABD.

We’ll start first with the longer time frame; the weekly, to show that SPBIO is at or near a Fibonacci 23.6% retrace.

Biotech SPBIO, Weekly

Looking just to the left of the right-side action we see a significant congestion area that’s highlighted below.

Note how price action has oscillated around that area.

It’s about three-months at this level before breaking lower and now, coming back to test.

The resistance is significant.

Next, is the inverse fund’s daily chart and the record volume.

SPBIO Leveraged Inverse LABD, Daily

Depending on today’s action, this is a potential ‘changing of hands’ from weak to strong.

We saw that such volume in the gold market (GLD) was indeed an infection point.

Concerning gold (GLD), back on March 20th, the report linked here, had this to say:

“From a Wyckoff, tape-reading approach, we have to trust what the chart is telling us.

That is, gold has reversed.”

How true that was. GLD never looked back and is now down around – 18%, from its highs.

The same could be happening for biotech.

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

Biotech … Good News, Bad News

Reversal, Finally Here

The good news for the bears and the shorts; this morning’s action was probably the final push higher for biotech SPBIO.

The bad news; if that’s the case (a reversal) and the right-side trend-line has been verified, it could be the very beginning stages of a massive collapse.

It’s about midway through the day’s session. The leveraged inverse fund LABD, is printing a repeating characteristic that identifies a reversal.

Biotech SPBIO 3X Leveraged Inverse LABD, Hourly

This is how it looks around 12:50 p.m., EST with no mark-up.

Next, we’re going to zoom in on two areas of interest. A previous reversal and the apparent reversal in progress.

The price action is near identical.

First a false reversal that’s followed by the real one. That’s where we are now with today’s action.

Summary

A follow-up post using the weekly time frame is due out before the session open tomorrow.

All short positions remain active (not advice, not a recommendation).

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

Biotech’s Liquidation Sale

Won’t Know For Sure, Until It Hits Bottom

Watching and waiting for the downside reversal; looks like it’s here.

With about thirty-minutes left in the session, biotech SPBIO, is printing a reversal bar.

It’s not just the reversal that’s important but we could also be on the right edge of a massive trading channel.

Biotech SPBIO, Daily

It’s hard to see what’s really going on until we compress the channel and look at the possibility.

It doesn’t seem real.

However, we all have to realize we’re in uncharted (literally) territory.

If this sector begins a significant decline, that’s when to expect “bad news” coming out in the mainstream … likely to accelerate the downdraft.

Positioning

The short position in FXI (via YANG) was closed out (TDA-YANG-22-01) at 10.64, with a 15.4%, gain.

A new position was opened in LABD @ 25.80, as LABD was reversing off the session lows (not advice not a recommendation).

Trade identified as TDA-LABD-22-02.

The original LABD-22-05, was maintained, still active.

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

Positions & Plans

Expectations, For The Week Ahead

Summarizing trading actions for the week and the action plan, going forward.

Open Positions:

Currently there are two open positions: details below.

TDA-YANG-22-01

Short the Chinese FXI via YANG (not advice, not a recommendation)

Enter YANG @ 10.95, with current stop @ 10.89

Friday’s close @ 14.05, Open profit = 28.3%

FXI, 3X Leveraged Inverse, YANG, Daily

Shown above, YANG appears to be in a trading channel (grey lines).

As a result of moving decisively higher (FXI, lower), the stop on the position is to be moved to YANG 12.79 (not advice, not a recommendation) at the next trading session.

LABD-22-05

Short the biotech SPBIO via LABD (not advice, not a recommendation)

Multi-entry LABD @ 28.11 (combined), with current stop @ 26.57

Friday’s close @ 26.98, Open loss = – 4.02%

SPBIO, 3X Leveraged Inverse, LABD, Daily

Last week contained both record daily volume (since inception) for LABD, as well as record weekly volume.

Downward thrust energy has dissipated. The down-move appears to be exhausted.

Supporting the assessment LABD is at or near a pivot point (reverse higher), we’re going to review the 3-Day chart.

SPBIO, 3X Leveraged Inverse LABD, 3-Day

Note, there is one more trading session (this Monday) needed to complete the current ‘3-Day’ bar.

First, we can see downward thrust dissipating as on the daily chart.

The prior three-day bar is identified as ‘Ease of Movement’.

It’s the first bar in the entire down-sequence starting on 6/14, where upside action was able to penetrate the prior (3-Day) bar’s high.

That’s an indication of demand.

After upside penetration, price continued lower.

However, here’s the important part, LABD, closed higher and posted a higher low when compared to the prior 3-Day bar; subtle clues a reversal may be in the works.

There’s one more trading session needed to complete the current 3-Day bar and anything can happen.

However, based on the analysis thus far, it’s reasonable to expect LABD, to continue to post higher; that we’ve reached the extreme of downside action.

The 3-Day below shows the higher lows and includes a zoom of the area.

Adding to the reversal case, on a weekly close basis, SPBIO reached underside resistance during the week of 7/8. This week just past, it closed slightly lower (chart not shown).

Summary

It’s the weekend and so we have the usual suspects of bad news … any of which could be the butterfly in the amazon, the final upset for the markets.

Just a brief list of current events, below:

Texas cattle being dumped on the market

Locomotive workers may go on strike

Child size coffins ordered in bulk.

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

Real Estate … “Easy Money”

After It’s Over, The Press Will State The Obvious

How many times have you heard after a move is nearly over, the financial press will say:

“Well, the easy money has already been made”?

They kept everybody on the wrong side long enough for the professionals to reap a windfall; then act as if you should have known it all along.

Back in 1992, during the presidential election, I watched as a major financial publication put our report after report how the economy was contracting, getting worse.

Then, after the election was over and the incumbent ousted, that very same publication’s next report stated the economy was not as bad as previously thought.

It was my first hint, something was wrong.

Not until many years later, when I determined (airplane) kerosene burning at 1,800 degrees Fahrenheit, could not melt steel at 3,400 degrees; did it all become very clear. 🙂

First Rodeo?

Not for me as you have probably guessed.

If we’re going to trade/speculate profitably in this (financial collapse environment), we need to be awake.

Wandering around with delusions of P/E ratios dancing in one’s head, is not going to translate to profits.

Which brings us to the following question:

Are we in the ‘easy money’ stage of (shorting) real estate?

Is this coming Monday, going to be a continuation to the downside in earnest?

Let’s take a look at the chart of IYR and see what it says.

Real Estate IYR, Weekly

Technically speaking, IYR is in Wyckoff spring position (poised to move higher).

It penetrated below support and has come back to test.

The Problem Is:

Price action went straight down into support (for three-weeks, at least), penetrated, and has now come back up for a ‘test’.

Is more upside a high probability?

Short answer … No.

Could price go higher from here? Yes, anything can happen but it’s not the likely scenario.

Real Estate, IYR Daily Chart

The daily chart shows we’re still in a trading channel. Friday was/is, a test of the right-side trendline.

The smaller, hourly timeframes had their channel lines penetrated; so, we pull successively farther out (in time) to see if the overall structure has been violated.

Looking at the chart above, the channel is still in-effect.

Trading Activity

The table below, is from one of my firm’s trading spreadsheets (not advice, not a recommendation).

It’s self-explanatory, showing a very busy two weeks.

The original position remains active; with Friday’s close of DRV 46.46, that represents an open gain of, + 40%

The Day Trade on Thursday, the 12th, was an attempt to increase the line. However, as the day progressed it became obvious that a reversal (or sorts) was in the works.

That day’s position was closed along with the one opened on the 11th, for an overall gain of + 3.85%

Next Leg, Lower ?

The position opened this past Friday was in anticipation of the next leg lower.

Note: The finger is always on the sell button in case the coming week shows more IYR, upside.

However, price action of IYR itself, is showing that it’s ‘respecting’ the Fibonacci projections as shown below.

Last week’s action confirmed and bounced off the 100%, projection level.

Putting the channel back in and compressing the chart gives us the following … yikes !!!

Summary

If IYR declines to the 161.8% projection, or even farther, expect there to be plenty of panic.

We should also expect to hear from our ever-helpful financial press when they say:

‘The easy money has already been made’

That of course, would probably be true (stating the obvious) and give us a potential confirmation to exit the position.

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

Herd Behavior … After The Top

Correction, Or Collapse

Structural Damage, SOXX

Even though technical conditions show we’re at least in a correction, if not outright reversal or collapse, record inflows for 2022, vs. 2021, present the herd-driven behavior of the public (and funds), to go long.

According to the link above, flows have been out of bonds and lesser performing equities, into equities that have gone down less.

In addition, you can see some of that flow (not addressed in the article) going into gold and the mining sector.

Stepping Back

Pulling away from charts and indicators for a moment, figuratively closing one’s eyes to get a ‘feel’ for what’s happening, it looks like the following:

We’re in a (potential) massive juggernaut reversal that’s been decades in the making; possibly having origins going all the way back to the ’87, crash, the ’95, bull market and then, repeated bubbles of 2000, ’07, and now.

At this point, it looks like the ‘average investor’ is doing the only thing they know how to do … that is, go long.

Those with at least some market knowledge, just got decisively whacked with their ‘put buying‘ strategy as the market has rallied strongly off the lows.

Pavlovian Panic

We’re witnessing the knee-jerk reactions of a public that’s been conditioned for decades, not to ‘think’, but only ‘do’.

Expect this type of behavior to go parabolic if the markets really do turn lower on a sustained, long-term basis.

Prechter has written extensively about crowds or the herd; especially in his text The Wave Principle of Human Social Behavior.

We can see this visceral behavior real-time, in other seemingly unrelated markets. Two examples below:

First, we had oil futures going negative for the first time in history; then we have LNG tanker rates going negative first time as well.

The model seems to be:

“Everybody wants it, and then, they don’t”.

The crowd runs to and fro, effectively leaderless.

With that said, one can make a case we’re just beginning, or already in an economic collapse; now being followed by the early stages of a market collapse.

Meanwhile, The Elephant Gets Bigger

Let’s not forget the massive elephant that’s just now getting so large, it can’t be ignored (time stamp 2:40).

Recall the example at this link … disparate crowds have a tendency to come to the same decision and modify behavior, all-at-once.

You have to wonder, when that crowd is going to simultaneously press the Sell, button.

Hit, In The SOXX

Unprecedented events are everywhere. That includes the massive, ‘never before seen‘, thrust lower in the SOXX.

The uptrend shown in the weekly chart of SOXX, has been decisively broken and with enormous volume.

The week ending Friday January 28th, saw 16.7-million shares traded … the most ever for the index (ETF).

More detail on trend break

Then, There’s Elliott Wave

Before the ‘Elliotticians’ get miffed by the previous (cookie cutter) comments, here’s this:

When this method works … it’s great.

It provides good projection areas and the useful ‘Fourth Wave of Lesser Degree’, targeting.

Note: A quick internet search for this Fourth Wave method (authored by Prechter) turns up nothing.

Logging onto ‘Club EWI‘, putting in ‘Fourth Wave’ has no items found.

One can try contacting Elliott Wave International, to request a copy of this targeting method. It may still be available (for a price).

The data used by this author to target the 4th wave retrace (shown below), is from a hard copy, dated, 1/8/2003. That information was excerpted from The Elliott Wave Theorist, July 9th, 2002.

First, the 2-Hour chart from Thursday’s update is repeated below with the ‘lesser degree’, added in magenta font:

Getting closer-in on the 4th-wave area below:

It’s subtle and difficult to spot. The price action congestion area is the ‘4th wave of lesser degree’.

Summary:

The previous update showed entry points for what is now SOXS-22-01 (not advice, not a recommendation).

Friday’s price action put this position well in the green; getting it to +24%, based on the close.

The table below are the ETFs being tracked along with the leveraged inverse fund tickers.

The percentage gain/loss, is for this past Friday’s action and shown for the inverse funds.

Obviously, the semiconductors were hit the hardest on Friday and so, SOXS, had the largest gain.

A good stop level for SOXS would naturally be Friday’s low (not advice not a recommendation). If we really are in an Elliott Wave 3, down … price action’s expected to continue its decline with haste.

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

SOXX, Downside Reversal

The Elliott Wave, Connection

A couple of things first.

Number One:

This site does not use Elliott Wave as a primary analysis tool.

However, to be aware of the technique, will at times provide an additional edge … like now.

Number Two:

Once again, gold and the mining sector have become unbearable to watch.

The amount of hysteria, hype and bloviation serves to make this market all about ego. Ego is a four-letter word for the professional speculator/trader.

We’re leaving it alone for now and moving on to the market at hand: Semiconductors (SOXX).

Semiconductors, SOXX

On a Monthly basis, the chart below is the entire trading history for the sector:

The next chart zooms into the area(s) of interest.

This market, the semis, had its most powerful thrust lower in January, for the entire history of the sector.

The following chart is where it gets interesting.

Elliott Wave labeling as shown. If correct, Wave 3, down has just started (not advice, not a recommendation).

Warning:

My former mentor, the late David Weis, who once worked for Prechter, said the approach is a “cookie cutter” (his words) attempt to force the markets into a pre-defined construct.

With that caveat in hand and the understanding the ‘wave’ could fall apart at any time, let’s see what it would project if price action followed the current labeling and structure.

The daily chart shows a Fibonacci projection based on the Elliott Wave labels:

The projections are in percentiles of the first wave distance.

Elliott Wave rules are that ‘Wave 3’ can’t be the shortest wave. If the structure holds, that means Wave 3 (if that’s what we’re in) would go below the 100%, level and potentially to 161.8%, level.

To Trade, or Not To Trade:

This structure was spotted late yesterday … after abandoning the gold sector. There had already been the pre-requisite hype about CPI numbers and such giving the ‘excuse’ for markets to rise.

That meant risk of a short position (yesterday, early today) was low: not advice not a recommendation.

The chart below of leveraged inverse fund SOXS, shows entry points for what is now: SOXS-22-01

Summary:

Taking a cue from the late Dr. Martin Zweig, on his words during this broadcast, he was very hesitant to use the word ‘crash’.

So, this update is hesitant as well.

However, if the forecasted move of SOXX, to the Fibonacci projected 161.8% level (or more) is realized, it’s a decline over – 37%, from current levels.

It would be significant … crash or not.

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.

Natural Gas First: Who’s Next ?

Is it Corn?

So, it begins.

This link to an article where lawmakers (using that term loosely) are attempting to limit the export of natural gas.

We’ve already discussed the likelihood of some type of corn or grain embargo as prices continue higher.

Now, we have a similar (limit export) event but in the energy sector.

Recall, the statement from that prior (corn) post:

“What we’re looking for here, is some kind of Jimmy Carter type stunt where corn exports are halted in the name of ‘national security’ or some such thing.”

And this, from the same post:

“Of course, if that happens, corn is likely to crash (like it did last time) if only temporarily.”

So, let’s take a look at what happened to natural gas (UNG), when our lawmaking geniuses proposed to limit exports.

Daily Chart Natural Gas, UNG:

So, when this type of announcement comes out, the market takes a major hit … just like it’s forecast to do if we get something similar in corn (not advice, not a recommendation).

Now, if the overall long-term objective, is to wipe-out the food supply, wouldn’t you want some kind of dry run to make sure markets are going to respond as expected?

So, let’s try natural gas first, shall we?

Remember that with corn, it will (if it happens) be different.

Because of the elevated fertilizer prices, a forced lowering of the corn market may be all that’s needed to make sure very little-to-no corn gets planted … and Voila!

For a reminder on just what exactly we’re dealing with here, please reference this link.

Moving on to other markets, we have some housekeeping in the gold mining sector.

Junior Miners, GDXJ:

As stated in the pre-market update yesterday, the finger was on the sell trigger.

After the first hour of trade, it was obvious higher prices were in the offing.

Not willing to wait through a correction to a higher retrace level, the short position was closed-out (not advice, not a recommendation).

The table below summarizes the entire round-trip. It should be somewhat self-explanatory.

A hypothetical $10,000 was used as the starting amount. Any additions to the position used margin.

The end result as shown, approximately, +21%, gain.

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

Gold, Before The Open

Gold Miners GDXJ, To Close The Gap ?

The magenta arrow and bar show pre-market action in Junior Miners GDXJ, about 25-minutes before the open.

Fibonacci retrace levels as noted.

The zoom chart shows a gap that action may be trying to fill and then? Is there something more?

Sated earlier, a 23.6%, retrace is rare and 38.2%, more common.

Summary:

The market looks to open higher.

If so, typical behavior is to come down for a test and then continue upward if that’s the overriding direction.

If the expected test fails, action may continue lower.

Once again, we’re at the danger point. The action itself defines the trading response.

Friday saw a partial exit of the short JDST-22-01, position in anticipation of higher prices (not advice not a recommendation)

Today may see the rest of the exit if the pivot higher is confirmed (typically within the first hour).

The fact pre-market trading is subdued with just (so far) a half-point or about 1.0% gain, still suggests weakness.

We can see price action penetrated support (bottom blue line) on the chart and so GDXJ, is in ‘spring position’. However, thus far that spring appears to be weak.

There’s a lot going on at this juncture.

JDST-22-01, Position Table to be updated and posted later.

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