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 hour is over: XOP (Oil & Gas) posted a new daily low.
Correspondingly, inverse fund DUG has posted a new daily high.
This is now, potentially a very dangerous juncture in the markets.
The firm is fully positioned (not advice, not a recommendation) in DUG.
Wyckoff analysis directives concerning bear markets, were used to identify (at this point) the single position.
More specifically, those directives are to identify the weakest market(s) not the strongest.
It’s the weak markets that will go down farther and faster during mark-downs (or bear phases).
Through a process of iteration (lasting months) as detailed in these updates, the weakest market up to now, has been identified and short positions opened via DUG.
Based on today’s action thus far, we have a hard stop in DUG which is the session low: DUG @ 24.727.
It’s unlikely price action will return and penetrate that (24.72) low.
The firm uses trading tenets from three market masters as detailed here.
There are essentially two main tenets from the late Gerald M. Loeb (former Vice Chairman of E. F. Hutton) and those are:
First:
Significant market opportunities are rare. When one is identified, use it to its maximum extent.
Second:
Do not diversify. Diversification is for those who don’t understand market behavior. Diversification is for the average … the mediocre.
That last admonition is harsh indeed. However, it’s backed by evidence from the top traders. Over and over we see their positions (detailed in the press after the fact) were highly concentrated.
Of course, none of the above is a recommendation.
In the next instant there could be an event which completely turns around the oil sector’s fundamentals … like a major earthquake taking out millions of barrels of supply.
As we have seen with seismic activity increasing dramatically, that scenario is not too far fetched.
At this point, we’re positioned in DUG. Hard stop, DUG 24.73
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.
It’s great that Texas has brought suit for ‘illegal’ voting.
However, with eyes wide open, there could be more going on than just contesting an international vote-rigging scheme that has entrenched corruption on a grand scale.
The oligarch controlled medial of course puts their spin on it and plies its evil trade.
Despite the way it looks, lawsuit and all, this could really be the first salvo on U.S. Balkanization. Plenty of information exists on the topic; here’s one source.
Texas of course would have to establish ground rules or structure for such action …. If that was to happen at the current pace of events … five years? Maybe faster.
A complete collapse and mass unemployment (with civil unrest … oh wait) would of course help things along from a public acceptance perspective.
Outlandish you say … complete insanity. Really?
How outlandish is an entire population running around with a piece of toilet paper across their face … afraid of something (the speck) that’s not even there. Even the CDC admits ‘no isolates [of the virus] are currently available [because it does not exist]’.
Go ahead … take a trip to your local graveyard. Where are the bodies?
By now, a real world-wide pandemic would have municipalities passing special measures (and taxes) to annex additional land to keep up with the dead. Back-hoe operators would be in short supply and a booming business.
Not happening; because it’s not there. The real story is here.
So, what about the markets?
Yesterday, the short positions in biotech were closed out as we got a higher open (not expected) instead of lower; even though bid/ask right up to the opening bell indicated a lower open..
IBB has now pushed past the 150-target area. There are no more forecasts for this sector. We’re at the target and no reversal … yet.
Moving on and giving credit where it’s due, Steven Van Metre, is the situation in oil.
With a huge economic slowdown (another collapse) coming, demand for oil is likely to vaporize yet again. Recall when the futures market went negative just eight months ago?
Oil prices may have been bid up on expected demand from a “re-opened” economy. That’s the current narrative.
What’s really going on looks like a short-squeeze that may have played itself out. The Weekly chart of XOP (oil/gas production ETF) shows upside progress has stopped dead.
Positions:
Based on the weekly price action of XOP shown below, we’re short oil and gas via DUG; a position established late yesterday.
At this juncture there’s no hard stop (not advice, not a recommendation) but we’ll wait during the fist hour of the coming session to see how the hourly bar posts.
Last week’s high in XOP was 61.06. If price action pushes beyond that by any appreciable amount, we’ll exit inverse DUG.
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.
Bid/Ask spreads on Biotech (IBB) indicate a lower open.
From last night’s update, this was the expectation if we’re in the early stages of reversal.
Empirical observation over many months shows IBB, tends to move counter-trend for the first 90-minutes of trade … then resumes its original direction.
If that holds true for today (and we’re in a reversal), expect IBB to open lower and then attempt a move higher during the first hour and a half; right up to about 10:30 a.m. to 11:00 a.m. EST.
Note: That’s empirical observation; typical market action for IBB.
However, each day is different and price action itself has the final say.
Both accounts being managed already have significant positions (BIS & LABD) with a BIS stop @ 24.64 and LABD stop @ 27.63 in the market (not advice, not a recommendation).
Following Livermore’s approach (get in big … and do it early) the plan is to monitor price action for another opportunity.
If somehow there’s a higher open for IBB, then we’ll wait for a lower daily low (to increase position) or be stopped out … whichever comes first.
It’s still quiet in the markets. No one expects a major reversal. Retail is all in (although insiders are selling en masse).
There are fundamental reasons why biotech may be about to crack (big time) but those reasons are for another report. Here’s a preview.
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 final arbiter is price action itself. We can analyze all we want but if the position does not cooperate, it’s time to leave.
Similar to closing nat-gas positions on November 3rd, as detailed here, it’s time to move on from Biotech; let it play out without us.
Biotech’s not working on the short side. So, we’ll come back when it is.
It’s important to note, after leaving UNG, it’s -21.2%, lower than November 3rd.
What’s working (for shorting), is gold and the miners (GDX) via DUST (not advice, not a recommendation). The GDX chart below shows the resistance level which is also the 23.6%, retrace.
A Fibonacci 23.6%, retrace is rare.
If that level is not challenged and GDX continues lower, the shallow retrace (to the upside) indicates significant weakness.
Recap: Markets (S&P, Dow, NASDAQ) at all time highs. The 30-yr Bond and Dollar, at short level extremes; the most in history.
Gold and GDX appear to be out in front, leading the way lower.
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 Danger Point® 