‘If, on the next pull-back, volume contracts, the spring has been tested …’; David Weis
On the chart, that’s what we have.
Today also looks to be an apparent 50%, retrace on Fibonacci Day 3, from the June 6th, reversal.
Taking it all together, the next session(s) could be very interesting.
Biotech XBI, Daily (inverted)
Is it textbook?
We have a spring set-up penetration (resistance non-inverted), a swift move upward and now, a test back to 50% (level not shown), on contracting volume.
If the test is complete, the obvious expectation is for a higher open (lower non-inverted) at the next session (not advice, not a recommendation)
Rule of Alternation
Using this update and the discussion of ‘alternation’, we can already see price action is more volatile and so far, has ‘simple’ form.
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 last update presented a multi-timeframe analysis; medium to long-term (potential) bearish set-up in biotech, XBI.
This morning’s action appears to be confirming the up-thrust potential.
Now, we’ll get into why this move may happen quickly.
Multiple Timeframes
If the premise is correct, that we’ve gone through a month-long test of the weekly (timeframe) up-thrust, testing may now be complete.
Naturally, the power behind a weekly move, has more substantial effect than daily.
Next, the topic at hand; Prechter’s ‘Rule of alternation’.
Biotech XBI, Daily
The first chart shows detail on the last up-thrust.
Price action penetrated resistance, then posted five-days of congestion before breaking lower.
We’re labeling that congestion action as ‘complex’.
Next, we have the current situation. An apparent up-thrust in its initial stages.
If what we have now, is indeed an up-thrust, taking all the prior considerations into account, it’s reasonable to expect the subsequent move will be less complex, having different form, and move more quickly (not advice, not a recommendation).
In any case, we have a ‘hard stop’ for a short position, at the session high (not advice, not a recommendation).
Our Quest, Is At An End
Like something out of Monty Python, the entire analysis of downside potential feels like the quest is at an end.
However, just like the video snippet in the link above, what looks to be a dramatic conclusion to weeks if not months of work, could be completely derailed by a bunch of ‘French’ guys hanging out in a British castle 🙂
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.
Actually, luck does not have much to do with it; let’s go to the action itself.
First, the long-term view of largest cap, Nvidia.
Nvidia NVDA, Quarterly
We can clearly see Prechter’s ‘Rule of alternation’ at work.
Complex, simple, complex and so on.
Note the massive upward spike in Thrust Energy (middle panel).
We’re less than a month away from completing the 2nd Quarter. It looks like thrust energy is, or will be, diverging (not advice, not a recommendation).
Moving on to the SOXX.
Semiconductors, SOXX, Weekly
Recently, the week of April 19th, there was a significant downard thrust.
A similar thrust (blue arrows) resulted in a decline lasting ten months, dropping approximately -45.35%.
However, in the case above, the reversal has yet to materialize … or has it?
Last week posted outside-down, but did not close outside-down.
It leaves the probability open for upward action.
However, from a risk standpoint, it’s The Danger Point®.
If we use last week’s high, SOXX 243.63, as a hard stop, the cost of being wrong positioned short, is least (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.
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.
‘…. and reminds you, she was only in it, for the money ….’ Steve Goodman
Seems like any time gold or silver blips higher, the shills come out; a new book to sell, more metals to peddle.
Obviously, what’s presented on this site, is neither; we’re searching for the truth, market truth, nothing else.
When looking at Junior Mining (ETF) Index, GDXJ, once again, it’s at The Danger Point®.
Junior Miners, GDXJ, Fibonacci 8-Day
The 8-Day chart gives us a clear view of the action.
There was an up-thrust during the week of April 14th, 2023.
Now, a Fibonacci 55 (-2) weeks later, another one during the week of April 12th.
Last Time, Is Not, This Time
The up-thrust in April ’23, resulted in a steady but choppy downside action until the bottom, February, this year.
Using Prechter’s ‘rule of alternation’, whatever happens from here, it’s not likely to be what happened last time.
So, essentially, we have two potential outcomes; strengthening with continued upside, or a swift decline back to support levels (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.
‘ … we’re at the 161.8%, projection and USO is hesitating; at the same time, Nat-gas, UNG, appears to be forming a long-term bottom’
The implication was: We’re at a Fibonacci level in USO, while the ‘herd’ has positioned themselves (massively) long and Nat-Gas appears to be reaching a (potential) long-term low.
Three trading days later, we have this:
Oil Tracking Fund USO, Weekly
If you look closely, the grey dashed line, the Fibonacci 161.8% projection, is just visible and extends out of the green line, highlighting that level.
A possible, nascent reversal.
Way back in 1902, after studying the markets intently, Wyckoff, discovered the following (paraphrasing):
‘Forces were at work, moving prices around, independent of any fundamentals, not connected to any valuations.’
Nearly, a century later, Prechter says this as well in one of his many interviews (paraphrasing, again).
‘If somehow, I was able to give you the newspaper headlines for tomorrow, you would not be able to tell me if the market was going to go up or down’.
The media is presenting oil (gasoline) and Nat-Gas prices as inversely correlated. Looking at the topping chart of USO and the bottoming chart of UNG, it’s believable … for now.
Downward thrust in Nat-Gas UNG, appears to be exhausting itself after a 20-month, bear market.
Risk is never zero, but currently appears to be at a low for UNG (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.
Right along with the current narrative, ‘The Fed’s going to cut rates’, is another narrative, ‘The Fed’s in charge, a leader, and sets rates’.
Is either one, actually true?
Years ago, Robert Prechter Jr. pointed out very convincingly, the Fed’s a follower, not a leader.
His research showed, over many years, the Fed consistently follows the market.
Along with that, was his premise, ‘The market leads the news, not the other way around’.
Using that, we’ll look at what the Fed’s likely to do next; let’s use the long-term view, the 10-Year Treasury.
What’s it telling us?
Macrotrends Historical Chart: Ten Year Treasury
As posted in the prior update, the 40-yr bond bull market, i.e., lower rates, is over (not advice, not a recommendation).
We see the upside reversal in rates (downside for bonds) took over 10-years to set up.
Rates pushed below established support into a Wyckoff spring condition, then reversed higher, then into an outright breakout.
Currently, we’re hovering around in ‘no-man’s land’.
Could rates dip lower (bonds higher) and we get a token rate cut in response from the Fed?
Well, as David Weis used to say, ‘Anything can happen’.
Strategy First
However, from a strategic standpoint and for the long-term, higher rates are more probable.
The market has already responded with interest rate sensitive sectors and stocks (IYR, KMX, CVNA, etc.), having peaked long ago, in 2021.
A Dangerous Game
Depending on one’s perspective, what’s going on here with interest rates, is a dangerous game of ‘chicken’.
As Uneducated Economist puts it, the Fed’s a ‘credible threat’; all they have to do is ‘talk’ and propose (i.e., threaten) to move rates and the market responds without the Fed actually doing anything.
It’s working, for now.
The Emperor Has No Clothes
The problem is, as Prechter has already shown with research done years ago, ‘the emperor has no clothes’.
The Fed does not control rates at all; it’s a follower, only doing what the bond market’s telling it to do.
For some reading this, it’s old news.
For others, it’s a shock to find out, yet another institution is not what you thought it was.
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.
Monday’s open could be important for the mania stricken Nvidia (NVDA).
This site’s not the only one figuring on a top if not the top.
Here’s a link showing typical behavior of previous mania bubbles; all-the-same.
Below, are specific price action behaviors pointing to either a pause with congestion, or outright ‘bubble-pop’ reversal.
We’ll find out soon enough.
Nvidia NVDA, 3-Day Bar Chart
We’re using a three-day chart, showing the magnitude of current thrust energy (mid-panel) and similar occurrence back in late May of ’23.
A lot of things are going on … all at once.
Back as far as 2006, the magnitude of the (two) upward thrust spikes has never happened before.
Is this a last gasp?
Price action reached and pulled-back from the (magenta arrow) channel high. That upward move was launched from an earnings release.
Now, we have two ‘bookends’ of upward thrust but here’s the key; markets tend to alternate.
That means: ‘What happened last time is not likely to happen this time’; Prechter’s rule of alternation.
The SOXX index itself plays a role as it had an ‘outside-down’ print on Friday; otherwise known as ‘key reversal’ or ‘bearish engulfing candle.’ (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.
At this point, market bulls have to be just a little bit nervous.
Is the reversal from Friday, going to hold into next week or was it just a blip on the way to much lower levels?
Can a ‘Once in 300-years mania’, affect us here and now. Is that knowledge useful for day-to-day decisions?
One way to answer is to place that fact in the ‘fundamentals’ category; knowing it’s there but stay absolutely focused on the immediate truth, that is, ‘price action’.
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® 