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.
With the kids at the card-table, freaking about ‘plunge protection team‘, rigged markets and Bitcoin, grownups the next table over, are planning their moves.
Friday’s late session rebound higher was not uncommon for a typical short squeeze.
These gyrations are intended to make sure only a select few are aboard when we get the break.
This idea is not new. You’ll find statements to that effect over and over in most any trading book.
The big difference now, is the amazing level of complacency and learned helplessness of the overall population.
Just one example of such before we move on to the charts.
Texas has opened up. Schools are about to go without diapers. Perish the thought.
Yet, there’s still a contingent that’s near hysteria about ‘safety’.
With all the information available, yes one actually has to do real research to find out what’s going on, huge segments of the population adamantly remain (intentionally) ignorant.
Unfortunately, that segment has voluntarily (at least in the U.S.) lined themselves up to be taken out; financially as well as physically.
Just a few of the most recent links, here, here, and here.
At some point, those links are going to become common knowledge.
Hopefully, there will be long lasting and certain retribution for the perpetrators. However, for those who ‘volunteered’, it’s already too late.
Now, on to the markets.
Friday’s real estate rebound (IYR) looked like short-squeeze action.
In response to that and late in the session, short position DRV (3X inverse IYR) was increased at price 9.37 (not advice, not a recommendation).
Volatility is still low in IYR. Short positions can be increased with less risk.
The Big Break
When and if the break comes, it’s likely to be fast; no time to plan.
Whatever plans one has should’ve been laid out well ahead of time.
Two markets being watching closely are Peabody Energy (BTU) and Seabridge Gold (SA).
By now everyone’s aware that a certain far east country is going about its business and building their infrastructure … as if nothing had ever happened. Funny that.
Conversely, the coal market has bottomed out and so has Peabody.
On top of that, the Texas Freeze laid bare the farce that is climate change, global warming and green energy.
Quietly, without fanfare, coal is seeing increased demand.
The blue arrow is a gap in trading that could be filled.
To do that, there might have to be a massive market collapse, pushing BTU back to that level … if only temporarily.
Huge volume in the past six months shows that somebody’s buying.
The next market is Seabridge Gold (SA) which is being watched for essentially the same reasons. If Van Metre is right and we’re in a deflationary impulse, the entire public’s on the wrong side of the trade.
If SA can get itself below 13 – 14, it then enters free-fall territory.
If that happens, as with BTU, it too might be a short lived event.
Positioning:
Currently, the firm’s position (not advice, not a recommendation) is short biotech and real estate via LABD and DRV, respectively.
If BTU and SA get to extreme lows, both of them have potential for a ‘ten-bagger’, the possibility to gain over 1,000%.
Getting to such gains would necessitate a change in the current strategy of trading, to buy and hold.
Summary:
Pressure seems to be building for some unexpected event that would cause a market break; Possibly the devaluation of the Yuan as discussed by Steven Van Metre.
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.
Interest rate sensitive markets are on the move … lower.
Updated 3:02 p.m. EST, as noted below
Fastenal (FAST), Home Depot (HD), Lowes (LOW), Real Estate (IYR), Weyerhaeuser (WY), Homebuilders (XHB), all taking a hit early in the session.
In their own way, there’re interest rate sensitive and related to real estate, construction or maintenance.
Since mid-January this year, real estate, IYR was identified as a potential strategic short opportunity.
Numerous shorts (via DRV) were opened, some exited (not advice not a recommendation).
On February 25th, it was obvious in early trading, this is it.
Reversal at hand.
The last of the shorts via DRV was opened and documented here (not advice, not a recommendation). Now in today’s session, we have a completed wedge and apparent downside breakout in progress.
There’s a lot of congestion to get through before (if and when) IYR reaches ‘free-fall’ territory. A lot could happen between now and then.
Even so, it’s fairly safe to say, price action’s not likely to come back to the IYR session high.
But that’s exactly what it did … and pushed just a bit higher (+0.15-pts).
So, we’ll set the DRV stop at that location (session low) … approximately 9.41; not advice, not a recommendation.
With the above push, the DRV stop will be set at today’s session low (currently 9.39).
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.
Nothing gets sharks in the water faster, than a failed move.
Last Friday, real estate IYR closed below support (black line). Doing so, put itself in Wyckoff spring position.
‘Spring position’ is a technical condition of instability where price can reverse dramatically.
At the open yesterday, that’s exactly what happened. IYR launched nearly instantly to a 50% retrace.
From there it was a long day of moderate price erosion all the way to the last hour; then it all went south.
IYR closed just 0.22 points higher or +0.25%, after being as high as +1.73 points (+1.98%), early in the session. In addition, that close was back below support on the heaviest volume since February 2nd. … another bearish sign.
We can see momentum, MACD has exhausted itself and posted numerous bearish divergences.
On the fundamental side, just in the past 24-hours, there’s been a raft of news articles posted showing commercial real estate’s in serious trouble.
IYR could still rally from here. However, with the conditions described in this post, it’s not likely.
Summary:
We’ve been short this market in a big way (not advice, not a recommendation) via DRV. The plan is to increase position size as long as price action allows low risk entries.
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.
IYR has reversed with a decisive ‘outside-down’ week.
This sector has likely seen its highs for the year and probably its all-time (recovery) highs.
The latest news from Steven Van Metre does not paint a good picture for the economy or the markets (bonds excepted).
Jerimiah Babe (J.B.) has also posted an update on Los Angeles. It’s a human and economic tragedy. Unfortunately, this is where the Cadillac has gone off the cliff.
We’ve continually held to the stance, there’s no recovery.
The “recovery”, is a mainstream narrative intended to keep the herd focused in the wrong direction and on the wrong things.
Judging by the hysteria with small cap short squeezes, physical silver and bitcoin (kind of hard to access when the power goes out), the promulgator to the proletariat, the mainstream media, has done an excellent job.
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.
Of course, it’s all part of the plan but that’s a topic for another time.
What’s shown in J.B.’s video(s) is that one after another, commercial properties are boarded up and fenced off.
One might think it’s only progressive utopia California that’s having a rough time; taking a look at comments to his videos shows otherwise.
Just one example taken from the video link:
“Even if the U.S. lifted all lockdown restrictions 100% TODAY, I still think for many companies, its too late.”
The economy is not coming back … not in our lifetimes anyway.
No matter what happens, re-building will take many decades. Even so, the destruction has to be completed first.
We’re nowhere near downside end (economy, markets or otherwise).
On Thursday you would’ve thought from the news, we just collapsed by 50% or more. In fact, the S&P (SPY) was only down -2.41%.
Think about what happens we get the hit … that does not come back.
As early as May 12th of last year, this site began to note the similarities of the markets to August of 1987. In retrospect, that post (and the ones that followed) seemed a little premature.
It’s a different story now.
Markets even more extended; bond rates higher.
Throughout the years, going back to the early 1900’s, the professionals always preferred down markets. Profits (and fortunes) can be made much faster and with more reliability.
Fear is much easier to gage (on the charts) than greed.
With that in mind, we can look at real estate with a clear head and assess the opportunities.
It turns out, not only has IYR got itself into a terminating wedge, it’s doing so at Fibonacci time frames.
During the past six-weeks, my firm (link here) has been positioning in and out, and back in, several times using short fund DRV (not advice not a recommendation).
Just yesterday, before IYR broke decisively lower, that DRV position was increased to its maximum level thus far.
Obviously, a new high in IYR is not anticipated. The reason for selecting real estate as a strategic short (unlike the LABD swing trade) is for the downside potential.
Inverse leveraged funds work best during a sustained, directional move. It remains to be seen if DRV was a good selection; not only for a trade vehicle, but for the anticipated collapse in real estate.
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.
With GDX posting a new weekly low (below 33.23) early this session, it’s helping to confirm a pivot and acceleration to the downside.
Bullish or bearish, it’s a crowded trade that we’re avoiding (not advice, not a recommendation).
It took over a week of oscillating price action before GDX decided to post below the February 4th, low.
Even so, when an established low is penetrated, it puts the market in “Wyckoff Spring Position’.
That means there’ll (potentially) be some type of rally or rally attempt. If that happens, it’s just more oscillations that result in erosion of leveraged inverse funds.
Other areas of the market are performing better on the downside. Real estate IYR, looks like it may post a narrow range day (as of mid-session).
It’s typical action when at support. If there’s no break lower today, then IYR could make an attempt higher at the next session.
Based on previous analysis, that attempt (if it occurs) is expected to be short lived.
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.
Trending higher at nearly 1,000% annualized, it’s obvious a break is coming.
Exactly how or when of course, is not known.
However, it has been proposed by this site (for years), when the final bubble-break comes, it’s likely to be an over-the-weekend event that results in a severe gap down open.
A gap down of say, 20% – 50%.
Can’t happen? After the events of 2020, we should all know that anything can happen.
Theoretically, a gap down of -25% from current levels, puts IWM right at long-time support around ~170.
Under such conditions when a severe disconnect is possible, one approach is to prepare on the short side (not advice, not a recommendation).
Using Wyckoff analysis techniques (for bear markets), that means to look for sectors not participating in the mania. When the downdraft hits, those markets will (potentially) move lower farther and faster.
That brings us to real estate, IYR
Using the same time-scale and trend line notations, we get the chart below:
From a purely visual perspective, the struggle to move higher is obvious. The past two sessions have made no net progress.
Looking more closely at recent action, IYR is following a Fibonacci time sequence.
From the low on January 12th, to the most recent high on Wednesday the 10th, is a Fibonacci 21 days.
The added bonus is the inflection point on Day 13.
Bid/Ask spreads on inverse fund DRV, in the pre-market are not that reliable; at this juncture, 8:10 a.m., EST) they indicate a higher open.
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® 