Elliott Wave: American Tower

Paul Harrell likes to start his videos with:

‘The next twenty minutes are going be long and boring. You might want to skip to the end to see the conclusion.

His rabid and loyal fans then proceed to hang on every word of his self professed ‘boring anecdote’ until the very end.

Not saying this site’s in the same league as Harrell’s.

Just saying, the following is going to be a tedious discussion of American Tower (AMT) and how it just might be ready to start an Elliott Wave III, down.

Market Extremes:

Its been no secret. The markets are at price levels and valuations never before seen.

In this site’s opinion, going long anything, is insane.

There could be a break, upset, world event, container ship run aground (oh, wait…), cyber attack, volcanic eruption (oh, wait …), major earthquake, nationwide weather freeze (oh, wait…) food supply disruption (oh, wait…) bond bear raid (oh, wait…) currency devaluation, or any myriad of disconnects that would instantly change the dynamic.

Change the dynamic in such a way as to make low-risk long exit, or short positioning impossible.

This site has documented several times where major brokers have already gone off-line as a result of markets fluctuating to the upside.

What happens when it turns down? Good luck getting out.

Looking for the (short) entry:

Its been an on again, off again, and back on again affair with shorting real estate, IYR. Anecdotal evidence such as Jerimiah Babe’s updates from his area, show the market’s been vaporized and is not coming back.

We’ve shown from a Point & Figure chart perspective, IYR has built significant price action congestion.

In Wyckoff terms, congestion equals potential.

The IYR index has built enough congestion that if/when the reversal comes, price action has potential to decline below the 2009, lows.

American Tower (AMT) Symmetry:

Now, for the analysis of AMT.

We’re going to start with the daily chart which has an interesting pattern of equal distance moves (or waves):

This equal move structure gives a hint that something’s up. The market’s moving in an orderly fashion. But what order?

To add more intrigue, we’ll go to the weekly chart. We see each retrace of the two initial waves, was Fibonacci 62%.

The last retrace (up to Friday’s close) is essentially 100%.

Looking up Elliott Wave “equal waves” turns up this presentation. It helps some but does not cover the current situation. The take away from the video is that equal waves do occur.

Looking at the daily close chart of AMT gives us this:

The Wave 1, down is placed at the low extreme. Price action then corrects to pivot (magenta oval) at the Fibonacci 38.2% retrace level.

It’s a near perfect retrace.

The reason to think AMT just finished a complex correction that terminated at “z” which is also “2”, is the structure of the fifteen-minute chart below.

The first chart is unmarked except where price action changes character:

Then we put in the Fib projection tool at that location; the inflection point, to get the following:

Incredibly, the top of Friday’s price action is also a Fibonacci target (423.6%) projection.

Getting back to the daily chart and labeling it using the above information gives us this:

Removing all but the labels is more clear:

There could be other ways to label the structure. It may become (very) apparent at the next open whether this interpretation is correct.

However, coupled with yesterday’s analysis of IYR, and its technical condition (at the extreme), we get the sense we’re close to some type of price action hesitation or outright reversal.

Summary:

We’re short this sector via DRV (not advice not a recommendation).

Price action appears to be at extremes and is meeting Fibonacci and support-resistance levels simultaneously.

Not related but an interesting coincidence (maybe): Van Metre’s update on Friday night:

“Is This a Sign Real Estate Prices Have Peaked?”

The futures markets just opened … S&P down 7-points. Let’s see what happens next.

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.

Early or Late?

It may have been Robert Prechter Jr. that said years ago;

‘You’re either going to be early, or late’

He then went on to say his trading method usually puts him in a little early on the move.

That means there are times when the anticipated direction does not materialize.

So, your either suffering through the pain of anticipated reversal (for seconds, minutes, or days), or you’re chasing the market.

You make the call.

There really is no other choice.

Both methods involve psychological pain.

Referring back to Prechter, he also said some of the best traders he knew were former Marines. By definition, they are well trained to deal with pain.

My former mentor, the late David Weis would say after hit on a set-up, if conditions warranted, he would enter again; as he told me, he would ‘stick his chin out’ and effectively tell the market to ‘prove him wrong’.

It was an interesting choice of words for him as one can see from his training video …. he had a distinctive chin.

Trading Style:

The trading style presented on this site is a combination of Wyckoff tape reading coupled with anticipating price action.

As inferred above, that means there may (and will ) be times of draw-down while working to enter a market reversal.

That’s where we are now.

Trade Actions:

Yesterday’s upward action in basic materials forced the ‘project’ out of its short (SMN) position. That sector may attempt to make a new 52-week recovery high before it’s ready for reversal.

Analysis: Real Estate, IYR

One market that did make a new 52-week high, setting up technically for a short, is real estate:

The weekly close of IYR has been inverted (turned upside down) to show the unique technical condition.

IYR has created a large terminating wedge that’s in the process of a ‘throw-under’. At times a market will attempt to breakout of a wedge in the opposite direction of eventual reversal.

This type of breakout tends to fail. Based on the dashed line contacting a prior congestion, there’s’ potential to at least hesitate in this area.

The daily chart below provides additional nuance:

It’s clear price action has contacted two prior areas of support – resistance during ‘throw-under’.

Anything can happen but it seems that IYR’s at maximum extension.

On Friday, IYR price action closed just 0.05-points off its high for the day. That high was also a 52-week high.

We’re now in a support-resistance zone.

If IYR is to move significantly higher, it might need additional fuel (a retrace lower) to break through.

Positioning:

The action then (not advice, not a recommendation) was to short the market via DRV.

Once again, the market itself is telling us where to go for opportunity.

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.

Dollar Rally

Wasn’t the dollar supposed to crash … go to zero … implode?

This is the flip side of the hyperinflation narrative.

Dollar implosion like hyperinflation, not happening.

Way back in 1921, Livermore said to Wyckoff that his assessment of the markets was, ‘it’s all about deception’.

Nothing has changed.

It’s in the best interests of those controlling the narrative to have as many as possible (always) on the wrong side of the trade.

We haven’t posted this link in a while … the video keeps getting deleted but re-appears every so often. This is how it really works … Period.

Note the date stamp on the comments. The video’s at least 13-years old and it’s still relevant today.

So, the dollar’s in a rally.

Not only that, momentum indicators, MACD, on the monthly, weekly, daily, all point higher. It’s in a rally and a sustainable one.

It’s completely opposite the accepted narrative.

You can feel the tensions building.

Bonds could be reversing but have already pushed rates high enough (long enough) to choke-off critical sectors of the economy like here and here.

Now we see the dollar has bottomed as well.

It looks like a strong multi-month (or year?) rally. Correspondingly, gold is weak. The overall markets are stretched to ever-livin’ extremes; never before seen.

Whenever this baby pops, try logging on to chaos, or exit any position (except maybe for the long bond).

Our approach then (not advice, not a recommendation), is continue work on positioning short. So far, the ‘project’ is taking small hits in those attempts. We’ll see how basic materials (SMN) works out today.

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.

Real Estate Channel

Yesterday, real estate IYR, may have formed a trading channel.

Update: 1:17p.m. EST. IYR has pushed past the channel. Short position via DRV exited (for now).

A new daily low (today) within channel boundaries would help to confirm.

If so, then stops for the long standing short position (via DRV) will follow down the outside right channel line.

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.

Test, Then Reverse

Today’s price action in real estate (IYR) looks like a test of the failed breakout (up-thrust) from February.

This session, price action came all the way back to support (87.90), which is now resistance.

The important part, the level did not hold. Late in the session there was erosion and retreat to close well below the day’s highs.

This type of behavior is near textbook for a significant reversal.

From a trading perspective, the short position via DRV was maintained (not advice, not a recommendation) except for reducing the position by about 2.5% … essentially negligible.

Today’s test and erosion is one of those few times where probabilities are high; the market’s tested the up-thrust (failed breakout) and we can expect prices to decline from here.

One last note adding weight: Today is Fibonacci Day 8, from the high on February 25th.

With conditions noted, posting a test high today, then backing off … indicates downside ahead.

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.

Inflation or Deflation?

Is the latest stimulus bill inflationary or deflationary?

For those adhering to the tenets of Wyckoff analysis (as this site does), you already know it’s sort of a trick question.

The answer is: It doesn’t matter.

Maybe a better way to put it, it’s the wrong question.

The right question is: What’s the market saying about itself?

The market itself will decide (or reveal) the next probable direction.

Before we get to the charts; remember, one objective for the (U.S.) markets and political kabuki theater is, destroy the middle class.

Exactly how that’s going to happen in the final act is unknown.

Perhaps it’ll be illegal to go to the bullion dealer (or the grocer) without proof of protection (injection). Problem solved.

That destruction remains the backdrop; the macro for the analysis.

Moving on to the charts:

Real estate remains in a terminating wedge. Last week’s action had IYR contact the lower wedge boundary and then retrace into the close.

Weekly volume was the highest since the week of March 13th, 2020, almost exactly one year ago.

So, we see the ‘face ripping’ Friday rally, ‘plunge protection team‘ action, had no material effect on the chart’s technical message.

Looking at it a different way, there’s also an axis line in play.

Market oscillations about axis lines are completely normal.

We’ll see if Monday’s action is ‘buy the rumor, sell the news’. We’ve already had buy the rumor (stimulus) with Friday’s rally.

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.

Closer to The Break

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.

If that’s going to happen it’s likely to be soon.

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.

Real Estate Breakout … Down

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).

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.

Real Estate: Off The Chart

New downside targets for IYR are literally, ‘off the chart’.

There’s a good deal of support in the 84 – 86 area. So, price action hesitation is to be expected.

However, technicals and fundamentals have aligned themselves. Conditions are now in place for a persistent, sustained decline.

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.

Failed Rally Attempt: Real Estate

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.

A short list of what has been found is below:

Mortgage market.

Mall values crash.

Bond tipping point.

Bond market calls Fed’s bluff.

U.S. Spending plummets.

Rising yields are now good for the markets?

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.

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.