Biotech … Ready To Reverse

Highly leveraged (3X Inverse of SPBIO), LABD, looks ready for upside reversal.

The next chart shows trendline contacts.

Volume increased on Friday while the trading range narrowed significantly.

The next chart’s a little busy but zooms in on the volume and the daily range in question.

The overall markets have rebounded during the past two trading days.

Inverse funds have declined correspondingly.

Interestingly, LABD seems to have maintained its upward bias (down for SPBIO) better than other inverse funds like SDS, DXD, SOXS, QID and TZA.

Summary:

For downside action, one wants to look for the weakest sector.

Look for a new daily LABD high on Monday, (new low for SPBIO).

This is a typical entry signal with stops at the last session’s low; currently LABD, 40.08 (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

Basic Materials, Building Blocks

Infrastructure … Not Going To Happen

The infrastructure bill, right along with any kind of sustainable ‘recovery’ is just not in the charts.

Sure, the bill passed into ‘law’, if you can call it that; however, law and action are two different things.

We’ll get into more fundamentals behind why it’s not happening in tomorrow’s Random Notes … to be released later in the day.

One hint on why we’re not getting a major U.S. wide building program, there won’t be the manpower or supplies available … each for their own reasons.

That brings us to the chart of the sector.

DJUSBM

The weekly chart shows how it looks going all the way back to early 2008.

If you did not immediately pick up on the right side’s message, it’s highlighted below … a massive bearish MACD divergence.

The divergence proposes that upside momentum for the sector is all but spent.

Let’s take a look at previous downside action and the current possibility.

Anybody that’s awake will not argue the current situation’s worse than 2007 – 2008.

If that’s the case, and if the market’s still alive at the bottom, DJUSBM could get as low, or lower than 2008 – 2009, levels.

A decline over 80%, is not uncommon for a bear/depression market. The Dow Jones 30, from top-to-bottom, during the Great Depression was around – 84%.

Inverse Fund, SMN

SMN is -2X inverse the DJSUBM.

However, this fund is not like inverse ETFs; SDS, DXD, SOXS, QID, DUST, and so on.

Basic Materials is not ‘popular’. At least, not yet.

That means the fund is illiquid with larger spreads (bid/ask). In addition, it takes a good few minutes after each open for those spreads to calm down and narrow up.

It’s not for the inexperienced.

Summary:

As we’ll get into tomorrow, ‘normal’, is gone.

There’s not going to be ‘normal’ (a personal opinion) in the lifetimes of anyone reading these updates.

That doesn’t mean there are no opportunities.

Basic Materials, DJUSBM, is about to, or already has (potentially) started its downside reversal.

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