Bears To Seize Control ?

World Chaos, Continues

The long-time reasoning behind this site’s ‘short only‘ trading plan, is becoming abundantly clear.

For years, there have been no ‘long’ trades on anything except leveraged inverse funds.

The premise? A ‘disconnect’ can happen at any time.

At this point, we’re getting to see those potential disconnects in real-time on a near continuous basis.

The past week bled-off the massive put leveraging; thus, setting the market up for (potential) downside reversal.

Getting Back To ‘Normal’

Those who bought the dip in Pavlovian fashion, may be thinking at some point, we’ll get back to ‘normal’.

News Flash:

What’s happening now, Is The Normal.

This is how it’s going to be on a go-forward basis.

Conflict, shortages, supply chaos, weather weaponry, nuclear saber rattling, bank runs are now, all normal.

With that, let’s look at last week’s markets and the set-up for the week ahead.

The SOXX, Rebounds

The last update discussed being short the semiconductors via inverse fund SOXS (not advice, not a recommendation).

The stop was hit, and that position (SOXS-22-02) has been closed out with a gain of about 6.2%.

Note how in the daily chart below, price action came right up to the stop level shown previously, then penetrated that level ever so slightly.

The ‘market’ knows where you are.

Being (stopped) out lets one look for a better opportunity.

Biotech (SPBIO), The Next Set-Up:

Turns out that biotech, SPBIO, may be at a low-risk juncture for a short via leveraged inverse fund LABD (not advice, not a recommendation).

Yesterday’s post highlighted some of the reasons for a biotech reversal.

The analysis below, builds on that reversal potential.

The weekly chart of SPBIO, has a channel and Fibonacci time correlation(s).

The next chart zooms-in on a possible target for a move lower.

Leveraged Inverse, LABD

Another reason to think SPBIO, is ready to continue downward, can be seen on the 4-Hour chart of LABD.

The prior report had daily range narrowing.

Getting closer into the action, we see the 4-Hour range narrowing as well.

In addition, down-thrust energy (Force Index) for Friday’s move appears to be exhausted.

Positioning

Early or late? If you’re trading professionally, that decision must be made ahead of time.

Some traders like to wait for ‘confirmation’ of a move and there’s nothing wrong with that.

For this author however, waiting for confirmation means I’m late. I’m behind the curve and ‘chasing’ the market.

With that said, LABD was entered towards the end of the session on Friday at 41.05 (not advice, not a recommendation).

We’ll find out soon enough, if Monday’s open will be in-the-green.

Summary:

Even as this post is being created, world news continues to pour in … this time, from North Korea.

Anything can happen in the coming week. The markets could somehow ‘shake-off’ all of the news and move higher.

However, probability suggests market continuation to the downside.

At this juncture, we’re about six hours before the Sunday futures open.

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

Bleeding Down The Options

Two Ways To Make ‘Put’s Worthless

The first way is of course, a rally to the upside.

That’s what market traders are expecting based on massive (retail) put option buying; the largest on record.

The other way, not talked about as much, is the boring way.

That is, the slow grind of time.

The massive positioning with puts can be ground down to nothing as well by the market going sideways or down but not down fast enough.

The semiconductor index the SOXX, has already pushed lower in a massive energy thrust (details here and here).

The instabilities from this action need to be worked off.

Prior analysis shows the most likely outcome, if yesterday’s highs are not breached, is a sustained move to the downside.

Let’s take a look at what the SOXX, is saying about itself.

SOXX, Daily Chart

We’re about ninety minutes after the open, with the following chart.

Marking up the chart, is a potential stop location for an open short position SOXS-22-02 (not advice, not a recommendation).

If SOXX penetrates that level to the upside, the market is either reversing higher or heading higher for more testing.

Either way, it’s not (for my firm) the place to be short.

The next chart shows a possible trading channel.

Price action can hug the right side of this channel and decline slowly enough to effectively neutralize the massive put positioning as linked above.

That scenario is not generally discussed. It’s not exciting and it does not get ‘clicks’.

Summary:

Today’s action will be important. A new daily high will close out the SOXS-22-02, short (not advice, not a recommendation).

A slight new low or and inside day, keeps the trade alive and results in one more day of put options bleed.

Everyone seems to be expecting a crash or a short-squeeze.

What’s not expected, the most frustrating for both sides … is neither.

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