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 mainstream has run out of hype; at least for now.
Their AI mania narrative and price action blew up yesterday.
The probability for a blow-up was identified ahead of time, here.
Who knows how many retail investors bought in, now, left holding the bag.
The more probable (overall market) outcome at this point, is sustained, persistent, downside … possibly for years if not decades (not advice, not a recommendation).
However, not every market is going to go straight down. Some, might actually go higher.
Natural Gas & The ‘Disruption’ Trade
One of those upside probabilities highlighted in this update was Nat-Gas.
From that update we have:
“If UNG, heads lower yet again, it could be the last straw for the weak bulls, causing them to close out.”
Nine trading days later, that’s exactly what happened.
The original chart of UNG, has been updated to show subsequent price action.
Natural Gas UNG, Daily
When price action penetrated support (lower blue line), it puts UNG at The Danger Point®
This is where the risk of being wrong for a long position is least (not advice, not a recommendation).
Positioning
Taking the above into account, with downside risk potentially minimized, two entries were made during this session (currently, 1:21 p.m., EST).
One at UNG 6.64, and another larger entry at UNG 6.75.
An obvious Hard Stop is yesterday’s low of UNG 6.49, with a Soft Stop (trader discretion) at today’s low of UNG 6.63 (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.
Yes … anything can happen but what’s the most likely thing?
At this juncture, based on price action so far (as of 11:38 a.m., EST), the SOXX looks like it will penetrate the blue line resistance tomorrow or the day after (not advice, not a recommendation).
That penetration should it happen, will set-up a potential reversal (Wyckoff up-thrust) condition.
Exactly how that action will take place is unknown. Nvidia (NVDA) is scheduled to release earnings tomorrow after the close.
Semiconductor SOXX, Daily
The chart shows a potential target area.
The target is right in the vicinity of a 50%, retrace from the reversal high (7/31/23), to the low, set last Friday the 18th.
Positioning
Based on the behavior of price action during the last session, it was clear for the short term, higher action in SOXX and lower action in SOXS was probable
With that, even though the stop of SOXS 9.93 was not hit (as it was today), a discretionary exit was made at SOXS 10.51, which yielded about +8.4% on the trade.
Next Steps
On the sidelines for now (not advice, not a recommendation) and watching closely.
It seems the mania has increased all the more even though we’re past the top on the SOXX.
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.
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.
Watch until the end (if you can stomach it) where the host asks in exasperation, after a 200% gain in NVDA, ‘is there really more upside?’
At this point (as of 11:05 a.m., EST), the answer is no.
Forces Of Thier Own
All the way back in 1902, Wyckoff discovered after studying the tape (the Ticker):
‘Forces were at work, moving prices, that had no connection to real values.’
That, ladies and gentlemen, is all you need to know.
Fundamentals are just a well-orchestrated ruse to keep the public thinking, if their pencil’s sharper than the next guy’s (think FactSet), they’ll have the market figured out.
Wyckoff ‘Nails It’
So, he we are.
Using Wyckoff analysis (reading the tape) the probability for the current reversal, was identified within a day.
The subsequent short position (via SOXS) was stopped out yesterday, almost lost completely, but for the re-entry @ SOXS 9.70 (not advice, not a recommendation).
As of this post, we’re a full point higher at 10.70, an 11%, gain in just hours … not bad.
With that said, we’ll shift gears a bit and go straight to the leveraged inverse fund SOXS, but use a 3-Day chart.
Semiconductors Leveraged Inverse SOXS, 3-Day
The 3-Day, is being used as the market itself has defined (for now) it shows price action characteristics more clearly.
Distance between the entry and the stop is 0.28-pts.
As a position size example:
Risking $1,000 on the trade would result in a size of 3,571-shares of SOXS (not advice, not a recommendation).
For more information on sizing, see Van Tharp, link here.
Note: There’s a big price difference (over 450%) between the Wycoff text and the Van Tharp text … just sayin’.
Next Steps
At this point, there’s not much to do on this trade (not advice, not a recommendation).
Keep in mind we’re at an historic bubble extreme, the likes of which has not been seen since Sir Issac Newton lost his fortune over 300 years ago.
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.
As if on cue, we have this piece of propaganda out from the mainstream.
‘AI short sellers lose big‘
Of course, there’s some truth … that in-total for the year, short positions have not been continuously profitable.
Contrary Indicator
The article represents another (potential) contrary indicator; short sellers (those that are left) may be about to ride the wave down (not advice, not a recommendation).
As the AI mania collapses, we’ll have the same set of clowns demanding short-selling be banned. 🙂
So, let’s see what our favorite AI chief cook and bottle washer’s doing in today’s session (as of 11:30, a.m., EST).
Semiconductors SOXX, Daily Candle
Ruh-Roh Scooby.
The daily chart has a terminating wedge that’s now breaking to the downside.
The magenta arrow with the ‘Note’ indicates, the current reversal was identified to the day; link here.
The dangerous part is, if the SOXX follows the ‘rules’ laid out in this link, it’s likely to be a swift and merciless decline (not advice, not a recommendation).
Positioning
With no obligation to do so, here is how I have addressed the SOXX, set-up thus far (not advice, not a recommendation).
Note: SOXS, is a ‘leveraged inverse’ fund for the SOXX
August 4th had two entries same-day, as noted.
This series is the fifth trade campaign in the SOXS for the year (SOXS-23-05).
Hard Stop is today’s session low of 9.46 (not advice, not a recommendation).
Obviously, with the SOXS currently at 9.97, all positions are well in the green.
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® 