S&P 500: Downside Target

If the analysis is correct and the S&P’s completing a terminating wedge, then we have a downside target.

The measured move is around 330 – 333. Reaching that level would put the SPY down about 16% from all-time highs.

If that happens, expect the usual suspects (the financial press) to say, ‘well, a bear market is 20% or more … so we’re good’.

Let’s see how that works out.

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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.

Changing Hands: Bonds

The financial press is rolling out the usual suspects; bonds yields are going stratospheric and hyperinflation’s just around the corner.

A more likely view, one that’s actually based on reality, the price action itself, bonds just changed hands; from weak to strong.

Those selling or going short bonds (weak hands) at this juncture are potentially left holding the bag in a big way.

Taking a trip back in time to Livermore’s day (Reminiscences), he stated time and again, the large speculators could not enter or exit their positions at will.

They needed to have some kind of ‘event’ with heavy volume so that it would mask their moves.

It looks like we just had such an event.

The weekly chart of TLT, shows two major volume spikes. One where bonds reversed lower and now … a potential reversal to the upside.

We’re dealing with probabilities and over two-hundred years of market activity (since the Buttonwood tree).

Huge volume spikes have significance. They typically signal a pivot or the start of one.

Using that reasoning, we may have seen confirmation of rotation not only in bonds but the markets themselves; The S&P, Dow, Nasdaq are pivoting lower, with bonds and the dollar reversing higher.

Summary:

The futures market opens in a few hours. It’s typically a light-volume affair for bonds.

At times, Steven Van Meter presents in his updates how bonds have been typically slammed lower in the overnight.

That type of action has been going on for months. We’ll be looking to see if there’s a change of character.

Stay Tuned

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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 … Implosion?

Watching J.B.’s (Jerimiah Babe’s) Los Angeles walkabouts, proves commercial real estate’s already imploded.

The instant the linked video starts, we see the root of the problem.

Neo-feudalism.

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.

Stay Tuned

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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.

Biotech Short, Revisited

So, the biotech short via LABD got stopped out last session.

Even though price action by its own behavior early in that session said to exit (at the highs), the position was maintained for the sake of argument.

The original stop was set at LABD 18.35, which was the 4-Hour low, noted yesterday.

Late in the session that stop was hit.

The overall sector (IBB) remains in a reversal with both daily and weekly MACD momentum indicators pointing lower.

In fact, Weekly MACD has a double bearish divergence in the histogram with MACD lines about to cross to the downside.

Putting all that together, expectation for inverse fund LABD is to head higher after yesterday’s counter-trend move.

Once stopped out (at LABD 18.33), LABD was re-established at a lower price (not advice, not a recommendation).

That entry price is on the weekly chart below:

We’ve switched to a weekly chart to show there are two other times in the past year, where LABD had three weekly up bars in a row.

Those reversals had narrow ranges and thus were quickly negated. This time it looks different.

The current bar is not complete but with the overall market (S& 500) at extremes and ratcheting lower, probabilities are high LABD will close higher for the week.

As for setting the stop on the new position, we’ll let the market decide.

Counter-trend action in the early session is usually over by 11:00 a.m. EST.

We’ll look at LABD at that time. Till then, hard (emergency) stop is located at the weekly LABD low of 15.96

Stay Tuned

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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 2021 Top

Empirical data shows market tops tend to occur before, during, or just after a holiday week.

Probably the most famous market top, was September 3rd, 1929.

That top was the Tuesday following the Labor Day weekend.

Now, we have another potential Tuesday top; February 16th. The Tuesday following the President’s Day Weekend.

While shiny object distractions abound; Game Stop (GME) hearings, Silver (SLV) squeeze, Bond (TLT) rout and more, the market may have quietly and without fanfare, put in the highs for the year.

Judging from the internet and YouTube chatter, everyone’s expecting some type of immediate crash.

Well, since everyone’s expecting it, it’s not likely to happen. Or more accurately, not the way anyone expects.

The last meltdown about a year ago was pretty much a straight-down affair. If we’ve seen the highs, what happened last time won’t happen this time.

That leaves at least two options:

  1. Gap down 15% – 30% or more, overnight.
  2. Slow, grinding decline, hardly noticeable until one day …

The chart of SPY below shows a possible Head & Shoulders, top formation. It’s still very early in the chart as even the head of the pattern’s not yet complete.

Nonetheless, it’s important to be ahead of the game and anticipate the next moves of the market.

Note the volume’s tapering off as we get into a possible head formation. If there’s to be a Right Shoulder, a textbook case will have volume fall away even more.

It’s about a half-hour to go before the open. SPY is trading down -0.65% to -0.80%, while TLT is unchanged.

If TLT makes a new daily high above 144.32, it’s a good sign we may have seen the bottom of that market.

Stay Tuned

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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.

Finally, Inflation Shows Up

Its been nearly twelve years exactly since the market bottom of March 9th, 2009.

At that time gold tracking fund GLD, was trading around 90.

Today, it’s at 167, a gain of about 85%.

Gold futures for April ’21, closed this past Friday at 1,777.4

Either way, it’s a far cry from the $10,000/oz. that has been bandied about for what seems like forever.

Prices for energy and food are rising because of reasons not discussed in the financial media.

That media is certainly not going to educate the public.

In turn, that public has shown there’re certainly not going to educate themselves. If they were awake, news channel ratings (in the link) would be at zero.

Unfortunately, this time around, the game’s up.

The ongoing collapse will decimate those who refuse to wake up and will probably take some of those who are, with them.

Which brings us to the so called inflation, at hand.

What can be said? We can call it lies, misinformation, propaganda but none of those really get to the root.

Input prices are rising not from inflation, but from supply constriction and disruption.

For example, the corporate (big-Ag) food supply chain as reported on many times, is intentionally being destroyed. The result of course, prices go higher.

We’re also in a quiet sun-cycle period that only serves to help with (cold) weather extremes. The only discussion from the media concerning the weather is that’s it’s getting warmer, right? Opposite of reality.

So we’re taking that ‘opposite of reality’ as a contrary indicator.

Whatever inflation we’ve got after nearly twelve years, is probably at or near a peak … ready to head lower.

That includes the market as well. The likely outcome:

Market down, bonds up.

The daily close of long bond TLT, has it in a support zone. One attempt has already been made to position long via TMF (not advice, not a recommendation) as detailed in this report.

Once again this past Friday, another TMF entry.

Both bonds and the markets (i.e. S&P 500) are at opposite extremes. The risk of loss in bonds may have reached its nadir.

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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.

Bonds: Measured Move, Met

From the wedge breakout to the downside, Friday’s action in TLT has met the measured move.

Price action finished at the low of the day (+0.01) and is posting a bullish MACD divergence.

On the other end of the spectrum, the S&P 500 finished at all time highs.

Intuitively, we can see how this is setting up.

Each market is at an extreme. That includes real estate, IYR at its own 76.4%, retrace … although severely lagging the S&P.

Unfortunately at such junctures, we can expect some type of ‘incident’ to set things off in the opposite direction.

It may not happen but if it does, the markets define the news; not the other way around.

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.

S&P 500: Trend Break, Test

Yesterday, the S&P tested its trend breakout and then reversed.

This morning’s pre-market action is down again.

The teminiating wedge is clear. Then a decisive break with an upward test. Late in the session that test was rejected and the market headed lower.

That scenario could have easily been from 1931’s stock market action, not 2021.

Buried within the Wyckoff training course material (first published 1931), available here, is a statement to the effect:

‘When a market breaks a trend decisively and with volume, there’s nearly always some type of rally to test the break.’

That’s exactly what we got yesterday. Now, the S&P (SPY) is in a wide pre-market range but essentially trading lower.

A terminating wedge is typically the last stop in a move; whether it’s up or down.

The S&P could of course rally from here. At this point, probabilities favor lower; at lest to a measured move target in the vicinity of 368, for SPY.

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.

All Markets Down

Pre-market action has all major indexes trading lower; SPY, DIA, QQQ, SOXX and IWM; all down.

Real estate, IYR has no real pre-market volume (20-shares) so its open is unknown. However, inverse fund DRV, does have volume (3,700 shares) and its action is up about 4%.

The daily close chart of IYR (above), has price action contacting an established axis line.

That was yesterday. Over the past two-weeks, as price ratcheted higher volume has declined (circled area enlarged).

That decline indicates lack of commitment at these levels.

Yesterday’s close also put IYR firmly in up-thrust position (ready for reversal).

Over the past week, short positions were opened using DRV (not advice, not a recommendation)

Average price of the short equates to DRV @ 9.92; not far from current pre-market trading.

If IYR posts a new daily low (below 86.62), it’s another data point the anticipated reversal may be at hand.

The rising action has changed the P&F forecast reported a few days back. Updates will be forthcoming.

If this is the start of a sustained reversal, the plan is to build the short position as price action dictates.

The downside of the entire market (S&P, Dow, etc.) is immense. Commercial real estate is especially vulnerable. Price action itself tells us that.

Stay Tuned

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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.

Flat-Line: Real Estate

It’s taken over six months for real estate’s IYR gain a net positive 1.9%.

The S&P eclipsed that many times over during the same time frame; gaining nearly 19%.

By this time, everyone knows about margin debt at never before extremes and the latest hedge fund blow-up.

As with earthquakes, cracks in the system appear to start small and then build to a massive disconnect.

Behind all the shiny object headlines, commercial real estate looks terminal. While the rest of the market powered to new recovery highs, IYR went flat-line.

Today’s close may be important.

We’ll see if somehow IYR is going to break out of the six-month sideways action, continuing higher or if this is it; no more upside.

Currently, the firm is short the sector with a negative return. Possibly a debatable position. However, if IYR is going to stall and reverse, this is a high probability location.

It’s not much different than Van Metre’s approach to the bond market. We know how the game is played. The market remains at manic levels … just waiting for the catalyst.

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.