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.
If there was a day to attempt a close of the (August 2nd) gap in biotech (XBI), today was that day.
With the higher open, supposedly from an interest rate policy reversal in Japan, link here and here, there appeared to be plenty of upside momentum for higher prices.
It didn’t happen
Instead, XBI posted a new daily low, painting that gap as a downside breakaway (not advice, not a recommendation).
As noted in other updates, failed moves are the most telling, getting focused attention from ‘The Street’.
Biotech XBI, Daily
The breakaway is noted.
In addition, trendlines have been updated.
The market could somehow recover and close the gap.
However, with the poor bond auction, pointing to no rate cut or even a rate increase, probabilities suggest more downside for XBI (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.
Developing a trading plan that accounts for broker outages, blow-ups, and platform lockups, was presented on this site, as early as December of 2020.
Back then, we had this:
“Built into that [system] approach is recognition there will be market outages, trading halts, communication interruptions and natural disasters.“
“The one thing that may separate this site from others, these (potential) events are taken into account.“
Fast forward to now.
Those events are not ‘potential’ anymore, but a reality.
Note: Before leaving that post, from December 2020, let’s not forget, the dollar reversal (and rally) discussed, is still going, nearly four years later!
That’s what’s meant by ‘a strategic, engineering perspective’ (see About).
Moving on to the topic at hand.
The last update showed potential trendlines in biotech, XBI.
As a result of today’s action, we’re revisiting the post with new information.
Biotech XBI, Weekly
As Dr. Elder said years ago, ‘trendlines are not made of glass’. Trendlines are more like a wire fence; the market can attempt a breakout that may ultimately get negated.
With the weekly XBI, that may be the case.
We’re about one hour before the close, only one day into the trading week; it’s pre-mature to say XBI, will finish the week (or even the day) inside the trendline shown above.
However, if we do end the week lower, it may be a serious bellwether; XBI could be in deep kimchi (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.
The daily chart of biotech XBI, may be showing us early signals of a trend as well as trading channel.
Back in the day, when being mentored by David Weis, he would typically start the session by putting up a chart on his computer (with me logged in remotely) and then ask:
“What do you see?”
More importantly, he did not ask, what I ‘thought’ or what the Fed was doing, or any other mainstream form of distraction. No, it was always “What do you see?”
So, we’ll do the same.
Biotech XBI, Daily
We’re moving in close with the (un-marked) 3-month, daily; what do you see?
Two things should be noticed almost instantly.
Frist: Heavy volume at the last session this past Friday.
Second: Price action (the close) is hanging in ‘mid-air’ with the next support level over two-points away, near 94.0.
Now, for the marked-up charts.
We’re using the ‘reverse’ trendline technique, presented in the Weis video to determine a potential right side trendline (black dashed line).
Next, we have the Up-Thrust on the daily which is also the right side of the ‘double top,’ shown on the weekly.
Taking both timeframes together, implies a significant inflection point (not advice, not a recommendation).
Anything can happen and the market could recover at the next session.
We’re below support (now resistance) and therefore, technically, in Wyckoff ‘spring’ position.
However, probabilities indicate we’ve had a downside pivot of some significance. That, along with heavy volume at Friday’s session would imply follow through at the next session (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.
‘When the tide goes out, that’s when you find out who’s been swimming naked’.
Or, to put it another way:
‘Everybody’s a genius in a bull market’.
Well, ladies and gentlemen, here we are.
We’re about to witness what method’s best suited to handle typical ‘price destruction’ behavior of a bear market (here and here) along with possible chaos in commodities.
That challenge also includes this site of course.
Bear Market Behavior
If we’re really entering a bear market, prices typically do not go straight down unless there’s an outright crash.
No …Bear markets are all about what’s called ‘price destruction’.
That is, price action whipsaws a near infinite number of times; getting into (a short) position for the downside or (long for) an upside squeeze is incredibly difficult.
The most recent example of this was the volatile whipsaws in 3X leveraged inverse fund, SOXS:
Swings over +/- 20%, back-to-back in days if not hours.
With that said, we’re looking at biotech XBI, to see if there’s a chance of it being ‘well-behaved’ during a decline (not advice, not a recommendation).
Biotech XBI, Weekly
On a weekly close basis, we’ve had a double top.
Using the MACD, it shows momentum weakened on the leg up to the second top.
Watching price action (the tape) of XBI late Friday, near the close, it gave the appearance of short covering.
Upward spikes that appeared to be labored.
If that’s true, then a lower open at the next session would be the expectation (not advice, not a recommendation).
Taking Action
As the disclaimer states, this site is ‘not certified’ by the SEC and does not, cannot provide any advice.
What it can do, is infer the actions being taken.
With that said, this update shows the ‘category’ side bar with LABD-24-16, thus inferring a short position via LABD.
That’s the firm’s identifier used for spreadsheet tracking; the 16th biotech short via LABD, for the year.
Never Too Early, To Trend
In the next update, we’ll discuss how even in the early stages of (potential) XBI reversal, we may already have a trendline.
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.
During today’s Fed induced squeeze, one index was noticeably stubborn.
Biotech looked like it was going to play along.
However, as the regular session wrapped-up, biotech XBI, retraced, proceeding all the way down to close near its prior day’s close.
Biotech XBI, Hourly
The hourly chart shows the initial squeeze that didn’t.
The last hour had significant volume, indicating the potential for more downside at the next session (not advice, not a recommendation).
Contrast performance of leveraged inverse semiconductors SOXS, at a massive -20.21%, loss on the day to leveraged inverse biotech LABD, at just -0.34%, loss for the day.
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.
Since Wyckoff analysis doesn’t care about the press, we’ll use it to discern the (potential) truth.
Let’s see how it did in the recent past. The Nat-Gas (UNG) low, was identified to-the-day,link here.
From that post, was this:
“Downward thrust in Nat-Gas UNG, appears to be exhausting itself after a 20-month, bear market.Risk is never zero, but currently appears to be at a low … “
So, it was. Afterwards, UNG bounced near, but never touched that low.
Twelve trading days later (Fibonacci 13 days, from low), it reversed decisively to the upside.
The Same, But Not
On the medium, to long-term, CORN action is the same as biotech (XBI), but opposite.
Instead of an up-thrust two-years in the making, we may have a spring set-up, taking just as long if not longer.
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.
From the outset, the premise for biotech XBI, was this:
We’re in a huge up-thrust, several years in the making (not advice, not a recommendation).
With a set-up that big, downside potential was projected to be just as big, link here.
Then came the hard part, validating the premise and getting into position.
Nural Plasticity
So, it’s been on again, off again; a total of seven short trades; LABD-24-06 – LABD-24-12, with an eighth, LABD-24-13 opened, as of today.
The entire (closed) series has been profitable.
However, during that time, assessment of (major) downside potential shifted from confidence to caution, and now back to confidence.
‘Sticking to one’s guns’, no matter what the market (the tape) is saying, is a sign of real trouble.
The market itself directed the entering/exiting.
With that, let’s move on.
The ‘New’ Paradigm
Reviewing the host of ‘experts’ in the press and YouTube alike, (except for UE), everybody has their reason on why nothing (bad) will happen until after the ‘election’.
The last go-round should have broken that paradigm completely; but no, we’re still hanging on.
The ‘new’ paradigm is probably, ‘no’ paradigm. 🙂
From a Wyckoff perspective, the financial press is to be ignored except for when data releases are scheduled.
What’s in the release is not important; it’s the time and date itself, warning of potential volatility.
Biotech XBI, Daily (inverted)
Once again, inverting the chart to show the short-side (LABD) potential (not advice, not a recommendation).
Note: The dashed blue lines, an extension of the support level shows we’re also in a potential spring set-up at one higher timeframe, the weekly; more background, link here.
Positioning
As noted above, a new short position was opened via LABD, during this session (not advice, not a recommendation).
Typically, discussion of open trades within the trading community is (or should be) taboo. As Elder said years ago, there’s the real risk of ‘ego’ causing errors in discernment.
With that said, I might exit this trade at any time, without notice, without explanation.
Veteran traders will agree with that statement; when something’s ‘off’ with a trade (only known to them), it’s time to get out.
Nonetheless, a hard stop for today’s position would be yesterday’s LABD, low of 6.97 (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.
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® 