From the outset of the bull market’s end, biotech has been the downside leader.
Of the two indices being tracked, IBB and SPBIO, the latter of the two, is the weakest.
Over the past several weeks, it’s been like a terrier on a mailman’s leg concerning positioning short this index (not advice, not a recommendation).
In the end (as we’ll see below), it turns out that waiting for an actual penetration, print, and close above resistance, was the best approach.
Now, it’s obvious, we’re in a reversal.
The unfortunate part from an economic standpoint, this could be the next big leg lower.
Biotech SPBIO, Daily Close
Penetration and close above resistance (blue line).
Then, price action retreats below resistance and back into the trading range; Wyckoff, Up-Thrust (reversal).
It’s important to note, if SPBIO closes at this level or lower, the prior analysis of ‘grinding to a halt‘ on a weekly close basis, remains valid.
Positioning
Right or wrong, the short position LABD-22-03, was never fully exited (not advice, not a recommendation).
Everyone has their own style.
From a personal standpoint, I despise ‘chasing’ the market. Chasing is for the lazy or frightened who are too afraid to pull the trigger. No thank you.
In fact, the LABD-22-03, position was increased near the end of yesterday’s session.
The intuition, the gut feel, if you will, was ‘This sector’s going to reverse. When it does, it’s going to reverse hard’.
With today’s pre-market action (about fifteen minutes before the open), LABD, trading higher by 3.10-points, or +6.35%, that intuitive assessment is proving correct.
At this point, an obvious stop level would be yesterday’s LABD, low @ 45.77
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.
First, biotech SPBIO, ‘printed’ into the danger point.
The next day (yesterday), it ‘closed’ into the same region.
The charts below show where things left off at that close.
As is frequently done, farther down, we’re going to invert the chart to show price action similar to the leveraged inverse fund LABD.
Biotech SPBIO ($SPSIBI) Daily Close
Adding zoom for more detail
Next, we invert the same chart to show how it looks going short via LABD (not advice, not a recommendation).
Biotech SPBIO ($SPSIBI) Daily Close … Inverted
We can see that price action has been in a similar set-up before; just prior to a significant decline (non-inverted).
Summary
Obviously, Monday’s print into the danger point was taken as the set-up for a reversal. That reversal appeared to be taking hold based on that day’s price action.
Yesterday, reversed the reversal but then wound-up printing and closing into a danger point; an up-thrust condition on the standard chart and a spring condition when looking at it on the inverted scale.
Positioning
As was done in prior action, the position size in LABD, was reduced as price retreated (not advice, not a recommendation).
However, the position was not exited entirely.
Pre-market action has LABD, trading higher about 1-point or 2.0%. This behavior is consistent with a potential reversal.
Today’s close is the important part.
Higher for LABD, and we’re in a potential reversal for a significant move; lower and it’s time to exit completely and stand aside (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.
On a weekly closing basis (as we’ll see below), it’s obvious.
Upward (net) progress in biotech SPBIO, has come to a standstill.
While the media continues to foment the lie that somehow interest rates have reached their limit, or ‘Da Fed’, is going to do this or that, behind the scenes the plan … set out years ago, continues to unfold.
Before we get to the charts, let’s not forget what’s happening ‘out there‘. The number of idiots seems to be increasing without bound.
As Goethe said way back in 1826, ‘There is nothing more frightful than ignorance in action’. He was being polite with the ‘ignorance’ part.
Now, on to the charts.
The un-marked, chart of biotech SPBIO, is below.
The second chart zooms-in, showing the percentage changes on a closing basis.
Biotech SPBIO, Weekly
Zoom in, showing net progress.
One would think, since biotech has dropped so significantly, there’s no more (downside) left.
Certainly, anything can happen.
However, the premise is, the overall collapse is still in the early stages.
We have not (yet) had a 50% – 90%, drop in the S&P.
In addition, pension funds are likely to go broke.
So all those $250,000/year ‘retired’ lifeguards that J.B. has spoken about? Well, how do you leverage that ‘skill’ to another industry?
SPBIO, Inverted
Next up, the inverted chart of SPBIO, to mimic the action seen in leveraged inverse, LABD.
Then after that, is the same chart marked with a potential forecast of where price action may be heading (not advice, not a recommendation).
Now, the markup showing potential action should biotech continue its decline.
Zooming in on the last few weeks of action.
The fact price action has bounced from this area of the chart, tells us the trading range is valid; the blue line is being recognized by the market.
Now as shown, we’ve come to a halt.
So, what happens next?
Positioning
As SPBIO ground its way higher (LABD lower) over the past week, the short position, LABD-22-02, was reduced further but not eliminated (not advice, not a recommendation).
Since there’s no more net progress upward and we’re still in an overall downtrend, expectations are for biotech to either stall, or reverse, continuing its trend lower.
As stated previously in this post, the market’s prior congestion was ‘complex’.
So, we’re expecting ‘simple’ this time around; all of which lends support to more downside.
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 last update presented that whatever happens with biotech (SPBIO), it’s likely to be decided quickly.
That conclusion was based on the ‘rule of alternation’ and the fact, the whole short squeeze event from last week, did not result in a new weekly high.
That, Was Then
What we have now so far in today’s session, is an attempt to move higher by SPBIO, which appears to have stalled and now, looking to reverse.
The reversal part won’t be confirmed unless, and until a new daily low is posted.
For today, posting a new low is somewhat of a tall order because of Friday’s wide trading range … but we’ll see.
Instead of going to the actual index, SPBIO, we’ll look at the 3X leveraged inverse fund LABD
SPBIO, 3X, Leveraged Inverse, LABD
Note:
The chart below, is a 3-Day chart with Friday, completing the last ‘third’ day.
As price action has moved lower, energy behind that move is weakening; seen in the thrust divergence
Why a 3-Day Chart?
When’s the last time you saw a 3-Day, 2-Day, or 6-Day, or any other non-conventional chart in anyone’s analysis?
Shown below, we have the same 3-Day LABD, compressed and marked up with a trading channel.
At this juncture, the 3-Day shows the nuances more clearly.
If this trading channel is in-effect, that is, if it’s active, potential exit points for an LABD position at this point in time, would be 105, or 240 (not advice, not a recommendation).
For LABD, to get anywhere close to those points, especially the second (240-level), biotech would need to collapse.
Summary
There’s plenty of chaos to go around. We have those who are still arguing whether or not ‘it’s the bottom’.
Such arguments are potentially (and likely) from those completely unprepared.
As Jerimiah Babe said in one of his latest videos, ‘something’s going to break’.
When or if that break happens, it won’t be to the upside.
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 we speak, economic activity is shutting down … fast.
Amazon shipments cancelled, gas stations going dry, banks halt lending, real estate sales collapse.
Meanwhile, the market’s in a short-squeeze.
What happens next?
We’ll discuss real estate and biotech farther down but first the data sources.
Dan from i-Allegedly reports here, he still has a couple of rubes (my word) that think the market just bottomed out.
Good luck with that.
As we’ll show below, the real estate bear market (IYR) rebound, was identified ahead of time.
Next, we have Red Hurricane describing one semi-trailer load after another being cancelled. He hauls for Amazon.
Shipping activity’s contracting, seemingly, by the minute.
Lastly, this link where the D-word, ‘Depression’ is used within the first one-minute, twenty seconds.
Bottom-out in the stock market? Probably not.
So, let’s take a look at real estate IYR, and see where it might go next.
Real Estate IYR, Weekly Chart
The last update (link, here) showed potential to rise into a test of resistance. That’s exactly what happened.
Back then:
And now:
With zoom
Obviously, the upward test happened much quicker than anticipated … but it was anticipated … no surprise.
Real estate got itself into Wyckoff spring position; so, a rebound (test) is normal market behavior … short-squeeze or not.
If it was a squeeze and if it’s over, we can expect an immediate drop in price action. We’ll analyze that as it plays-out in the coming week.
Now, on to biotech, SPBIO
Biotech SPBIO ($SPSIBI), Weekly
Some housekeeping first.
Obviously last week, with being short, more downside action was anticipated resulting in upside for LABD.
On Friday, that did not happen. Biotech was part of the squeeze as well.
The short position via LABD, identified as LABD-22-02, was reduced but not exited completely (not advice, not a recommendation).
At present this is where we are.
First, we’ll start by inverting the chart to mimic the action of 3X inverse, LABD.
Next, we’ll zoom-in and highlight the ‘squeeze’.
Doesn’t look like much when viewed that way does, it?
Next, we’re going to zoom-in, on the zoom
In spite of all the squeeze chaos on Friday, price action could not post a new weekly low (high on the non-inverted).
We’ll see this Tuesday, if that’s important or not.
This post is getting long but let’s end with the rule of alternation. The same chart is marked up below.
If this rule is still in-effect, we’re at a juncture where one can expect a ‘simple’ alternation.
We’ve already had complex action on the prior congestion; so, we can expect current action to be simple in character.
That means, price action’s not likely to stick around at these levels whether it’s going up or down.
Based on the above analysis, the expectation for Tuesday’s open is a gap lower for SPBIO and higher for LABD.
If that does not happen, something else is at work … we’ll report on that as necessary.
Summary
Has the market bottomed out? Not likely.
Those who are at this late stage, still arguing with Jerimiah Babe and Dan (and Patera), that the market’s rebounding, everything’s fine, are in a state of delusion.
The mindless herd following spending with ever newer cars, moving up to the McMansion, opulent vacations, posting it all on Facebook is most decidedly, gone.
It’s finished. It’s Done.
The problem is, as J.B. notes above (time stamp 7:15 and 8:30), those still living that life don’t seem to know it’s over.
For the leaders, the tiny minority and those reading this post, who are, or who have been preparing for years, it means potential huge (life changing) opportunities.
That is, as long as the markets, the banks and other infrastructure stay open; not guaranteed in any way.
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.
