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Remember the maps at the mall … that showed the layout and where you were?

Well, here we are:

In candlestick lingo, Thursday was a ‘hanging man‘ set-up.

Friday was confirmation with a lower open, lower close, and penetration of the prior day’s low.

Error Correction:

A prior update made somewhat of an error when it said ‘Of all the major indices, biotech on a percentage basis, is the downside leader.’

Sort of.

The Index Table below is updated to include gold (GLD) and the senior miners, GDX.

In fact, GDX is leading the downside.

From a trading standpoint, GDX has been ignored because it’s such a crowded market. Nonetheless, for different reasons than biotech (i.e. deflation), strictly speaking, it’s the downside leader.

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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.

Print High & Close

The table lists well known index ETF’s; along with most recent highs and current (Friday) close:

All the usual suspects are there:

S&P 500, SPY, The Dow 30, DIA, Nasdaq, QQQ, and on.

What’s also listed is how far each index (ETF) is from its most recent all time high or ‘recovery’ high (in percentage terms).

Obviously, one of these is completely out of bed: Biotech, IBB

We’ll be discussing the technical condition of biotech tomorrow. For now, the updated ‘project’ chart’s included below:

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.

Basic Materials

Nobody’s paying attention to this index. It may be one of the cleanest (technical) short opportunities.

Basic Materials. Sounds boring.

Sounds like fertilizer … and it is … right along with industrial chemicals.

Three largest cap in the sector are below:

Industrial gasses, Linde AG

Industrial gasses and chemicals, Air Products & Chemicals

Water purification, Ecolab

DuPont is next and then Newmont mining. So, this is a potential deflation play (Newmont) as well.

A post just out yesterday, Uneducated Economist does an excellent job destroying the inflation narrative.

Steven Van Metre has also repeated many times, we’re likely to get a deflation impulse first before inflation.

One of the most important things he’s said, the Fed is not going to correct the public’s (false narrative) perception that inflation’s the danger.

If everyone’s pointed in the wrong direction, and it serves their interests, why correct it?

Which brings us back to Basic Materials. ‘Nobody’s watching’ this index. How do we know?

Look at the inverse fund, SMN.

Russell 2000 inverse, TZA, averages 6 – 10 million shares per day. Compare that to SMN’s 2,500 shares on a good day.

Volume does pick up as price action becomes active. Some days will be 100,000 – 200,000 shares.

Looking at the technical condition, there are bearish divergences on both daily and weekly time-frames. The chart at the top shows a Wyckoff up-thrust (reversal) condition just tested yesterday.

The response is to go short via SMN (not advice, not a recommendation).

Since we’re actively managing accounts throughout the day, it’s not a problem to monitor SMN and the bid/ask of the fund when trading is light.

The ‘project’ table has been updated:

Pre-market has SPY trading down about -1.5 points or -0.40%. The expectation is for Basic Materials to follow suit.

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.

S&P, Down in Pre-Market

The last update on the SPY said this:

“The SPY shows a nascent reversal. Price could come back to test resistance (black line) or continue to decline from here.”

That’s what it did. Price came back to test.

It’s early in the pre-market and SPY is showing a slightly lower open; currently down -1.29 points, or about -0.32%.

Thrust energy on the test was low. There’s potential for continued down action from here.

Recall that last week’s price bar was a reversal. A new weekly low would help confirm there’s more (sustained) downside ahead.

The ‘project’ is already short real estate via DRV (not advice, not a recommendation). If it follows suit, downward action in IYR can be expected.

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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.

Sentiment Shift

There’s been a change in direction; a sentiment shift.

Not in any particular order:

The Fed will not, or does not want to control the long end of the curve (long bond).

Interest rates (mortgage rates) are now rising and have been there long enough to start affecting the real estate market.

As reported by Uneducated Economist, there’s been a shift in behavior of his lumber customers.

Instead of furiously attempting to secure lumber (as prices continue to rise), now, there’re backing off; Not wanting to be holding overpriced inventory if/when there’s a reversal.

Remember:

Sentiment first. Then volume. Then direction

From way across the pond, Bjorn Andreas Bull-Hansen gives his input that ‘Things are changing … the entire structure of society’.

He also sates, as this site has done many times … ‘it’s not coming back’.

Has all this fed into the markets?

Let’s take another look at the S&P 500 (SPY), analyzed on the 15th.

At that time, we stated the SPY’s at the danger point.

The original location of that analysis is the orange arrow. Indeed, the SPY continued a brief rise before reversing.

Downward pressure (thrust energy) has increased.

Unless it’s a flash-crash, markets do not go straight down.

The SPY shows a nascent reversal. Price could come back to test resistance (black line) or continue to decline from here.

It’s important to note the overall market position (of the large indices) as they affect everything else.

With that, our focus remains on biotech (IBB) as it appears to be the weakest of the major sectors (not advice, not a recommendation).

Sunday futures open in a few hours.

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.

S&P 500, Danger Point

Early in the pre-market, SPY is trading unchanged.

Looking at the daily SPY close, we’ve got a tentative breakout just above resistance (black line).

Lower right of the chart shows upward thrust energy has declined significantly … right along with volume.

Yesterday’s update showed longer term momentum (monthly, weekly) for the S&P was pointed up. Continued price action drifting higher is possible.

However, if there’s a reversal in the making, this is a good place to start.

The buyers (volume) have backed off at this level; leaving the SPY hanging just above breakout resistance.

The SOXX, QQQ, and IBB are well off their highs and may be leading the way lower. Our focus remains on shorting biotech IBB, which is the weakest of the three (not advice, not a recommendation)

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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.

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.

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

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 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

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.

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.

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.