SOXX, Ready To Drop

All The Good News Is Out

Liquidity Risk?

It’s been long enough; most have forgotten the ‘Flash Crash‘ of 2010.

That crash happened in May of that year.

May of this year, would make it 12-years and interestingly, a Fibonacci 144, months.

Normalcy Bias:

As Nissam Taleb said in his book, ‘The Black Swan’, every day is like every other day on the farm, for Mr. Turkey … that is, until Thanksgiving Day.

Let’s take a look at the historical chart of Semiconductor ETF SOXX, and see the effect of a Flash Crash.

Easy to spot … prices did recover by the end of the day.

What about the next time?

This report just out on ZeroHedge, shows liquidity is drying up in the bond market. Actually, liquidity has been drying up ever since Dodd-Frank of 2010.

All of this is working (to increase risk) in the background.

Let’s take a look at another unprecedented event … the downthrust and apparent recovery in the semiconductor index, SOXX.

SOXX, ETF, Daily Chart

First up, is the unmarked chart of the index.

Next, we’ll show the recovery higher is on diminishing volume.

There’s no real commitment to the higher prices …. they are just drifting upward.

We’ve already shown the Elliott Wave assessment of the current structure. Now, let’s look at it from a Wyckoff standpoint; Up-Thrust and Test.

Price action posted an Up-Thrust, declined and now has come back for an apparent test.

Confirmation Bias

At this juncture, both Elliott Wave and Wyckoff Analysis present a price action structure that’s set for downside reversal.

In a way, we’re at the danger point for both methods.

Summary

From a personal and corporate standpoint, going long in this market and all markets for that matter, was abandoned long ago (not advice, not a recommendation).

To borrow a phrase from Dan at i-Allegedly, he repeats over and over in his videos, ‘We’ve had warning, after warning’.

So, we have.

The SOXX, is telling us, it’s ready to resume action to the downside. After-hours, already has the index trading lower.

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 Danger Point®, trade mark: No. 6,505,279

p.s. The insight of 2010 Flash Crash, anniversary of Fibonacci 144 months in May of this year, is exclusive to this site.

‘Four Generations’

The Average Life Of A Fiat Currency

What if the ‘imminent collapse’ of the dollar is overblown by about 50 – years?

According to this just out, on private gold-filled currency, the article states average life of a fiat currency, is four generations. It goes on to say there are exceptions like the British Pound, continuing on even after hundreds of years.

The Black Swan

In Taleb’s book ‘The Black Swan’, he says it’s an event that nobody expects. It has long lasting repercussions and permanent change.

However, what most if not nearly everybody ignores or leaves out, is his alternate definition. That is:

A Black Swan can also be a future event that’s widely accepted as fact, that does not happen !!!

Is that where we are with the U.S. Dollar?

Even though the dollar has not collapsed and in fact, has rallied as we’ll see below, the ‘collapse’ talk continues unabated.

It’s easy to talk about dollar collapse.

It’s what gets the clicks. No matter that an actual collapse may be years if not decades away.

As of this post, how many ‘monopoly money’ YouTube videos can be found? Seems like it’s the same number or more than, ‘gold to skyrocket higher’.

Well, so far, gold has not skyrocketed higher.

On top of that, this site’s even provided an exclusive correlation that gold’s moving inversely to corn.

See ‘Insight Note at the end of this post.

Ever since the ‘Derecho‘, it’s never been the same.

Back to the dollar.

No doubt, the dollar was whacked over the past trading week. Let’s take a look at what the UUP, price action is saying about itself.

Dollar, UUP, Weekly Chart

The unmarked chart shows the dollar oscillating, testing support for six-months at the beginning of 2021.

Then, in mid-June ’21, UUP pivoted decisively higher (gold, GLD, pushed lower) and never came back to those levels.

Of course, this past week The Usual Suspects were out talking about the dollar and ‘monopoly money’.

Since the ‘gold skyrocketing higher’ forecast failed spectacularly, along with it being the investor’s fault, we then had the ‘clueless‘ and now, it’s ‘monopoly money’.

The chart below shows last week’s bloodbath has served to bring UUP, down to an established trend-line.

It’s important to note, with all that (down) volume, the most since early 2020, UUP was not able (thus far) to break through the trend (blue line).

That leaves the dollar at or near, the danger point.

Continued, sustained selling, risks breaking the uptrend.

If the opposite takes place and UUP starts to rally, last week may have been an inflection point (to the upside).

Gold (GLD) and the dollar appear to still be inversely correlated.

Summary:

Ever since removal of the link to gold in 1971, the dollar has the potential to collapse at any moment.

However, in this case, we at least have some historical precedent that on average, fiat currencies tend to last four generations before becoming worthless.

Wyckoff sates in his writings over and again, ‘somebody always knows something’.

If there’s a collapse afoot, he tells us to look at what the market is saying about itself (not advice, not a recommendation).

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 Danger Point®, trade mark: No. 6,505,279

Insight Note:

It’s been a strange coincidence over the past year or so, ideas presented on this site make their way to certain YouTube sites either in the titles, or within their content.

The timing of this phenomenon, that within a day or two, ‘post it first here, see it on YouTube there’, has occurred more times than one would consider as just ‘coincidence’.

Admittedly, the insights (making their way to certain YouTubers) have not been exclusive … that is, until now.

Recognition of the Gold/Corn inverse correlation, first posted here, is unique to this site.

As far as is known, this correlation has not been presented on any other financial site or YouTube channel or any other medium.

It may be an important data-point and map into this site’s long-time premise; it’s the corn and the grain first, then gold and silver (not advice, not a recommendation).

For more detail, search for Genesis 41.

When ideas from others are incorporated into the analysis presented on this site, full acknowledgement of the source is cited.

As Dr. Elder said in his book ‘Come Into My Trading Room’:

“I have zero respect for thieves”

He’s talking about the theft of his book title: “Trading For A Living”. He goes on to say, (paraphrasing)

‘Do you really want to use market analysis or input from someone that can’t think for themselves?’

Authorization:

Therefore, this footnote is authorizing the further use of the Gold/Corn inverse correlation by others in the industry if they so choose with the following caveat:

If one of the sites monitored (or some other media) uses this exclusive insight, and does so without referencing the source, it puts this author in the unenviable (but not unfamiliar) position of calling out the thief by name … not unlike what Stew Peters is doing (to the hoax/genocide perpetrators) on his broadcasts.

This market environment’s providing a fantastic public service:

It’s separating out the hucksters, the shysters and the otherwise incompetent from those who are, or who are striving to provide a service or useful insight.

The general investing public may find out soon enough, they’re on their own. Maybe unbeknownst to them, they’ve always been on their own.

End