However as was done with real estate, changing from 2X inverse to 3X inverse, the same has happened with biotech; from BIS, to LABD.
Since the overall bearish assessment has not changed, this morning’s upward move in the markets was used to re-position to a higher (inverse) leverage vehicle … LABD (not advice, not a recommendation).
The hourly charts below show the exit of BIS and the entry of LABD.
Biotech 2X Inverse, BIS
Biotech 3X Inverse, LABD
As this post is being written 12:55 p.m., EST, price action’s at the danger point.
We’re at the extreme; the risk is least but price can go either way.
Watching that action in real time, it looks like LABD wants to go higher; currently trading at 57.20-ish.
If LABD is higher, that means SPBIO, is moving lower.
Unless price action of biotech (IBB, SPBIO) and the overall markets signal a change of behavior … the bear move is still in play.
If we get a significant break lower, ‘retail’ that’s not positioned properly, will provide the majority of downward thrust energy.
It’s no different than it was in Wyckoff’s time, over a century ago.
As with Newmont Mining in the Senor Miners Index GDX, ProLogis is the largest market cap in the Real Estate Index, IYR.
When markets ‘thin-out’, when they reach the end of a long sustained bull move, capital exits the lower caps, the lesser performers, and is thrown into the last man standing; the largest cap(s) in the sector.
In can be argued, that’s where we are now with IYR.
As expected, because of the near thousand point drop in the Dow, YouTube’s abuzz with everyone attempting to figure out what’s going to happen this coming Monday.
The Maverick does an excellent job (linked here) of posing the question, ‘Where are we’?
He doesn’t even bother with are we in a market collapse; that’s pretty much a no-brainer. It’s the ‘where’ in the collapse, that’s the question.
Real Estate … What’s Next?
From this site’s perspective, we’ll let the market itself tell us what’s likely to happen next.
Since the focus over the past week has been real estate (IYR), let’s look at the largest cap ProLogis PLD, to get clues on the next potential action.
ProLogis PLD, Weekly Chart
First, we’ll look at the big picture.
PLD was vaporized in the last market collapse.
We should also note, it took about 12-years to get back to pre-crash levels; good ‘ol ‘buy and hold’ 🙂
Of course, a multi-year covered call strategy could have been implemented if maintaining long. With that approach, PLD could have potentially become a cash-cow.
Note on the chart above, PLD didn’t just up and crash; it gave clues well beforehand.
We’ll go into those clues in a later update.
For now, let’s look at next week’s probable action.
ProLogis PLD, Daily Chart
First, the un-marked chart to show where action finished up on Friday.
Next, we see an upthrust, test and sharp reversal.
Price action finished at support and just below the lows set on Monday, the 18th and Monday the 25th.
Wide, high-volume bars tend to get tested.
So, we’re below the lows with a wide high-volume bar. That puts PLD, in spring position.
Because PLD and IYR (and the rest of the indices) finished at or near their lows, there may be some downside follow-through this coming Monday.
Price action’s the final arbiter but there’s potential for some kind of upside test in the coming week(s).
As a courtesy, the DRV chart below shows the entry location for DRV-22-02 (not advice, not a recommendation) and the current stop.
Note how liquidity has picked up over the last two weeks.
Friday’s volume of 309,800 shares, was the largest ever for the inverse fund.