Biotech Reversal, Repeating Trend

9:45 a.m, EST

Price action itself defines the trend

The unmarked hourly chart (above) of inverse fund LABD, shows the location of the last update.

That update called for LABD to reverse higher; based on thrust action of the market itself.

Soon after (magenta arrow), LABD pivoted higher.

The right side action has a familiar repeating trend:

The chart below is a compressed version.

The repeating lines have been added. Arrows show contact points:

Strictly as a courtesy, daily chart of LABD is below with notations of buy and sell (not advice, not a recommendation) for my firm’s main account.

A good many that monitor this site have probably become bored with biotech … just as they did with Steven Van Metre’s analysis of bonds (back at the lows).

Van Metre is providing an excellent service. True, he probably has people moving their accounts to him. He’s running a business after all.

However, that does not negate the fact, he’s one of, if not the only one saying that we’re about to enter a deflationary environment (if not just temporally); complete opposite the conformist (and media led) crowd of hyper-inflationists.

Even Johnny Bravo has said, ‘hyper-inflation will come … but when?’

Summary:

The short positioning in biotech (via LABD) continues: Not advice, not a recommendation.

Rumors are swirling now about power outages and cyber attacks with major corporation website shut-downs.

Does anyone really want be to playing around with long positions when torpedoes (to hit the market) are already in the water?

Stay Tuned

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.

Economic Collapse … The Model

1:44 p.m., EST

South Africa shows us how it’s done

‘Hey J.B., when’s the collapse?’

That’s a comment often seen on any number of Jerimiah Babe’s updates; openly mocking his doom and gloom assessment.

Whether he’s at the local homeless camp in Los Angeles, or in his home next to the golf course, the question remains the same;

‘J.B., When’s the collapse?’

Sometimes his response (if he’s at home) is to turn his head to the window and say “Have you looked outside?”

A good number of American’s have become so pathetically weak, ignorant, and just (to overuse the word) plain stupid, they expect to sit on their newly built patio deck (using last year’s stimmie check) and observe the fall of the U.S. from the comforts of their own back-yard.

Of course, there are some (including this author) who are first generation Americans. Their parents and grandparents emigrated (or escaped) from communist countries.

Those people do not have to ‘wake up’; they were never asleep.

Coming Attractions:

South Africa gives us the model for what’s in store … at least for sections of the U.S.; probably starting first with the blue sates (we’ll see).

You might say, it’s already happening in Portland.

One news item of note shown in this report from South Africa, is neighborhood patrols.

If that’s coming our way, then we’ll need to get outfitted (if not already). Here’s a good place to start.

All of which, brings us to the markets.

Bonds (TLT):

Yesterday’s update showed how the so-called ‘bloodbath‘ was actually a set-up to go long (not advice, not a recommendation).

It didn’t take long for bonds (TLT) to give a Weis method ‘buy signal’. That happened at the open today.

The bull move in bonds does not confirm the ‘re-opening’ hype. That in itself, should be all that’s needed to make decisions.

It is interesting to note; on sites like ZeroHedge, there’s no talk whatsoever that biotech has (already) reversed and is leading the way down.

As of this post, inverse biotech fund LABD, is up about 38%, from its lows of late June. It appears poised for yet another breakout; lower for SPBIO and higher for LABD.

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.

Garbage In … Garbage Out

10:49 a.m., EST

Another day spent digging in the trash

This morning’s perusal through the usual suspects of finance, leaves the feeling you’re sifting through garbage.

Every once in a while, like yesterday’s post, there’s something useful.

Most times, not.

Today is no different.

Here we have an article about the ‘bond bloodbath’ and how inflation is not transitory.

Instead of falling into the trap of contesting the current false narrative, we’ll take a different approach.

How can the constant stream of financial nonsense, lies and miss-direction, be put to use?

Since the article linked above is about bonds, we’ll use that for our example.

The Bond Market (TLT):

First, the David Weis training video (linked here) has been discussed many times over the years.

We can’t make recommendations but we will make a suggestion; that is, whatever the video costs at this point is well worth it.

Our TLT market entry technique (below), is taken from that video (not advice, not a recommendation).

We’ll start with an unmarked chart of TLT. The ‘bloodbath’ referred to in the link above, is yesterday’s down-draft.

Steven Van Metre has already laid the fundamental groundwork (for about a year) on why bonds will rally.

We’re there now but the market’s not going to let anyone get positioned long easily.

The next chart shows how the Weis technique can be used to get aboard the rally.

Yesterday’s so-called bloodbath, is really a trade entry set-up.

Notice how the market does not come back to the ‘entry’ levels. This chart fits the Weis example to perfection.

The bond market’s signaling there’s something very wrong with the ‘reflation’ or ‘re-opening’ trade.

The reflation, re-opening does not exist.

The economy is not coming back.

Summary:

It took over twenty years of searching to stumble across the Weis video. As with a lot of things in life, it was almost by accident.

After watching him dissect the ‘Apache Spring’ (APA) trade, it was obvious the search for ‘truth’ had ended; the education was about to begin.

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.

Project Update

Early today, LABD was exited having hit the stop.

If there is a story for the day, it’s the long bond TLT.

Potentially a nascent reversal.

Interest rate sensitive markets, like real estate, appear positioned for reversal as well.

Inverse fund DRV above, shows penetration below support and then testing action today.

We’re at the extremes of price action. IYR and DRV do not need to go far to confirm or negate a reversal condition.

At this point (1:03 p.m. EST) our ‘project’ has no position … although DRV looks enticing and low risk (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.

Changing Hands: Bonds

The financial press is rolling out the usual suspects; bonds yields are going stratospheric and hyperinflation’s just around the corner.

A more likely view, one that’s actually based on reality, the price action itself, bonds just changed hands; from weak to strong.

Those selling or going short bonds (weak hands) at this juncture are potentially left holding the bag in a big way.

Taking a trip back in time to Livermore’s day (Reminiscences), he stated time and again, the large speculators could not enter or exit their positions at will.

They needed to have some kind of ‘event’ with heavy volume so that it would mask their moves.

It looks like we just had such an event.

The weekly chart of TLT, shows two major volume spikes. One where bonds reversed lower and now … a potential reversal to the upside.

We’re dealing with probabilities and over two-hundred years of market activity (since the Buttonwood tree).

Huge volume spikes have significance. They typically signal a pivot or the start of one.

Using that reasoning, we may have seen confirmation of rotation not only in bonds but the markets themselves; The S&P, Dow, Nasdaq are pivoting lower, with bonds and the dollar reversing higher.

Summary:

The futures market opens in a few hours. It’s typically a light-volume affair for bonds.

At times, Steven Van Meter presents in his updates how bonds have been typically slammed lower in the overnight.

That type of action has been going on for months. We’ll be looking to see if there’s a change of character.

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.

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

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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.

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.

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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.

Biotech Short Nets 8.2% Gain

At this juncture in the market, trades are only to the short side.

The one exception is the bond market.

With everything stretched to never-seen-before extremes and ready to break at any time, bonds are in position to rally.

This short-story of the biotech short actually begins with a bond loss.

Going back in time a bit; on Friday the 12th, a long position was opened in bonds via TMF. That action was documented in this post.

Then, we had the holiday weekend and the Texas freeze.

These posts are originating from a location near Ft. Worth Texas, where temperatures reached a low of -3 F.

At the office, we have backup power and physical (hard-wire) connection for internet. Both systems operated well as main power was cut repeatedly over a three-day period.

Those conditions are mentioned because at the open on Tuesday the 16th, transmission, execution and update times on trades were affected.

A potential harbinger of things to come.

Imagine a nation-wide outage where the market’s down 15-20% and still collapsing. All the while, trade platforms are locked-up with brokers inundated.

During that open on Tuesday, bonds (TLT) gapped-down which was unexpected. Inverse fund TMF was immediately down about -4.5%.

Overall, the bond market is still in position to rally. However, the open on Tuesday said ‘not yet’ and we’re not going to change the trading strategy to one of ‘hope’.

With trade execution times slow (minutes, not seconds), by the time a confirmation came in from the broker, exit on the position posted a -5.2% loss: A dent in the account for sure.

At the same time, we’re monitoring a large set of equities and markets.

So, the immediate task at hand was could that hit be mitigated quickly. Was there an opportunity in another market for gain?

The short answer was yes. It was in biotech to the downside.

Price action on the platform was slow to update. However, it was clear from what was available, shorting biotech via LABD was high probability.

That’s what happened. Entry was at LABD 14.73, about ten-minutes into the session.

Obviously, under the conditions, stress level during re-positioning was high. Temperatures in the trading office were about twenty-degrees below normal.

It’s hard to say exactly, but sometime as the last trade was being entered or confirmed, main power was cut again.

Subsequent price action on LABD was fast.

By the time we’re halfway into the session, not only has the loss been mitigated but the account is showing green. Good stuff.

The position and the account finished the trade in the green and the rest is history. Entry and exit are shown on the 15-minute chart below.

On the exit and in retrospect, the trade was held for a bit longer than it should have been as there was potential for additional upside.

When it became clear it was not to be, LABD was exited with an 8.21%, gain as noted:

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.

Bonds On An Island

If bonds (TLT) finishes the day essentially where it started, it will have printed an island bar on the weekly chart.

Bonds (TLT) are currently trading in the pre-market around 144.15 – 144.65.

If trading stays in that tight range, with the technical conditions shown below, TLT may set up for a Monday gap-up reversal.

The potential island gap is shown on the weekly chart:

The part that’s not so noticeable on the bar chart (above) is better displayed on the weekly close chart:

TLT is right at established support.

To borrow Steven Van Metre’s assessment, with all the selling and the extremes in short positions taking place over the past six months, bonds have only been able to retrace to well known support levels.

Trigger events have a nasty habit of happening over the weekends.

That’s when the largest number of participants can be trapped with no escape. It’s how the game is played.

The island-gap weekly bar may not happen. Bonds could reverse (or collapse) during the up-coming session.

However, successful participation in the markets requires awareness of what could, or what’s likely to happen … before it does.

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.

AMT: Downside Leader

Early in the session, looks like AMT is leading the way lower.

In addition, a new pivot may have been established along with a new (lower) trend line. Subsequent price action will determine if we’ve seen acceleration to the downside.

Separately, IYR has just posted a new daily low … helping the case for reversal (and not ‘throw-over’) at this juncture.

The firm maintains its short position via DRV (not advice, not a recommendation).

Separately, bonds (TLT) broke lower at the open which was unexpected.

The long position in TMF (3X TLT) was exited just after the open. Not advice, not a recommendation.

Even though expectations are for TMF to recover, we’re not going to wait around and hope.

One gets the sense events are happening quickly at this session. Was the Texas blackout the ‘event’ to trigger a market reversal?

It’s possible. Real esate, IYR now trading lower at -1.38%, just 90-minutes after the open.

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.