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

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.

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

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.

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

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.

Throw-Over, Or Not?

IYR’s in a terminating wedge … will it throw-over, or reverse from here?

American Tower (AMT), the largest cap in the ETF, bounced off a 23.6% projection during last Friday’s session.

That keeps a short term bullish possibility alive. Longer term, AMT still remains in a downward trading channel.

Bonds and the dollar continue at extremes. On the dollar side, it looks like a significant bottom is in the works.

Weekly UUP, MACD has posted a bullish divergence along with an MACD lines cross (to the upside) signal.

Bonds (TLT) remains at its near term lows; near support levels formed back in September, 2019.

IYR is right at the upper wedge boundary and volume (upside pressure) has dropped significantly.

It could still levitate higher … however, it seems that getting a significant ‘throw-over’ is going to require more energy than is currently available.

We’ll see what price action has in store for Tuesday’s session.

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.

Bonds: A Closer Look

The last report on bonds said to expect fireworks soon.

Price action has the final say. It’s saying not yet but close.

The weekly chart of TLT shows the area we’re going to look at a bit closer.

The chart has been expanded below:

In the past six weeks, there have been three decisive down weeks.

The black arrows on those weeks show each successive down week has less net travel.

Last week was the shortest net travel of the three. In addition, that week had higher volume than the week prior.

Less range, more volume.

The late David Weis in his Wykoff analysis video (link here) discussed a similar situation using Apache Oil (APA).

The short version of the story is: Less range, more volume … ‘somebody’s buying’.

Although not really a bond fan, the opportunity is there. Risk has been or is being removed (never entirely) and one way to participate in a reversal and bull move is using leveraged funds (not advice, not a recommendation).

This past Friday, I positioned the firm in TMF, a 3X leveraged bond fund.

Volume (liquidity) is acceptable at around 600,000 – 800,000 shares daily (allowing pre-market entries/exits).

It’s important to note, while TLT was making new daily lows, the high yield HYG, ticked just 0.01-point above its post recovery high. Since August of last year, TLT and HYG have been inversely correlated.

On way to read this, we’re at extremes.

We’re just one ‘incident’ away from sending things violently in the opposite direction; complete with down-gaps, trading halts, brokerage lock-ups … the whole nine yards.

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.