The Taiwan Connection

Eyes On The Prize

Huge truth bombs from a just released Stew Peters broadcast, linked here.

At time stamp 15:25, one of the major truths is Taiwan; specifically, Taiwan Semiconductor, TSM.

Why Taiwan?

Why focus on Taiwan Semi and its connection to the Emerging Markets, EEM, ETF?

We’re focused on it because that’s what the tape itself is telling us to do. The EEM, has already been in a sustained downtrend since mid-February, last year.

It’s been three successive (chart) quarters of lower lows and lower highs.

Looking at semiconductors in general, out of the top ten market cap equities in the SOXX, only TSM, is at or below its 23.6% retrace level. All others have rebounded much higher.

As Wyckoff said a hundred years ago … ‘somebody always knows something.’

Meaning, those really in charge (time stamp 2:53, above) already know the plan; their actions show up on the tape.

We’ll look at those tape actions with TSM below

Taiwan Semi TSM, Daily Bar

Moving closer in on the daily, we have the following.

It’s clear, at this juncture, price action has stalled.

Two sessions ago (Wednesday, 23rd) there was an outside down (reversal) bar.

This session and yesterday’s, have been inside action so far.

There has been no new high or low, posted.

Although today’s action posted below yesterday’s low, it has not posted (currently, at mid-session) below the reversal low.

Summary

Anything can happen.

Price action, TSM could launch upward past the resistance and continue to a 38.2%, retrace.

At this point, it seems to be low probability; all the good news (i.e., the short squeeze), may be out.

We’re heading into the weekend and we’ve seen over and again, that’s when things go sideways.

As Livermore said, ‘surprises tend to happen in the direction of trend’.

TSM, is and has been, testing the underside of its breakdown; it now appears poised to continue 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

Taiwan Semi … Reverses

The Market Leads The News

Price action leads the news, not the other way around.

The last update on TSM had this:

“A reversal away from this area confirms the channel and weights probability to more downside …”

As seen in the chart of TSM, a reversal is what we’ve got.

TSM, Daily Close

Note that volume increased on the reversal; helping to confirm the channel.

If this reversal ‘sticks’ and TSM continues lower, the downside potential is significant.

Summary

It’s a no-brainer to assess the world situation as unstable.

It’s exactly during these (once in several generation) events where international borders (for example) like Taiwan and China could potentially change.

Several links of interest on China/Taiwan are below.

China ‘There by tomorrow

Tencent shares plunge

Hong Kong … mandatory tests

China mandates ‘zero policy

China lockdowns to disrupt supply chains

What could go wrong ?

As Livermore said nearly a century ago … ‘surprises tend to happen in the direction of trend’.

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

Taiwan Semi … At Resistance

Testing The Underside

Trading Channel

Weekly Close, TSM

Starting with the weekly close of TSM below, we can see the recent top, breakdown and now test.

Closer-in on the next chart, the market’s testing resistance.

Looking at the daily close, it gets more intriguing.

Daily Close, TSM

Looks like TSM’s at the right edge of a downward channel.

Zoom-in

A reversal away from this area confirms the channel and weights probability to more downside (not advice, not a recommendation).

Summary

Taiwan Semi (TSM) is the largest cap in the Emerging Markets, EEM.

Leveraged inverse of the fund is EDZ.

If we get a reversal in TSM this session or possibly next, it may affect the overall emerging markets sector, dragging the EEM down as well.

Unless the tone changes (U.S. and world), meaning that volatility would have to subside, price action behavior at this juncture, suggests it’s a bear 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.

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

TSM Collapse, Dead Ahead ?

Sell-Off, Has Been Orderly … So Far

Taiwan Semi (TSM) is the largest cap in the Emerging Markets, EEM (ETF) Index.

As we’ll see from a technical standpoint, TSM’s posted a massive bearish divergence.

That divergence is now being confirmed with price action breaking lower.

As shown below, price action’s launch from a low of 5.83, in November 2008, to a high of 145.00, on January 13th, this year, has been stratospheric; over 2,595%.

However, for about eleven months, the last part of that action was sideways. Then, a Wyckoff up-thrust during the middle of January and reversal lower.

That’s where we are now.

Taiwan Semi (TSM) Weekly Chart

Highlighting the divergence.

The problem or the benefit (depending on long/short), such reversals take much longer to play-out, than anyone expects.

Moving closer in, on the weekly.

At this juncture, TSM’s following a trendline lower that’s declining at approximately – 95%, annualized.

Volume for the week increased from the week prior, which increased from the week before that, also increasing from the week before.

Downward pressure continues; TSM’s down -30%, from its all-time highs.

Emerging Markets, EEM

When looking at the weekly chart of EEM, we can see the downward effect of TSM on this index.

Drilling down into the daily chart of leveraged inverse fund EDZ and compressing the vertical scale, one gets a sense for the potential of this move.

EDZ Daily (vert. scale compressed)

As a courtesy, entry dates, prices and current stop are listed (not advice, not a recommendation).

TSM & EEM, (EDZ-22-01) Targets

Coming up in another update, more specific (Fibonacci) targets for potential exit of the EEM short via EDZ.

At this juncture, an obvious (capital preservation) exit would be decisive penetration of the trendline shown or hitting the current stop; not advice, not a recommendation.

Summary

One of the hardest things to do for amateur and professional alike, is nothing.

That may be where we are with TSM, EEM and EDZ. The short position has been opened; stops and trend identified.

Now, the waiting.

As Livermore said nearly a century ago, it’s the waiting (not the thinking) that made him the money.

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

Dent In The Gold ‘Armor’

Sometimes, It’s Just One Sentence

‘If Russia’s commodity sales decline, it could sell-off some of its gold reserves to pay for war in the Ukraine.’

That, my friends may be the clue, the dent, the chink in the armor.

What if everybody (i.e., other nations) winds up in a similar spot for various reasons … being forced to sell off gold reserves?

It’s early in this session and gold’s attempting to breakout above well-established resistance.

For GLD, the 76.4%, Fibonacci retrace is near 185.50 – 185.60.

Currently GLD, has posted an intraday high of 185.40.

Gold (GLD), Daily Close

Getting closer in on the action (below) we see GLD, at or near 76.4%, retrace, attempting to break through established resistance at the same level.

We’re obviously at the danger point.

It’s time for GLD, to decide on its next move.

Strategy Note

From a strategy standpoint, we can almost feel the pressures. Emerging Markets (EEM) continues to decline with TSM, leading the way.

Obviously, downward pressure.

Then, we have upward pressure on the metals (less so, silver) and the big question is … Is this pressure temporary?

Are all sectors (ex. food/energy) in decline with gold/silver just the last ones to reverse?

Price action itself will let us know.

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

Taiwan Semi … On The Edge

Down On Heavy Volume

Taiwan Semi (TSM) is the heaviest weighting in both the Emerging Markets, EEM, and the SOXX.

Those indexes were down sharply on Friday with EEM, losing just over -2%, and the SOXX down -2.65%.

Even though the SOXX, was lower in percentage terms, it’s EEM, that may be entering free-fall territory; led by its largest component, TSM.

World (planned) Instability

At this point, that’s an understatement.

There’s no telling if somehow, Taiwan (the nation) is going to be dragged into the fray.

Note: As this post was being finalized, we have this, just out.

The good news (sort of) is from a Wyckoff analysis standpoint, we don’t have to know the inside scoop on who or what has plans to do next.

To be very blunt, those in the know are so arrogant and greedy, their actions are going to show up on the tape.

That same arrogance and greed was rampant in Wyckoff’s day … why should it be any different now?

Taiwan Semi (TSM) Weekly Chart

As we can see, TSM closed the week just below support on very heavy volume.

Downward thrust pressure is immense.

The coming week could see an attempt to ‘relief rally’ or we could just continue lower in earnest.

If TSM breaks lower, it’s in ‘free-fall’ territory as there’s no real support until the 80-area … down nearly – 24%, from current levels.

Leveraged Inverse Fund: EDZ

As covered earlier, the leveraged inverse fund EDZ, has picked up in volatility as well as trading volume.

The daily (close) chart showing the breakout is below:

The second chart documents trade entries and current stop location (not advice, not a recommendation).

The entries may look to be at ‘elevated’ levels but recall in the last report, the market tested its breakdown … tilting probability to the downside (upside for EDZ).

Entries were made at support/resistance trendline break and test … ‘the danger point’

The EDZ, fund typically, is not popular and is normally very quiet; however, that all changed in the past two weeks.

The EDZ, Entry

Let’s dig into the nuances of the entry on the two charts below. From the closing chart above, the entry looks like it’s hanging in mid-air.

Looking the ‘prints’, shows the entries made at (nearly) the lowest risk point(s) possible.

The day prior to the 10.86, may have been the best but recall from this update, the entry was made as price action tested the breakdown of support/trend on the EEM.

The trade plan for the next day (March 3rd) was if EDZ made a new daily high, the breakout is likely underway.

Another entry was opened (mid-session) as price action pulled back from that new daily high (new low for EEM).

Note the stop was originally set at the March 2nd, low of 10.69, then moved up to 10.90, the next day.

If stopped out at this juncture, the entire trade would be at break-even (not advice, not a recommendation).

Note in the charts above, there were several false attempts to break to the upside. Each attempt was followed one or more red bars (candle) that negated the attempt.

The current breakout looks like the real thing but it too, was initially followed by a red candle (February 25th).

In this instance, price action reversed and started making higher-highs and higher-lows.

That was the signal to go long.

Summary:

At this juncture, trade EDZ-22-01, is fully positioned (not advice, not a recommendation).

Anything can happen between now and the open on Monday. However, the power of TSM’s thrust lower suggests downside continuation is a high probability.

Let’s not forget, we’re in a market environment where a ‘fat-finger‘ upset is not just a possibility but highly likely.

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

Emerging Markets, Breaking Down

Trend-Line, Confirmed

A new daily low for EEM, Emerging Markets, confirms the trend-line, outlined below.

Looking at the components of EEM, has it essentially a Taiwan Semi (TSM), and Tencent Holdings trade.

Taiwan Semi, topped-out mid-January, this year and has declined nearly – 25%, since its high.

Looking at the weekly chart of TSM (not shown), has it currently hovering right at support levels … possibly giving price action a positive bias.

Even though today’s action confirms the trend, we’re still at the danger point; just a little bit of a shove either way, can cause EEM to bounce higher or collapse.

EEM Daily Chart

At least six trend hits above, provide confirmation.

We’re about midway through today’s session and price could still make a recovery.

However, momentum indicators (MACD) on three time-frames are all pointing down: Monthly, Weekly and Daily, thus tilting probability for lower action.

The chart below zooms-in on the trend-line hits.

The low(s) of the wide bar from February 24th, are likely to provide some amount of support.

If price action continues its decline, expect some amount of hesitation or indecision in this area.

Summary:

It’s about two hours before the close and anything can happen.

Trendline contact(s) and momentum indicators all show probabilities favor the downside.

Similar to yesterday, U.S. markets are mixed-to-higher (but with those gains eroding) while Emerging Markets, EEM continues to show weakness.

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