The ChatGPT craze lasted just long enough to ramp Nvidia and the SOXX, to stratospheric levels.
In the coming weeks and months, we’re likely to see who ‘cashed-in’ (a la Elon Musk) and for how much.
When a bull market nears the end of its lifecycle, it tends to thin-out.
As the smaller cap stocks fall away and underperform, they’re sold and that capital’s funneled into the ‘last man standing’; in this case, Nvidia (NVDA).
Broadcom (AVGO) is there as well, but it’s a distant second at 1/3rd, the market cap of NVDA.
Short Positioning
We’re short this sector via SOXS (not advice, not a recommendation) with entries shown in the prior update.
There was a third entry on 7/6 (not shown), but it’s minimal size when compared to the others.
Now, on to the charts
Semiconductor Leveraged Inverse Fund, SOXS
The following chart has the current hard-stop progression and soft-stop (trader discretion) locations.
Moving in closer with the zoom version.
The ‘AI’ bulls are in their brain stem (un-thinking), enabled in their fantasy by articles like this one and this one.
Of course, there’s more like here and here but we get the picture.
Taiwan Semi (TSM) Earnings Date
At the time of this update, TSM earnings date was an estimate, now confirmed as July 20th, before the open.
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.
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.
Beginning at time stamp 6:24, at this link, The Maverick goes through an investigation into NVDA, projections.
‘Something doesn’t add up here ….’
That report was three weeks ago. What’s happened, lately?
As of the close this past Friday, NVDA, the largest in the SOXX, was at $1.1-Trillion, market cap. A distant second, is Taiwan Semi (TSM) at $545.5-Bln.
Below, we have a confluence of events for the SOXX.
Semiconductor (ETF), SOXX, Weekly Candle
We’re at the top of a trading channel.
We’re in Wyckoff ‘Up-Thrust’ (reversal) position.
A lot of volume expended with less (net) upward progress than previous volume spike; ‘effort vs. reward’.
Getting down to the daily, we see a terminating wedge that’s coupled with reduced volume.
Semiconductor Index SOXX, Daily Candle
So, what does that mean?
The ‘probabilities’ for more upside are, or have been, reduced significantly (not advice, not a recommendation).
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.
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.
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.
“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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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® 