Downside Leader

Two months ago in this post, the idea was floated that biotech, IBB may be the downside leader.

It certainly didn’t look like it at the time.

Biotech even went on to make a new high … potentially negating the theory.

shutterstock_146355983It’s different now.

After that new high, IBB has reversed and is trending lower.

On the other hand, the overall market, S&P 500, continues its push upward.

It’s within 1% of all time highs.

Pre-market action as of this post, has the S&P opening up about 0.4%, higher … ever closer.

At this juncture, biotech has hinted at downside leadership.  That hint my become a solid fact if and when the S&P has a decisive downside reversal.

 

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.

Moderna: Pump-n-Dump?

With the highest daily volume ever, 91-million shares last session, who’s taking the other side?  Of course, it’s a rhetorical question.

The professionals are likely the ones selling and selling-short.

Maybe there are a few amateurs as well who are just starting to figure out how the game is played.  That is, after they’ve blown out their account for the third, fourth, or fifth time.  Account blow-ups seem to be a requirement for every soon-to-be professional.

2020-07-16_9-31-17-MRNA-Daily-3-bar-notesEven with that historic one-day volume, price action could not break through and close above previous resistance (see chart).

Today’s action continues below resistance.  Not a good sign.

We see that biotech fundamentals are out the window and herd (insanity) mentality is at the helm:  Video link here.

The risk of going long (IBB) at this juncture was displayed just a few days ago (Monday, the 13th) when downside action showed just how quickly the bottom can fall out.

What if there’s major rout?  Does anyone really expect their trading platforms to remain operational?

Lest anyone forgets, let’s review what a crash really looks like.

On this site, the impending reversal in biotech has been covered for some time and we’ve been looking to open a strategic, short-position.

With that said, it’s been a frustrating and somewhat expensive endeavor over the past two months to establish that short.

Biotech (IBB) action posted an all-time high yesterday with low thrust energy.  Today we have a new daily low.

It’s lower highs and lower lows.  That may be the signal:

Reversal underway.

 

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 Higher? Probably Not

Biotech could levitate on higher in the coming week but probabilities say no.

The chart (expandable version here) prints slowing upward energy since April, this year.  It’s clear that each upward thrust has produced less net gain.

2020-07-02_16-58-20-IBB-Weekly-5-bar-notes-BISThe first upward thrust from the end of March to late April, was a solid 28.7%.

After that it was 6.78%, then 2.31% and now last week, all the index could manage was 0.50%.

At this juncture, biotech appears exhausted

Anything can happen.  Price action can move higher in the coming week but it’s a low probability.

A quick internet search of ‘going short biotech’ turns up nothing recent except for this article from May, this year.

The chart of IBB shows the location of the linked article; Just towards the end of the first solid upward thrust.

That was then, this is now

Subsequent thrusts have lost energy.  It looks like we’re at an inflection point.

 

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.

Trend Change in CORN?

Massive volume inflows into CORN suggest that crop failures, grand solar minimum and controlled demolition of the food supply are all coming to fruition.

iStock-1019396932As reported by Ice Age Farmer at this link, the earth is cooling so rapidly that northern grow areas for corn aren’t warm enough on a go-forward basis, to mature the harvest.

There aren’t enough heat units (known as ‘growing degree days’) to mature the crop, plain and simple.

The result is crop failures on an unprecedented scale.

Couple that with planned, controlled demolition of processing capability; whether it’s not enough harvesting manpower, not enough transportation vehicles, drivers, or whatever excuse can be conjured up, the availability and supply of corn is being crushed.

Corn futures look to have made a long-term bottom and are pivoting to the up-side.

 

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.

Winter of Discontent

With layoffs, bankruptcies and production shut-downs, the energy sector may be setting itself up for higher oil and gas prices; especially this coming winter.

Fotosearch_k1394195There’s potential for brutally cold winter temperatures from decreased sun-spot activity (called solar minimum) while at the same time producer output is contracting or disappearing altogether

In a paradoxical price action set-up, UNG, the commodity tracking ETF, may have just signaled a long term bottom.

Discussion and technical analysis of UNG is here.

As of this post and with natural gas prices declining for so long, looks like today’s action is a short squeeze.

Now is the winter of our discontent

Richard III

 

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.

Sideways Is A Bear

We’re just one month shy of exactly 5 years since the biotech top of July 2015.

Fotosearch_k7909008For those five years, biotech has struggled higher with sideways, corrective price action.  Only within the past two months, has IBB made it to new highs.

A sideways market is a bear market as dollar purchasing power drops steadily.

Bearish divergences seem to be everywhere.  Divergences on both daily and weekly charts:  MACD on the daily, RSI on the weekly.  Even on the monthly chart, MACD lines are divergent.

Last session (Thursday) had IBB attempting to push higher.  Up-volume contracted by 51% from the prior (down) session; another bearish sign.

Biotech is set to reverse in a big way.  In what looks to be a possible last ditch attempt to cash-out, news was released that Texas has re-imposed restrictions.

IBB’s response was to push slightly higher for about an hour.

After the blip, price action reversed and continued lower; posting new daily lows right around 2:00 p.m. EST.

The move higher has failed.

There’s no more powerful set-up in the markets than a failed move.  Failed moves show one side has reached exhaustion.

Well followed market sites such as Money GPS and Sajad, have their respective comments sections expecting the Plunge Protection Team at any moment.

What if that ‘team’ has accomplished their objective?

 

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.

Extreme Biotech

In today’s trading session, biotech IBB, was stretched to the extreme; coming within 0.30 points of making a new weekly high.

Fotosearch_k76678088Doing so, would have negated the bearish (reversal) case that’s been presented on this site over the past six weeks.

Late in the session, price action began to erode and ultimately closed posting a reversal bar.

Even though IBB posted a reversal, the actual close was higher than yesterday’s.

That fact holds out the possibility of higher prices.  It’s the way of the markets.

Who’s in control, bulls or bears, is always under contest.

If the next session moves lower and posts a new daily low, we’re at a pivot point; a trend change and potential for much lower prices.

A long term view of biotech shown here has the Relative Strength Indicator in a significant bearish divergence.  From that perspective, biotech is out of fuel.

 

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.

‘Cash In’

As it becomes more apparent the entire ‘mask experience’ was a mirage, a fabrication, there may be no bottom in sight for biotech.

Fotosearch_k21914517New highs for IBB back in April, prompted this video ‘analysis’ clip.

Biotech, moved even higher from there.

Anyone shorting IBB (via BIS or LABD) back then, most likely covered with a significant loss.

Now, things look different.

In classical analysis, Wyckoff parlance, what’s been going on is called an “up-thrust”.  It’s an archaic term to describe a false breakout:  A reversal.

Biotech may actually be one of the market leaders to the downside.   It’s already made new highs and is reversing now.   

The overall market, the S&P could defy gravity and prognostications for an immediate crash by making its own new highs before rolling over.

A technical chart and nascent trend-line of IBB, is here.

If we keep getting lower lows and price action stays within the trend, there’s significant downside potential.

Are You Experienced?

Every major corporation has the same tag line … it’s all about the “experience”.

Their goal’s nothing substantial; just the ephemeral. 

Shadow stats reports that real unemployment is at 35%; already way past 1930’s depression-era levels.

Fotosearch_k34589852We won’t have to go searching for the experience.

It’s coming to us.

Even those still employed are wondering if they’re next or what’s going to happen if/when their pay is cut.

As a result, huge masses have poured into the markets; Desperate for income or distraction from collapsing food supplies, society out of control and free-fall economy.

Meanwhile, the market itself has already told us where to go and where to look.  The S&P just opened down 2.3% and may be starting the next leg lower.

Is that the place to go … the S&P? 

The S&P is probably the most computer controlled, algorithm induced, manipulated market in the world.  All eyes focused on it.

Back around 2009 or so, my firm stopped trading the S&P and moved on to a more effective approach.

A strategic view was developed.  Trading methods created that were focused on positioning instead of instant (day-trade) gratification.

With that in mind, biotech has been the topic of discussion and analysis.  Price action in IBB has been tight and getting tighter.  That allows one to take a low-risk short position (not financial advice) if so desired.

At this point, knowing where to go and where to look, may be the only essential experience.

Cat & Mouse

It’s rigged.  It’s been rigged from the beginning.

Back in the day, the father of technical analysis, Richard D. Wyckoff, called this sort of manipulation, the ‘composite operator’, or the ‘central mind’.

Fotosearch_k21341071

If one could figure out what the big players were doing, there’s opportunity to position for profit.

That’s why tape reading was (and is) so important.  The moves and potential moves of the big players show up on the tape.

So, what’s happening with the cat and mouse chess game now?  Where should one look for potential profit?

A better question is not ‘what’s happening?’, but rather, ‘what’s not happening?

Until price action proves otherwise, what’s not happening is biotech (IBB) is not participating in the swift rally over the past month.

It stopped-dead right around May 13th.  That’s where to look.

While all others are focused on if/when the market’s going to new highs or crash, biotech looks like it’s under distribution.

Attempts to move higher are being sold off.  The market has stalled.

Things can change quickly.  Distribution can turn into accumulation if there’s a breakout to new highs.  However, at this point, price action is tight and (short position) risk is low.

 

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.