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.
Bear markets are not (always) prices going straight down, a la 1987.
Bear markets are ‘price destruction’; a series of ups and downs that effectively drain (whipsaw) the typical market account.
The last two weeks have seen record breaking extremes; the latest being this update, indicating the market posted the largest volume ever recorded.
Dodging Bullets
A case in point, this site’s narrow miss on having a huge gain (LABD-25-06, short biotech) being completely obliterated in last week’s largest short squeeze, ever.
It’s (almost) a ‘no-brainer’, this type of market behavior is not bullish (not advice, not a recommendation).
Then, The Propaganda
If it’s not dodging bullets, it’s sifting through the propaganda, half-truths, and outright lies.
The latest of these, (could be) ‘China dumping dollars’ and other ‘collapse’ narratives.
There’s volatility for sure. That’s what bear markets are about. However, this link might help mitigate the hysteria around the ‘It’s all blowing up’ narrative (not advice, not a recommendation).
In the above link, how it really works, time stamp: 17:58
So, here we are. What’s next?
Gold & Silver, Update
Even though both gold (GLD), and silver (SLV), are trading lower as of this post (12:52 p.m., EST), the Junior Miners GDXJ, posted a new daily high, thus, short JDST-25-09, was exited (not advice, not a recommendation).
Today’s activity does point to a new potential (developing) set-up, this time, silver miners SILJ.
Silver Miners SILJ, Daily
The set-up (spring-to-up-thrust) may develop from here, or it could diffuse into chaos.
It remains a possibility, until price action itself says, ‘no’.
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.
Everybody seems to talk about the crash of ’87, as if it suddenly appeared out of nowhere, October 19, 1987.
Digging deeper, the crash started months earlier, at the market peak on August 25th.
One may consider today, Monday, August 26th, the 37th anniversary of that top; when by chance, we’re at another all-time high.
By now, most of us are tired of The Gong Show style prognostications:
‘Crash this’ and ‘crash that’, ‘the dollar’s going to collapse’ and there’s that! 🙂
At this point, none of those things have happened … yet.
In fact, the ‘collapse’ may actually be of a different sort this time around; posed by Uneducated Economist, link here (time stamp: 2:04).
Real & Separated
We may indeed get an ’87 or ’07, type of collapse, eventually.
Or, it may be that sectors wipe-out individually.
However, as UE points out (above, link), the ‘crash’ this time is hidden. It’s the separation of wealth from the ever more have-nots, to the haves, and have-more.
The (Biggest) Bubble
As the Dow Jones is making an historic high, possibly the biggest bubble of all time, the A.I. bubble, led by NVDA, and the SOX Index (SOXX, tracking ETF), peaked out on July 11th (not advice, not a recommendation)
When we last left the SOXX, with this update, link here, it had this to say (emphasis added):
“If we just saw a test of resistance (solid black line), then there’s only one (or a variation of one) right answer at the next session.”
“That is, SOXX, price action (by the close) to be either net sideways or down (not advice, not a recommendation).”
Well, ladies and gentlemen, that’s exactly what happened.
The SOXX, posted a new daily low, closing down -5.86-pts., or -2.51%.
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 public thinks rates are coming down. It’s the ‘credible threat’ as Uneducated Economist puts it. The Fed ‘threatens’ to lower rates, and it ‘happens’, sort of.
Actually, rates aren’t lower, but the market has distorted itself, as if they were.
So, let’s get past the narratives and go straight to the truth, price action in the bond market.
Long Bonds, TLT, Weekly Close
As my mentor Daivd Weis used to say: “What do you see?”
I’ve already marked-up the chart and I see one Wyckoff Up-Thrust, reversal, after another (not advice, not a recommendation).
That, along with exhaustion spikes in Force Index, at or near significant reversals.
The ‘Scary’ Part
Wyckoff analysis is not only price action, it’s volume as well.
Look at the volume in TLT, over the past year.
Massive inflow and what has price done? It’s gone essentially nowhere.
Wyckoff called this ‘Effort vs. Reward’. Lots of effort with little (net) reward.
Add to that, a potential exhaustion spike in Force Index (far right side, purple circle).
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.
From the outset, the premise for biotech XBI, was this:
We’re in a huge up-thrust, several years in the making (not advice, not a recommendation).
With a set-up that big, downside potential was projected to be just as big, link here.
Then came the hard part, validating the premise and getting into position.
Nural Plasticity
So, it’s been on again, off again; a total of seven short trades; LABD-24-06 – LABD-24-12, with an eighth, LABD-24-13 opened, as of today.
The entire (closed) series has been profitable.
However, during that time, assessment of (major) downside potential shifted from confidence to caution, and now back to confidence.
‘Sticking to one’s guns’, no matter what the market (the tape) is saying, is a sign of real trouble.
The market itself directed the entering/exiting.
With that, let’s move on.
The ‘New’ Paradigm
Reviewing the host of ‘experts’ in the press and YouTube alike, (except for UE), everybody has their reason on why nothing (bad) will happen until after the ‘election’.
The last go-round should have broken that paradigm completely; but no, we’re still hanging on.
The ‘new’ paradigm is probably, ‘no’ paradigm. 🙂
From a Wyckoff perspective, the financial press is to be ignored except for when data releases are scheduled.
What’s in the release is not important; it’s the time and date itself, warning of potential volatility.
Biotech XBI, Daily (inverted)
Once again, inverting the chart to show the short-side (LABD) potential (not advice, not a recommendation).
Note: The dashed blue lines, an extension of the support level shows we’re also in a potential spring set-up at one higher timeframe, the weekly; more background, link here.
Positioning
As noted above, a new short position was opened via LABD, during this session (not advice, not a recommendation).
Typically, discussion of open trades within the trading community is (or should be) taboo. As Elder said years ago, there’s the real risk of ‘ego’ causing errors in discernment.
With that said, I might exit this trade at any time, without notice, without explanation.
Veteran traders will agree with that statement; when something’s ‘off’ with a trade (only known to them), it’s time to get out.
Nonetheless, a hard stop for today’s position would be yesterday’s LABD, low of 6.97 (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.
This update will show why there’s a probability for lower open, lower price action, and/or ‘island-gap-reversal’, for the SOXX, at the next session.
With the understanding that ‘anything can happen’, let’s get into the SOXX price action, along with chief cook and bottle washer, Nvidia.
Market Reversal?
First off, does anyone expect a significant reversal?
Following the breadcrumbs, here’s a link from the comments section posted during a livestream by Uneducated Economist; go to Time Stamp 23:45.
Note: The second link is not from Simon (Uneducated Economist) himself but obtained from snide remarks made to him during his livestream.
Using the timestamp, judge for yourself.
My takeaway is:
They don’t know. The amount of time wasted ‘crunching the numbers’ is mind numbing. Number crunching is easy and that’s why (nearly) everyone does it.
Reading price action (effectively) is hard and that’s why you’re here. 🙂
Semiconductors SOXX, Daily Candle
The chart highlights the ‘island-gap’ potential.
However, the real story is in the second chart, Nvidia.
Remember that markets tend to alternate. Last time, is not this time.
The last time Nvidia had a significant outside-down, it went into consolidation before moving higher.
Nvidia NVDA, Daily Candle
Looking at the chart, ‘this time’, is already different.
From the 10:1 split, to outside-down, is Fibonacci 8-Days.
Last time there was a wide outside-down (March 8th), the next day was narrow range, volume decreasing,
This time, we have narrow range, volume increasing.
The Higher Probability
Taking it all into account, the higher probability is for continued downside. It’s a probability, not a guarantee.
If we get upside at the next session, then it’s time to stand aside, re-sharpen the pencil and start looking for another reversal potential (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.
The day started out with a bang; market’s up sharply on CPI print.
One could think, months of biotech (short) analysis, has been blown apart with this morning’s sharp move (not advice, not a recommendation).
Remember, this update said watch out for ‘French’ guys:
“However, just like the video snippet in the link above, what looks to be a dramatic conclusion to weeks if not months of work, could be completely derailed by a bunch of ‘French’ guys hanging out in a British castle.”
Well, here they are. 🙂
From a trading, positioning perspective, is it really that bad, what’s going on?
For that answer, we’re going straight to the hourly chart of 3X Inverse Leveraged Fund LABD.
Biotech 3X Leveraged Inverse LABD, Hourly
Early morning price action penetrated the stop level given in this update.
However, as can be seen, price action behavior of LABD was different than (inverse fund) SOXS, under similar conditions; it did not keep going lower but stopped dead.
It’s clear, action at this point, is pulling away from the lows.
Rate Cuts Not
Way back in January of 2023, this site proposed the ‘rate cut’ discussion was nothing more than a ruse; keeping everybody (the press, especially) busy acting like Pavlov’s Dogs, while the big rug-pull was being set-up.
With that in mind, here’s the real story of what’s going on (not advice, not a recommendation).
Positioning
In a little bit of a market ‘cheat’, LABD is currently trading above the prior stop level.
At the risk of making a gross trading error, the short position in biotech (via LABD) is being maintained (not advice, definitely not a recommendation).
However, even as this post is being created (3:15 p.m., EST), biotech XBI continues to erode back into the trading range with LABD, continuing to rise.
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.
Right along with the current narrative, ‘The Fed’s going to cut rates’, is another narrative, ‘The Fed’s in charge, a leader, and sets rates’.
Is either one, actually true?
Years ago, Robert Prechter Jr. pointed out very convincingly, the Fed’s a follower, not a leader.
His research showed, over many years, the Fed consistently follows the market.
Along with that, was his premise, ‘The market leads the news, not the other way around’.
Using that, we’ll look at what the Fed’s likely to do next; let’s use the long-term view, the 10-Year Treasury.
What’s it telling us?
Macrotrends Historical Chart: Ten Year Treasury
As posted in the prior update, the 40-yr bond bull market, i.e., lower rates, is over (not advice, not a recommendation).
We see the upside reversal in rates (downside for bonds) took over 10-years to set up.
Rates pushed below established support into a Wyckoff spring condition, then reversed higher, then into an outright breakout.
Currently, we’re hovering around in ‘no-man’s land’.
Could rates dip lower (bonds higher) and we get a token rate cut in response from the Fed?
Well, as David Weis used to say, ‘Anything can happen’.
Strategy First
However, from a strategic standpoint and for the long-term, higher rates are more probable.
The market has already responded with interest rate sensitive sectors and stocks (IYR, KMX, CVNA, etc.), having peaked long ago, in 2021.
A Dangerous Game
Depending on one’s perspective, what’s going on here with interest rates, is a dangerous game of ‘chicken’.
As Uneducated Economist puts it, the Fed’s a ‘credible threat’; all they have to do is ‘talk’ and propose (i.e., threaten) to move rates and the market responds without the Fed actually doing anything.
It’s working, for now.
The Emperor Has No Clothes
The problem is, as Prechter has already shown with research done years ago, ‘the emperor has no clothes’.
The Fed does not control rates at all; it’s a follower, only doing what the bond market’s telling it to do.
For some reading this, it’s old news.
For others, it’s a shock to find out, yet another institution is not what you thought it was.
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.
YouTube content creators have noticed the public’s inability, refusal, and denial to recognize (or accept) the truth:
Michael Bordenaro; ‘everybody’s so weak, so sensitive, they can’t handle the facts.’
Patera, Appalachia’s Homestead; discussing her lineage (Cherokee) and history, seeing the similarities of today, applying the lessons; some are more concerned about her hair and makeup.
Then, Uneducated Economist; ‘no amount of wishing is going to bring events back to the way it was. It’s effectively a new construct.’
Interest Rate Ruse
The 40-year bull market in bonds is over; rates are not going lower, they’re going higher (not advice, not a recommendation).
Ignoring or refusing to recognize this (highly probable) truth when analyzing markets, is a potential strategic error.
The longer the ruse goes on, the more violent the reaction may be when the masses (finally) ‘awake’.
All of which brings us to biotech, XBI, SPBIO, $SPSIBI.
Biotech Truth
Truth about biotech is brutal; described here, here and here.
Exactly how this will all hit the mainstream in force, is unknown. However, let’s not forget, ‘when price action goes south, bad news comes out’.
Biotech XBI, Daily
Heading south at this point, is biotech XBI.
Market test of the Wyckoff up-thrust (reversal) appears complete; previously discussed here, here and here.
As of 1:40 p.m., EST, XBI is trading back into congestion (92 – 96) and looks to have formed a trading channel.
Left channel contact line shown as No. 1, is supported by this post, potential long-term 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.
The Danger Point® 