Most of the major indices finished higher today except for the miners, real estate and biotech.
The early session update said IYR, price action may be in a test of its up-thrust (reversal) from October 18th.
If that’s a valid assessment and it was a test, the volume is important.
Whether it’s an up-thrust or a spring, when the set-up gets tested, the volume gives additional clues.
What we’re looking for is when price action comes back to test, volume contracts.
If that happens, it means (with good probability) there’s no commitment to sustain prices at the test level.
Real Estate IYR, Daily
The real estate situation may be about to get interesting.
Volume contraction is near-textbook.
This is one of the rare times, there’s a high probability expectation; that is, IYR price action resumes its downtrend (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.
Not to be outdone, we have this ‘me too’ melt-up article as well.
Let’s not forget, all the ‘Fed must do something’ rumors and feigned concern by its members.
If anyone really wants to know the big picture, the overall plan (a wide majority do not), this interview may be the best explanation to-date.
With all of that, we certainly could get some kind of rally in the coming week. We’ll let the price action speak for itself.
As a reminder, Wyckoff analysis does not concern itself with press releases, rumors or ‘fundamentals’; Wyckoff himself, determined based on price action alone, they have no material effect on market movement.
In his words, ‘other forces are at work’, and it’s those forces that interest us.
Gold & Silver
As said in this update, gold (GLD) was just ‘ticks’ away from posting a new monthly low. In fact, it got just 0.24-pts, from a new low before rebounding.
Of course, each time we get any kind of rally in the metals, there’s the usual hysteria. Even though for the past seven months and counting, those rallies occur at lower and lower levels … i.e., a bear market.
Shown below, it’s in a trading channel with price action at the right-side channel line.
Gold (GLD) Weekly
The chart below gets closer-in.
From left-most contact point on the channel to the initial contact on the right side is a Fibonacci 13-weeks.
Also note, the weekly high posted at the center line is a Fibonacci 5-weeks from the left-most contact.
Highly emotional markets tend to adhere to Fibonacci until either the emotion wears off or ‘everybody’ recognizes the structure.
Obviously, to keep the channel intact, a lower open (and lower action) at the next session is needed.
Looking at the daily chart of TLT below, Friday’s level of (down) volume has occurred only three times in the past three years.
Each time, there was a near immediate rebound or in the case of March 2021, the rebound came several weeks later.
Bonds (TLT) Daily
Moving in closer, we see the possibility of an ‘island-gap’ at the next open.
What could drive capital into the bond market?
Well, how about a ‘shock’ or continued market melt-down (not advice, not a recommendation).
A quick check of the local newsfeed (as of 12:45 p.m., EST) shows nothing on the horizon other than usual nuclear attack threats, power outages, child mutilation protests, marauding bears and the disarmament of Canadians.
Nothing to see here …
Real Estate
There is no mistake, events in real estate are happening at the fastest pace in recorded history.
As Scott Walters put it, over 10-million people bought into the ‘work from home’ hype and got themselves instantly (nearly) upside down in their transaction.
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 last update, posted late in the session, said with the upward bias provided by the sizable Op-Ex event, we can look for the weakest (or one of the weakest) sectors.
The chart below summarizes yesterday’s action:
Friday 10/21/22, Single Day Gains
Gold miners GDX, is the outlier at the top and real estate IYR, the outlier at the bottom.
Before anybody gets excited about ‘hyperinflation’, just a reminder; silver SLV’s, action has retraced to a weak 38.2% (chart not shown), as it was forecasted to do from last week’s update:
“Silver (SLV) is currently at support levels; therefore, some upward action (staying below SLV: 18.5) is normal behavior.”
Price action is the final arbiter; we’ll see what happens next.
Back to real estate.
Professional Wisdom: ‘The Crash’
We’re going to use the experience and insight provided by Scott Walters concerning the potential for real estate; that is, we’re in a world-wide event the scale of which, no one alive (and possibly, ever) has seen before.
The Economic Ninja has just seconded that opinion (time stamp 3:45) with his quote:
“Right now, we are in the greatest collapse since The Great Depression; and I believe it will be as severe, if not worse, sharper, faster, than what people experienced in 1929”.
So, what would that ‘collapse’ look like on a chart of real estate, IYR?
Ah, yes. That’s the hard part.
To take useful wisdom like that above, and somehow map it into potential market behavior.
For that, we’re going to use the Quarterly chart of IYR.
Real Estate IYR, Quarterly
There are still two months and one week left to go in the 4th, Quarter.
We’re at a confluence of price action as we’ll cover in the Hourly chart farther down; first, what’s the potential?
Here is one artist’s rendition (not advice, not a recommendation).
That puts it into perspective.
We may know at the very next open, if we’re pivoting higher or continuing the decline.
Butterfly In The Amazon
Of course, the market’s not going to tell anyone its next move. We have to decipher that (read the tape) ourselves.
Sometimes, as Wyckoff said a century ago … ‘It’s as if the weight of a feather is all that’s needed, to push the market further or to reverse.’
So, let’s look at that feather (the butterfly) on the hourly chart.
Since we’re positioned short (DRV-22-05), the chart’s inverted to mimic leveraged inverse fund DRV.
Real Estate IYR, Hourly (Inverted)
The important part is we see a repeating pattern of trendlines.
Moving in closer, we have this. The blue arrow is ‘expected’ action based on the analysis up to this point (not advice, not a recommendation).
Moving even closer, the zoom shows IYR, finished the day in Wyckoff spring position; having pushed past minor support (resistance on non-inverted).
Summary
If IYR opens lower or gap-lower, we’ll have to wait and see if it posts a new daily low (below IYR ,77.24).
If that happens, we have some confirmation lower prices are ahead and can then set a definitive stop for DRV-22-05.
Obviously, a higher open (pushing past IYR 78.91), negates the trade.
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.
We’re going to use the chart from yesterday’s post to set the stage for getting closer-in.
This past Friday’s early morning ‘spike’ is barely visible; the 30-minute (inverted) chart below, has more detail.
SPBIO, 30-minute (Inverted)
Price action rejected the lower levels (higher on SPBIO) and pulled away throughout the session. That ‘pulling away’ continued on, all the way into the close.
That’s a clue there may be follow-through at the next session.
If the early session opens ‘gap-higher’ (SPBIO, lower), into the resistance area (four magenta arrows, hourly chart), it would be the fourth time pressuring at this area; markets rarely hold a fourth attempt.
Summary
Of course, other markets are being watched like real estate (IYR), Tesla (TSLA), and even Basic Materials (DJUSBM), a potential sleeper for significant downside.
Updates are planned if/when low risk shows up.
Positions: Current Stance (courtesy only, not advice).
The following is the positioning of my firm’s main (largest) account.
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.
How is it possible to have silver stocks sold out here and here, yet silver bears have trapped the bulls.
As we’ll show below, this morning’s action in SLV, has confirmed the reversal; a Wyckoff up-thrust, pointing silver’s probability to lower levels.
For starters, let’s recap on how this (trading) game is played.
That is, the public i.e., the masses, need to be led to and fro so they are continuously on the wrong side of the trade.
That’s it.
So it is with precious metals and specifically silver.
The media came out recently, effectively telling everyone ‘Now is the time to buy gold’.
Where were these guys in 2001, when gold bottomed around $271/oz.
No, they show up at the end of the move … not the start.
Public Buys Hype, Not Facts
So the public has bought into the hype and run the silver coffers dry. Everyone excepts an immediate currency collapse and certainly anything can happen.
The original (bullish reversal) analysis is now supported by the facts; it’s been nearly two-years since that post and the dollar (UUP) is still headed higher.
So, let’s find out where silver is likely to go. For that, we go to the weekly chart.
It’s a repeating pattern found across the markets.
Price action gets itself into a spring condition by penetrating support which subsequently sets up the reversal; the up-thrust.
Next, we’ll use the Fibonacci Projection Tool, showing likely areas for downside destination.
A full 1 : 1 projection gets us right back to where we started the whole ‘short-squeeze’.
If SLV, gets back down to the 10.50 – 11.0, level, one can only imagine what type of hype will be in vogue.
However, at those levels, it’s reasonable to expect the local bullion dealer will be begging for sales … they might even offer their product at, or near, spot. 🙂
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.
With TSLA, price action approaching The Danger Point®, that earnings release is likely to be a catalyst.
The monthly chart has the trendline (and channel) break along with the distribution phase.
Tesla TSLA, Monthly
Note, each thrust attempt higher (magenta arrows) has subsequently failed.
Thrusts following the first one, are at lower levels.
The weekly chart below, shows what we’re looking for; penetration of support to potentially set up a short-trade (not advice, not a recommendation).
Tesla TSLA, Weekly
When or if that penetration takes place, depending on the depth of the thrust, we’ll have a Wyckoff spring set up … that ultimately is expected to fail.
Ways To Trade
As if on cue and possibly in anticipation of TSLA fireworks, there’s a long and short ETF, for just this ticker.
Released just months ago; TSLS, a 1X inverse (bear) TSLA. The bull side has 1.5X leverage with TSLL.
TSLS, has a 100% maintenance requirement and TSLL, has the same.
Or, one can short directly.
There’s no dividend and the broker used by my firm shows TSLA, has no borrowing restrictions other than a 40% maintenance requirement (not advice, not a recommendation).
Then, there are options … we’ll discuss those if some kind of high probability opportunity presents itself.
The Masses
Let’s not forget the herd. What are they doing/saying?
With that in mind, a random check of our favorite holding pen, SeekingAlpha, has oodles of TLSA analysis.
The most recent is actually quite good from a thoroughness perspective. It admits/discusses the downward pressures and identifies the support/resistance levels discussed above.
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.
Once again, stopped-out of the biotech short (not advice, not a recommendation).
Call it bad timing, incorrect analysis or whatever. Every opportunity for SPBIO, to go lower is being thwarted … so, no more for now.
On the flip side, the potential collapse in silver has been discussed over the past few weeks, here, here, here and here.
Looking at the chart below, not only do we have a Wyckoff Up-Thrust, but unless it’s negated by subsequent price action, we’ve got an ‘island gap reversal’ as well.
Prices can’t be sustained at yesterday’s higher level.
Silver SLV, Daily
As previously discussed, very late in the session as SLV, price action rose higher, reducing the risk, a short was entered via Leveraged Inverse Fund ZSL @ 28.08 (not advice, not a recommendation).
The trade is identified as ZSL-22-01.
An obvious hard-stop would be yesterday’s high in SLV, or the corresponding low in ZSL @ 26.55.
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.
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.
Because the price action tells us at this juncture, we’re in some kind of ‘deflation’ impulse.
Taking it a step further, what happens if we don’t get the much assumed ‘hyperinflation’.
What if something else is afoot?
Remember, a Black Swan can also be an upcoming event that’s widely accepted as fact but does not happen.
Now, to the ‘inflation’ indicator itself: Gold
Gold (GLD) Weekly Close
The downside penetration is clear.
GLD, is at The Danger Point.
If we really do have inflation and gold’s going to launch much higher, the last report stated, penetrating support and setting up a Wyckoff ‘spring’ condition would be a good place to start.
So, here we are.
As this post is being created, GLD is rebounding higher by about +0.50%.
This is normal market behavior.
However, the next chart says gold’s likely to have a hard time moving decisively higher.
On a weekly close basis, gold’s in a confirmed downward channel.
It’s going to take a lot of demand to break out of that trend.
Summary
So, far, the attitude of the ‘average investor’ to gold’s decline is “Good, I’ll just buy more.”
Six months or a year from now, when food supplies have run out or become so expensive, only ‘zee bugs’ will be reasonably priced, one has to wonder if we’ll all have the same attitude.
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® 