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.
In the past few weeks, it seems like the markets have been whacked with a lot of, ‘the largest, ever’.
Trading in bonds, specifically TLT, is no exception.
While the media and pundits alike, deflect with ‘who’s doing the selling’ (hint: it’s not important), we’re going to look at the harder question of ‘what does it mean?’
Kick-Off, or Capitulation
Borrowing from research and writings of Wyckoff, Weis, and Prechter, when we get such a huge thrust downward (chart below), it’s typically one of two events:
A massive kick-off to much lower prices or a capitulation that washes-out the weak hands.
A bond upside reversal (rates lower) is a common sign of nearing or active economic downturn (not advice, not a recommendation).
In this interview with Greg Hunter, Ed Dowd covers the topic … the expectation for the reversal. However, that interview, was before the massive thrust lower.
Long Bond Proxy, TLT, Weekly
For years, it’s been one failed upside (reversal) after another.
Is this time, different?
The right side (magenta arrows) shows unprecedented thrust and volume.
So far, there has been a weak recovery to 38.2%, retrace of the recent down-move.
If that retrace level holds, with bonds continuing lower (rates higher), it does not bode well for the ‘capitulation’ narrative.
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.
If things don’t change soon, the wheels have come off the bond market (not advice, not a recommendation).
At this point, it’s common knowledge the (U.S. Treasury) bull market of forty-years, ended in March of 2020.
It’s been nothing but rates ratcheting higher, ever since.
Recession Reversal … Where?
However, a strange thing happened on the way to the anticipated bond reversal … typically, a long-time indicator of an impending recession.
Just weeks ago, during the market meltdown with the largest trading volume ever recorded, bonds did not respond as expected.
The Blip
During that wipe-out, bonds (TLT) blipped higher into a false breakout, a Wyckoff Up-Thrust, and have since collapsed on the largest weekly downside (thrust) energy and volume ever seen.
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.
If the trendline is in-effect, meaning the market’s hanging in mid-air in a false breakout, getting back into that trend may result in some dramatic downside action.
Well, we got the dramatic downside.
Biotech XBI, collapsed nearly -11%, and 3X Inverse Fund LABD, is up +38%, and climbing.
As Wyckoff said a century ago:
‘Someone always knows something … and that ‘something’, shows up on the tape.’
It turns out in this case, showing up on the tape, was this, and this.
Biotech XBI, Daily
The chart from the week-ago post, has been updated.
As is typical, the ‘reason’ for last week’s price action comes out later, after the fact.
Positioning
At this point, trade LABD-25-05, is being maintained (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 Good: Only the Senior Miners, GDX, have managed to claw their way past the highs set nearly five years ago in August of 2020.
The Bad: Junior Miners GDXJ, remain below that August ’20, level.
The Ugly: Silver Miners SILJ, are the worst, having their peak a bit later in February of 2021; they remain over -35%, below their highs.
The Market Rolls Over
Yesterday, Friday, was a down day for the Dow, S&P, The Qs, Transports, Airlines, Semis, nearly everyone.
For some of these indices, their all-time highs were posted months, if not years ago.
There may be some (bidding) ‘defensive’ action with gold (GLD) continuing higher; as said in earlier posts, the rest of the monetary metals are far below their highs.
Let’s look at the weakest; the silver miners, as they are likely going to be the ones most affected by an economic decline (not advice, not a recommendation).
Silver Miners, SILJ, Daily
We’re at an interesting spot.
Friday was a down day that pushed below existing support, shown in zoom area.
We have simultaneous action.
Once resistance was penetrated on March 18th, it could not hold. After eight trading days, on Friday, it posted lower on heavy volume.
However, we can see that SILJ, is now in (a minor) Wyckoff ‘spring’ position. So, the question is, what happens next?
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.
While we can’t officially declare biotech dead like ‘Bones’ Dr. McCoy, we can say the charts below, paint a less than bullish picture.
The XBI, is so packed full of nuances, it needs at least two charts.
Biotech XBI, Daily
First, apparent weakness.
Price action’s only been able to retrace 23.6%, after penetrating support (blue line) and forming a Wyckoff ‘spring’ set-up.
On the far right, just below the magenta line, the grey lines show a minor up-thrust (reversal).
Next, we have a series of spring set-ups, that have failed.
Each time a spring condition is created, price action rises for a brief period, then collapses.
At the far right, the spring (shown in the first chart) appears to have failed; now subdividing lower.
Positioning
During Friday’s session, as price action began to rise unexpectedly, short LABD-25-03, was closed.
Then, late in the day after XBI appeared to have reached its high and reversed, a new short position, LABD-25-04, was opened (not advice, not a recommendation).
Obviously, the expectation for the coming week, is XBI 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.
Yesterday’s mid-session update said Carvana’s posting a repeating pattern.
That pattern is what’s called a Wyckoff ‘spring-to-up-thrust’.
Even before, yesterday, this update said we’re expecting some kind of bounce.
Well, we got it; then, price action went on to post a potential reversal (not advice, not a recommendation).
Today’s session may or may not contain a ‘test’ of that (reversal) action.
Let’s go to the chart.
Carvana CVNA, Daily
There’s a lot going on.
As the chart notes, when taking the retrace measurement from the after-hours high of 310, posted during the earnings release, yesterday’s action topped out right at the Fibonacci 23.6%, level.
We’re about twenty-minutes before the regular session; CVNA, is trading lower by 3.6-pts.
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.
Corporate Insiders Scramble To Buy Their Own Stock As Buyback Blackout Period Begins. Link here.
Last but not least, my personal favorite 🙂
Recession Canceled: US Industrial Production Jumps To Record High. Link here.
David Weis 1980s
Back in the 1980s, the late David Weis was a bond trader.
He published a series of trading articles using Wyckoff analysis; in one of those, this comment stood out (paraphrasing):
‘We considered none of these things …’
That is, stay focused on what the market is saying about itself. Ignore the press and any other distractions.
With that, we have Carvana.
Carvana CVNA, Daily
What can be said?
After penetrating support, some kind of bounce is expected … except, so far, it’s not happening.
This post is coming out before the regular open.
CVNA is trading a couple points higher (pre-market) but nowhere near the nearest 189-ish, resistance area.
The Fed has yet to announce their shenanigans for the day; that itself, could cause a bounce higher … or not.
While the press chases after squirrels and gold, the market itself (CVNA) is saying, if it can’t retrace higher but pivots down, it indicates significant weakness (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 Danger Point® 