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 the kids at the card-table, freaking about ‘plunge protection team‘, rigged markets and Bitcoin, grownups the next table over, are planning their moves.
Friday’s late session rebound higher was not uncommon for a typical short squeeze.
These gyrations are intended to make sure only a select few are aboard when we get the break.
This idea is not new. You’ll find statements to that effect over and over in most any trading book.
The big difference now, is the amazing level of complacency and learned helplessness of the overall population.
Just one example of such before we move on to the charts.
Texas has opened up. Schools are about to go without diapers. Perish the thought.
Yet, there’s still a contingent that’s near hysteria about ‘safety’.
With all the information available, yes one actually has to do real research to find out what’s going on, huge segments of the population adamantly remain (intentionally) ignorant.
Unfortunately, that segment has voluntarily (at least in the U.S.) lined themselves up to be taken out; financially as well as physically.
Just a few of the most recent links, here, here, and here.
At some point, those links are going to become common knowledge.
Hopefully, there will be long lasting and certain retribution for the perpetrators. However, for those who ‘volunteered’, it’s already too late.
Now, on to the markets.
Friday’s real estate rebound (IYR) looked like short-squeeze action.
In response to that and late in the session, short position DRV (3X inverse IYR) was increased at price 9.37 (not advice, not a recommendation).
Volatility is still low in IYR. Short positions can be increased with less risk.
The Big Break
When and if the break comes, it’s likely to be fast; no time to plan.
Whatever plans one has should’ve been laid out well ahead of time.
Two markets being watching closely are Peabody Energy (BTU) and Seabridge Gold (SA).
By now everyone’s aware that a certain far east country is going about its business and building their infrastructure … as if nothing had ever happened. Funny that.
Conversely, the coal market has bottomed out and so has Peabody.
On top of that, the Texas Freeze laid bare the farce that is climate change, global warming and green energy.
Quietly, without fanfare, coal is seeing increased demand.
The blue arrow is a gap in trading that could be filled.
To do that, there might have to be a massive market collapse, pushing BTU back to that level … if only temporarily.
Huge volume in the past six months shows that somebody’s buying.
The next market is Seabridge Gold (SA) which is being watched for essentially the same reasons. If Van Metre is right and we’re in a deflationary impulse, the entire public’s on the wrong side of the trade.
If SA can get itself below 13 – 14, it then enters free-fall territory.
If that happens, as with BTU, it too might be a short lived event.
Positioning:
Currently, the firm’s position (not advice, not a recommendation) is short biotech and real estate via LABD and DRV, respectively.
If BTU and SA get to extreme lows, both of them have potential for a ‘ten-bagger’, the possibility to gain over 1,000%.
Getting to such gains would necessitate a change in the current strategy of trading, to buy and hold.
Summary:
Pressure seems to be building for some unexpected event that would cause a market break; Possibly the devaluation of the Yuan as discussed by Steven Van Metre.
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.
Interest rate sensitive markets are on the move … lower.
Updated 3:02 p.m. EST, as noted below
Fastenal (FAST), Home Depot (HD), Lowes (LOW), Real Estate (IYR), Weyerhaeuser (WY), Homebuilders (XHB), all taking a hit early in the session.
In their own way, there’re interest rate sensitive and related to real estate, construction or maintenance.
Since mid-January this year, real estate, IYR was identified as a potential strategic short opportunity.
Numerous shorts (via DRV) were opened, some exited (not advice not a recommendation).
On February 25th, it was obvious in early trading, this is it.
Reversal at hand.
The last of the shorts via DRV was opened and documented here (not advice, not a recommendation). Now in today’s session, we have a completed wedge and apparent downside breakout in progress.
There’s a lot of congestion to get through before (if and when) IYR reaches ‘free-fall’ territory. A lot could happen between now and then.
Even so, it’s fairly safe to say, price action’s not likely to come back to the IYR session high.
But that’s exactly what it did … and pushed just a bit higher (+0.15-pts).
So, we’ll set the DRV stop at that location (session low) … approximately 9.41; not advice, not a recommendation.
With the above push, the DRV stop will be set at today’s session low (currently 9.39).
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.
That was a phrase from the late David Weis, used during his training session video (link here).
That’s what we’re gong to do.
Biotech (IBB) is nearing support and it was thought the overnight would result in an obvious gap-down open, exit signal.
However, with just about a half-hour to go before the regular session, markets maintained their positions overnight keeping the door open for continued decline or counter-trend action.
All markets, the S&P, Dow, Nasdaq, (and biotech) are pivoting lower from insane valuations. We could be at the very beginning stages of a sustained deflationary move.
One example of how such moves behave, was the oil market in July of 2014. The tracking fund USO, had nine successive down months (declining over 60%), before a significant retrace.
With that in mind, we’re setting the LABD stop at the prior session low of 21.80 (not advice, not a recommendation).
With an LABD entry point at 18.08, being stopped out at 21.80, would yield a gain around 21%.
So, we’ll leave it there and move on to other opportunities.
The weekly has IBB, nearing support around 140 – 142 (dashed line). We can expect price action to hesitate as (or if) it encounters those levels.
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.
Markets might continue their decline in overnight and pre-market.
If pre-market or early regular session has IBB trading near its target level, we’ll plan on exiting (LABD) in response; not advice, not a recommendation..
Every other active trader sees the H&S at this point and is probably waiting to close out (their shorts) at or near the bottom.
If so, it may result in buoyancy and the trade will start to degrade; exit is warranted under those conditions.
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.
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.
Nothing gets sharks in the water faster, than a failed move.
Last Friday, real estate IYR closed below support (black line). Doing so, put itself in Wyckoff spring position.
‘Spring position’ is a technical condition of instability where price can reverse dramatically.
At the open yesterday, that’s exactly what happened. IYR launched nearly instantly to a 50% retrace.
From there it was a long day of moderate price erosion all the way to the last hour; then it all went south.
IYR closed just 0.22 points higher or +0.25%, after being as high as +1.73 points (+1.98%), early in the session. In addition, that close was back below support on the heaviest volume since February 2nd. … another bearish sign.
We can see momentum, MACD has exhausted itself and posted numerous bearish divergences.
On the fundamental side, just in the past 24-hours, there’s been a raft of news articles posted showing commercial real estate’s in serious trouble.
IYR could still rally from here. However, with the conditions described in this post, it’s not likely.
Summary:
We’ve been short this market in a big way (not advice, not a recommendation) via DRV. The plan is to increase position size as long as price action allows low risk entries.
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.
The Danger Point® 