Volume increases on IYR; range contracts even further.
In what’s beginning to look like its been taken straight out of David Weis’ training video on ‘trend reversals’, volume has surged and range has contracted drastically.
The last update had range contracting down to 1.83% (from 9.77%).
Now we’ve got yesterday’s range down to 0.60%; volume up to 18-million shares … the highest since October 2nd, last year.
One of two things is happening.
It could be absorption for a new leg upward to ever higher, highs.
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 inverted chart of IYR, shows the extremes of current price action.
The chart has a compressed time scale which may be hard to see. It was necessary to present it this way to show extreme action.
The prior update, has a wedge ‘throw-over’ that’s been one year in the making. The daily above, has its own terminating wedge formed over a six-week period.
The important part, is the range and volume.
Back on November 9th, 2020, there was a large volume spike and a move whose (total) range equated to 9.77%
Thursday, April 1st, was a similar volume spike but total range was just 1.83%; a huge (range) contraction when compared to the prior move.
This tells us massive volume is not having a significant result. Of course, if the volume persists, sellers in this area will be absorbed and IYR will move higher.
If not, this could be distribution; a reversal can be expected.
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.
It’s about 9:37p.m. EST, on Sunday. Price action in the futures markets (SIK21) has silver up about +0.40%.
Projecting that action onto the regular daily session of silver, has it within the black box; located right up against the blue trend line.
At this juncture, the down-trend is still in effect.
In others markets … real estate:
A report just out by Uneducated Economist has ‘boots on the ground’ reports lumber inventory (for housing construction) is piling up at mills at levels never before seen … ‘stacked to the rafters’.
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 is going to be one of those technical discussions that are tedious and long-winded (also to include at least one boring anecdote).
If desired, go to the Summary for the CliffsNotes wrap up.
For the rest, let’s get into it:
A quick look at the news and financial sites has the inflation narrative still raging.
This link to an article on ZeroHedge offers a slightly different perspective than one-way hyperinflation.
At least it says deflation is a possibility.
Back in the day, I used to read as many of these press releases as possible; combine them, put them in a spreadsheet, develop a ‘voting’ system (with variable adjusted algorithmic weighting), look at buy and sell recommendations, try to figure out if MACD, RSI and Stochastics could predict the next move … and then, I would watch Wall Street Week with Louis Rukeyser.
It’s a frustrating, unprofitable exercise that was ultimately abandoned while the search for market truth carried on; only to be found much later in 2007; that’s a story for another time.
There’s nothing wrong with Rukeyser. In fact, I did use his program (once) in what was at the time, a trade of pure intuition.
During his opening monologue (probably May 19th, 1989), Rukeyser talked about gold reaching multi-year lows.
The sense was ECO had slowed its decline and seemed ready to move higher. Gold also felt like it might retrace part of its decline.
The trade result is on the chart below:
The entry date for going long ECO was May 22, 1989, a Monday.
That would seem to follow if Rukeyser’s gold statements were on his (prior) Friday broadcast.
As the chart shows, gold bounced and then went slightly lower before going into a sharp (but short) rise.
The exit came on January 23rd 1990, right at the top of the brief move.
Once again, it was from intuitive feeling that gold had reached some kind of stopping point.
What solidified thinking ‘we’re at a top’, was Joe Granville coming out in his newsletter that he was going “all-in” on gold.
At the time, Granville was not making good market calls. This one seemed like a stab for attention as by now, gold was in the news.
To add to the nostalgia (looking at the confirmations), commission for going long (100 shares) was $47.60 and for getting out, $49.00
Many decades later and in retrospect, the trade worked because it was sentiment based.
After declining steadily for two years, gold sentiment was negative. At the top in January ’90, it had tuned positive.
What does all that have to do with today?
Looking at the chart of gold above, you’ll note a sharp rise in price from June of ’86 to October ’86. In effect, it’s a wide price bar.
From Wyckoff analysis, markets tend to come back to wide areas for a test. That’s exactly what we see from December ’87, onward.
Now, let’s look at the monthly close of silver (SLV):
The chart shows how each wide bar has (ultimately) been tested. Price action either rises to test or declines … but it does test.
This is how markets behave. It’s what they do.
Looking at the current situation for silver, one would think it’s time to exit (if long); anticipating a retrace or go short (not advice, not a recommendation).
There’s a wide bar from the March 2020, low to the August 2020 high, that has not been tested.
That (test) thinking is bolstered further, by the chart below:
On a monthly closing basis, SLV has pivoted (down) off the 38.2% Fibonacci retrace level when looking at the entire decline from April 2011, to march 2020.
In addition, it tagged the 23.6% level as a pivot to the upside which led into the now famous, but fading fast, ‘short-squeeze’.
It’s important to note, the short squeeze was so weak, it could not even register a new closing high on the monthly chart.
Summary:
It’s not important or profitable to figure out whether it’s inflation or deflation. The important part (and the hard part) is to read the price action itself.
That price action … at least for silver, is saying we’re at a juncture (Friday’s close) where SLV’s in position to retrace and test the wide trading area created from March – August, of last year.
A retrace is possible because that’s what markets do. Our anecdote example from 1989, shows that markets do not change.
If silver, SLV opens lower on Monday, it weights the probability we’re on our way to the 17.50 – 18.00 level and/or a test the March ’20 lows.
If it opens higher, the market’s in spring position (ready to head higher) as described in this link.
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.
A long time ago in an interview whose source is long forgotten, the question was asked:
‘How many times do you attempt to enter a trade before giving up?’
Years ago as an amateur, I was shocked. I didn’t even know that several attempts could be made.
Was that even allowed?
I thought the ‘professionals’ were supposed to know the market. If they get stopped out, they must be some kind of (idiot or) shill.
Well, you can make your own call on that one … as for the ‘project’, we’re re-positioned for one more time.
Monitoring price action throughout the day, it became obvious just before 3:00 pm; EST, that IYR was going to make a breakout push.
The DRV short was exited at 7.48 and then, we waited.
The upside breakout came just twenty minutes before the close (forty minutes after exiting). IYR pushed significantly higher while DRV went sharply lower.
Ten minutes into the breakout, as IYR was still rising, DRV was re-entered at 7.358 (see table below).
Price action continued higher right into the close. DRV finished at 7.25.
Looking at the weekly chart, the ‘throw-over’ looks terminal.
Price rose for the week but range was more narrow with volume (effort) up and force down.
The amount of volume needed to move price slightly higher increased significantly from the week prior.
Note: Each upside force (from start of the recovery) has declining energy.
For the week just ended, Force Index barely ticks higher while volume increased and range traveled decreased.
Wyckoff termed this “effort vs, result”. The bulls are tired.
The table shows current status. We’ll decide on a stop (or exit) during the next session.
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.
Silver, SLV’s at a juncture where it can either go sharply higher or continue lower from here
Punching through support puts SLV at the danger point.
Whenever price action penetrates support and hesitates, it’s in Wyckoff spring position; poised to move higher.
Because we’ve got a weekly MACD bearish divergence in addition to a huge volume ‘changing of hands’ on February 1st, probability would favor downside action … continuing on to 17.50 – 18.00 area.
Nonetheless, SLV could rally from here … even in the midst of a longer term bearish (deflationary) environment.
The precious metals sector is a crowded trade and one to be avoided (not advice, not a recommendation).
An interesting post on the current inflation/deflation scenario is 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.
IYR made an unexpected print high; then failed to hold into the close.
The inverted chart of IYR puts it all in perspective.
It’s obvious we’re working the area of IYR, where medium to long term reversal is possible. The inverted chart shows how each successive thrust lower (blue lines) covered less net distance.
Instead of exiting out of DRV, then getting back in, the position was held with the expectation new IYR, print highs would not hold.
They didn’t.
Not only that, there was plenty of intra-day kabuki:
Early session lower, then reversal to new highs, then fail and lower close. Anything can happen but IYR’s upward action looks exhausted.
If IYR had maintained its new high into the close, DRV would have exited (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.
Expectation was for a measured move higher … about 2 – 3 points.
As soon as price action penetrated the stop area, it reversed.
Shown above, is the re-entry (DRV) when IYR action posted an outside down hourly bar.
The chart below has more detail which indicates successive market rejections as price attempts to move higher
There are no guarantees. Some kind of demand could come in to move IYR higher.
However, based on the failed attempts to do so thus far, the market’s saying we’ve seen the highs for this cycle.
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 stop on our ‘Project Stimulus’ account was originally listed as “TBD”.
The market itself needed to define the stop. Now, it has.
The 4-Hour chart of IYR shows a wedge pattern that’s right at resistance. The early session is over and posted a narrow red bar.
We’re just into the second half; price action is inching up.
If IYR gets above the inter-session high of 92.50, it’s likely to make one last push higher into a measured move.
We’re short via DRV (not advice, not a recommendation) so we don’t want to be around if that happens.
The Project table has been updated with an approximate location for a DRV stop:
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.
“It’s unlikely silver is going higher any time soon. There could be some upward spasms as the crowded trade exhausts itself; it’s likely we’ve seen the SLV highs for quite some time.“
Taking today’s pre-market action into account, SLV is down -12% from February 9th, and down nearly -20% from its most recent top of 27.98, posted on February 1st.
The weekly chart above shows a huge bearish divergence in momentum (MACD); thus far, it’s in-effect.
The next chart has SLV breaking out of a wedge, forming a measured move that could take SLV down to 17.50 – 18.00, area.
The so-called ‘Silver Short-Squeeze’ is becoming a distant memory as the public are being herded into the next non-event.
There’s always the caveat, anything can happen. Somehow there could be a change of character in the market. For now, we’re still leaning toward a deflationary event of some type.
For those that may be new to these updates and as a reminder, rising prices (food, lumber and gasoline) are not signs of inflation. They are signs of supply constriction.
It’s becoming very clear that’s the game (or the plan). Perhaps the most critical constriction is the food supply.
We’ll leave that one there. If you need more info, search Food Supply on this site.
As this post was being created, SLV has continued lower in the pre-market; currently down -2.00%
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.
