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Wednesday, August 18, 2021

Market Update 8/18/21 - looks like a bearish reversal, but why isn't the market selling off?

I'm running a little late this morning, but not seeing futures down too much at the moment. 

It can take a little time to confirm a reversal, but as I tweeted, going into yesterday's close:

It's a tough call, going into OPEX (Options Expiration) Friday, but I'd venture to guess, we're not going to see any more new highs before then. There is always the possibility that OPEX is the only thing holding the market up, as it did, just ahead of the covid crash, and at that time even Bloomberg was left asking, "why isn't the market selling off". The reason is that every underlying market move only designed to manipulate the heavily over-leveraged Options market. If you don't understand that, just put it up on the shelf.  

Bearish (China) Options are also bound to pay.... and I suspect Government Sachs (and the like) is behind the selling in China. Of course Bloomberg reports - as usual - that some supposed resurgence of the covid virus is scaring markets, while I believe that the uncertainty coming out of China, is a heck-of-a-lot scarier to investors. 

I don't know if entire sectors - in China - are about to be wiped out entirely, but I do know technical short selling, when I see it. And I see the Bloomberg talking heads, blaming hedge fund liquidation. Calling BS on that fake news. 

$FXI China - Was taken down precisely below the 200 week moving average, more than a week ago. I suppose this was designed to take out some stops, and apparently worked, but "fool me twice, shame on me"!  

To explain the above chart a little further, the blue lines you see on the chart are parallel to the upper purple line. What's obvious is that China is not even close to falling into a bear market, and once the short sellers collect on their bearish bets, Chinese stocks are going to be off to the races again.  I think the rebound could easily last into the end of the year, and I much prefer beaten down Chinese stocks, to over-bought US technology companies (for example), 

 The final thing I wanted to touch on this morning, was the reversal in Biotech stocks. 

$NBI - Pulls back to the 50 day moving average. It was one of the easiest trades. I've had the pleasure of making, in a long time. 

Take Care, AA 

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