During the week ended Friday, October 17, out of 1899 stocks meeting institutional price and volume criteria, the screens produced the following results :
Picks closed since September 9 showed an average gain of 7.6% on an average holding period of 29 calendar days. Currently open picks have an average gain of 3% on an average holding period of 22 calendar days. This compares with a gain of 2.2% in the S&P 500 since September 9. Past performance does not indicate future results.
The market is at a pivotal juncture for U.S. equities as the S&P 500 hovers near key technical thresholds that will determine whether the recent rebound evolves into a renewed uptrend or fails into a deeper correction.
I have been around long enough to have lived and traded through a parabolic extreme move like this in 1979-80. Do I believe that this is like that? Yes. It did not end well, but tops, even parabolic blowoff tops, take a few months to complete. The cycle projection on the 9-12 month cycle is doable, provided that any pullback holds above xxxx-xxxx. Any pullback below that would probably reduce the final target of this move.
Dealers’ shrinking holdings, depleted cash, and reliance on leveraged hedges show that current market stability rests on repo financing rather than balance sheet expansion. The system remains vulnerable to any funding or sentiment shock.
The bullish fever broke on Friday, and today’s list of new additions to the list shows the effect. However, Friday’s break was driven by a statement made by President Trump. Picks closed since September 9, or open as of the October 10 close, showed an average gain of 8.5%, which is a drop from the 11.6% gain the previous week. This compares with a gain of 0.5% in the S&P 500 since September 9. The average holding period was 32 calendar days. Table below.
Seeing the pre-market rebound this morning, I have to admit this is one of the toughest calls I’ve faced. Did Friday’s Trump-triggered selloff truly break the market—or not? At this point, I can’t say with confidence. Based strictly on Friday’s price and indicator patterns, the uptrend was broken. But today’s early recovery could still repair the damage if it carries just a few points higher from the current 6644 level. As Europe opened around 3 AM NY time, the S&P was already testing 6660—the threshold I identified as critical to re-establish the uptrend.
For now, we wait to see how the session resolves. Ideally, that clarity comes today.
Cycle projections for the 13 week and 9-12 month cycles have been reached. Indicators suggest the onset of down phases in shorter cycles, but it’s not clear that these will turn down in absolute slope. It would appear to mark only the beginning of top formation. We are taking profits in miner swing picks as gains have averaged 43% over an average holding period of 2 months.
September’s Treasury data shows headline revenue strength masking a deeper slowdown. Withholding taxes remain in their normal cyclical range, but real growth is flat once wage inflation is factored in. Tariffs are propping up receipts even as they squeeze corporate profits and the deficit widens. Repo financing and basis trades continue to feed the rally. Consider that the bull market is supported by artificial financial engineering, not fundamental economic growth, or even conventional central bank money printing.
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Picks open as of the October close, or closed last week, showed an average gain of 11.6%, up from 7.5% the previous week, with an average holding period of 30 calendar days, up from 24, the previous week. Past performance does not indicate future results.
Buy setups were again predominant. Setups are not guarantees. They are valid only when short-term signals follow. Therefore, the next screening layer looks for short-term trigger signals from within the stocks that have met the setup criteria.
On that basis, the results this week are as follows:
Market averages continue to respect their long- and intermediate-term uptrend channels, with momentum and cycle indicators still aligned xxxxxxx. There is no evidence yet of a completed top or imminent reversal. Momentum across major cycles supports continuation of the equity uptrend into xxxx xxxx, with targets extending toward xxxx on SPX.
Gold has exceeded long term trend limits. In the short run, the 4 week cycle has reached its projection, but the 13 week cycle still points to xxxx, ideally due by xxxxxxx xx. Closing below xxxx next week would be needed to break the uptrend. The gain in miner swing trades is now 44.7% over an average holding period of 8 weeks. With the charts now extended, I have added trailing stop recommendations.
Massive Treasury issuance, repo expansion, and leveraged basis trades have fueled both economic strength and equity gains, but extremes in valuations and leverage point to rising risks of reversal.
I track weekly real time cash flow data from the Fed and Treasury that foretell the next moves in stocks and bonds.
Lee Adler