Stock Pause That Refreshes

Lee Adler 2 - Technical Trader October 31, 2021

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Short term cycles look to be headed for a breather. But don’t expect much downside.

I must now rate the 10-12 month cycle as xxxxxxx , with a strong possibility that it has begun xxxx xxxx xxxx xxxx (subscriber version only). The 6 month cycle is early in an up phase. The 13 week cycle is in an up phase, with an updated projection of xxxx.

Short term cycles have entered what should be consolidations lasting a couple of weeks. They may manifest as merely a slowing in the rate of advance or a trading range.

On the third rail chart the SPX broke out to a new high and continued its climb in the upper half of its short term uptrend channel. The top of the short term channel starts the week at xxxx and rises to end the week at xxxx.

Above that are multiple intermediate and long term trendlines around xxxx (subscriber version only). If broken the SPX could run to xxxx. or even xxxx..

On the weekly chart, updated long term cycle projections as of October 10, 2021 show targets ranging from xxxx to xxxx. for cycles of up to 7 years. The SPX is above the 18 month cycle channel extension, suggesting that the long term trend is accelerating toward a possible target of xxxx at the end of November (subscriber version only). .

Long term momentum indicators suggest higher for longer. They normally form negative divergences long before price peaks.

On the monthly chart, the market uptrend channel lower bound is at xxxx in November. They’d need to break that to show any sign of possibly ending the bull market. Clearing the long term trendline around xxxx would set a course toward xxxx in November and possibly xxxx in December or January. The monthly long term cycle momentum indicator remains bullish.

Cycle screening measures are in a pullback but remain generally bullish.

Swing trade chart picks will be posted Monday morning.

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These reports are not investment advice. They are for informational purposes, intended for an audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance.

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It Only Takes One House Fire to Start a Conflagration

Lee Adler 1 - Liquidity Trader- Macro Liquidity October 31, 2021

Subscribers, click here to download the report.` Primary dealers have reduced their long fixed income positions but they have dramatically increased their leverage. On the one hand, they have reduced their risk exposure, and on the other hand, they have increased it.

It doesn’t make much sense on the surface. But the leverage increase appears extreme, and that’s something to note as the government moves toward its ultimate resolution of the debt ceiling. That will allow a tidal flow of Treasury issuance to batter the market. At the same time, the Fed will almost certainly begin to “taper” its bond purchases. In other words, the supply of Treasuries will increase, while the market’s largest source of demand will diminish.

These facts argue for much higher yields and lower bond prices. The short term timing is uncertain. We’ll rely on the technical analysis of the charts for that. But beyond the next couple of months, all the pressure on yields should be to the upside. Which means bond prices will head lower. That could set off a firestorm in not only Primary Dealer inventories, but bank long term bond portfolios as well.

It doesn’t bode well for a neat and clean outcome for the Fed’s tapering attempt. At some point it will be forced to reverse course. But they’ll try for a while. I think that the outcome in the markets will be chaos to the downside in prices.

This report looks at the particulars of dealer positions, financing, and hedges, as well as the profits and capital trends of the big banks in the aggregate (charts and discussion in subscriber version). These aren’t timing tools but give us some idea where the risk of a blowup lies. Then I discuss the technical charts, key benchmarks and strategy (subscriber version).

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Gold Report Glitch

Lee Adler 3 - Gold Trader October 27, 2021

I don’t know if this issue is affecting all subscribers, but I did hear from one of you that it is, and I found that it’s also affecting me, as I attempt to download the latest Gold Trader report. I have a temporary workaround. Just right click on this link to the report and select open link in new tab (or window). That will open the login screen and you can open as usual. If you are a new subscriber, just type your user name and password, and click enter and the file should open. If it does not, email me from the support form and I’ll send you the file directly.

Sorry for the inconvenience! I’m working on getting this fixed ASAP.

Lee

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Gold Sets Up for Eventual Breakout

Lee Adler 3 - Gold Trader October 26, 2021

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The 13-17 week cycle now has a projection of xxxx (subscriber version), suggesting that xxxxxxxx xxxxxxxxx xxxxxxxx (subscriber version) . Both the 9-12 month and 15 month cycle indicators are now constructive for a breakout when xxxx xxxx xxxx.

The mining stock index HUI has broken out of an intermediate term base with a measured move target of xxx (subscriber version ). Cycle projections don’t point that high yet, but there’s plenty of time in the 6 month cycle up phase for it to happen. Likewise, the 10-12 month cycle seems to have turned up.

Today, there are 4 buys and 5 sells from the swing trade screens of 52 gold mining stocks. This is a consolidation phase after 26 buy signals and just 3 sell signal three weeks ago. Current open picks have an average gain of 18.5% and an average holding period of 25 calendar days. I will let these picks ride without stops again this week. None of the new buy signals were compelling, therefore no new picks this week.

See table and charts (subscriber version).

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US Treasury Says, More Beans, Mr. Taggart! – LINK CORRECTED

Lee Adler 1 - Liquidity Trader- Macro Liquidity October 26, 2021

Apologies for the bad link in this report I posted yesterday! Now corrected!

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The Fed poured $132 billion of QE into the accounts of Primary Dealers between October 14 and 21, the regular monthly MBS settlement week. As a result, we got the usual predictable result of a rally in stocks.

But there was only a weak, late holding action in Treasuries. They sold off for most of the week. That’s understandable, considering that the US Treasury sucked $218 billion out of the market that week after the debt ceiling was lifted.

It will pull another $196 billion out this week. At this rate, they’ll hit the new debt limit by xxxxx xxxxxxxxxx (subscriber version). Then the extraordinary measures game and the political/fiscal brinksmanship will begin anew.

At the same time, the Fed will begin cutting its outright QE purchases, and MBS replacement purchases will also decline because of higher rates and few mortgage refis, and thus prepayments. That would normally be very bearish, but remember! They have a slush fund! The Fed’s RRP account, which currently still holds about $1.4 trillion in cash ready to absorb the flood of new T-bills.

In the context of all this new supply pounding the financial market, the stock market rally was pretty remarkable. Stocks rose despite the fact that there was more Treasury supply than there was QE. True, there’s still plenty of cash sitting in the Fed’s RRP slush fund. As I’ve pointed out, this will cushion and help to absorb the supply hit coming from the US Treasury.

Think of the RRP slush fund as a big pot of beans simmering on the money manager cowboy camp fire. Fed QE adds more beans to the pot. The US Treasury keeps eating mass quantities of the beans. It constantly refills its plate, consumes the beans, and passes the gas into the US economy. It can continue to consume those beans until they’re gone, as in when the RRP fund is exhausted. That will happen in some months, especially as the Fed gradually stops adding beans to the pot (tapering QE).

Or maybe not that long. Maybe some of those money managers tending the pot will at some point will be like Mr. Taggert. In response to the Treasury asking for still more beans, they’ll say “I think you’ve had enough!”

That’s when both the stock and bond markets will get really interesting for bears. Of course in my view, the bond market is already plenty “interesting,” and has been for some time.

Media reports have pointed out that professional money managers are overwhelmingly bearish on bonds, as if that’s some kind of contrarian bullish omen. I hate to be a party pooper, but market consensus is often right for long periods, especially when the facts support it. In this case, the facts support the consensus. So I’m xxxxxxxx xxxxxxx xxx xxxxxxx (subscriber version). Treasuries. I wouldn’t want to hold long term debt in this environment.

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For the rest of the story, including the multi colored charts and discussion that will entertain, delight, and enlighten you about what to expect, and what to do about it, subscribe!

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US Treasury Says, More Beans, Mr. Taggart!

Lee Adler 1 - Liquidity Trader- Macro Liquidity October 25, 2021