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Author: Lee Adler

Reason to Stay Optimistic on Gold

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The 13 week cycle up phase aborted early and the pullback has negated the base breakout. When that happens there’s usually a recovery before a second high that confirms the top. I want to remain optimistic that this will only result in a mild correction/consolidation. As long as the 10-12 month cycle indicators continue to signal an up phase, that’s where I’ll give the benefit of the doubt.

Here’s what the current up to the minute charts say about that (subscriber version).

The HUI mining stock index 6 month cycle is probably topping out. But with the 10-12 month cycle due to stay in an up phase for at least 12 more weeks, I’ll give the benefit of the doubt to the 6 month cycle down phase playing as a consolidation, rather than deep decline. The parameters to watch on that are here. (subscriber version).

Today, there are 2 buys and 13 sells from the swing trade screens of 52 gold mining stocks. This followed 2 buys and 6 sells last week, on the heels of a flood of buy signals the week before. That suggested the possible onset of a new upleg.  Now we’re in a correction.

Could it be something worse? Maybe, so I’m putting stops on all picks, but with a little wiggle room to allow for a little more dipping and then hopefully recovery. I’ll see on the recovery if it’s too weak, and close out picks where the charts call for it. But for now, I want to give them time to allow for recovery.

Current open picks got crushed with the sector as a whole, ending the week with an average gain of just 14.1% on an average holding period of 41 calendar days. That was down from an average gain of  21% with an average holding period of 34 calendar days.

I didn’t see any charts I wanted to add this week. I will stick with existing picks, with stops added as shown on the table.

See table and charts (subscriber version).

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An Explosion of Sell Signals in Swing Trade Screens

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This Friday’s screens had 19  buys and 53 sells. 2 of those were inverse bond funds so we can ignore that. 51 sells is still a big enough number on the sell side to make me sit up and pay attention. I was overconfident on the long side, and overstayed several of the longs on the pick list without trailing stops. I’ve instituted them, and a few outright sells this week. I also didn’t trust the short picks and bailed on two of them too early last week.

1340 stocks met the initial screening criteria in the current screen. 5.4% of them rendered signals on Friday, including nearly 4% that were sell signals. That’s a more than a typical percentage of new signals on a given day. So it’s time to look for a possible rollover and more shorts to add to the list.

On reviewing the charts, I found 6 setups I liked well enough as shorts to add to the list. They’re on the table below. I will remove 4 longs as of Monday’s opening price. I have added stops to 5 others.

In total, this will bring the list to 15 open picks, of which 9 will be longs, and 6 will be shorts. This is the most shorts we’ve had in many moons. “Many moons” is a way of saying how long its been when you don’t know the actual number of months. Let’s just say it’s been awhile.

As of Friday, the average gain of open picks and those closed last week was 3.6% with an average holding period of 27 calendar days. That was a drop from an average gain of 8.5% on an average holding period of 25 calendar days two weeks ago. I allowed the list to age too much without installing trailing stops. Will compensate going forward, but the market will undoubtedly make that look bad too.

The table and charts of open picks are below. I’m back to using trailing stops, and have instituted a couple of new picks with initial protective “just-in-case” stops.

The table and charts of open picks are below (subscriber version only).

Table (subscriber version only)

Charts (subscriber version only)

Technical Trader subscribers click here to download the complete report.

The strategy and tactics opinions expressed in this report illustrate one particular approach to trading. No representation is made that it is the best approach, or even suitable for any particular investor.

These picks are illustrative and theoretical. Nothing in this report is meant as individual investment advice and you should not construe it as such. Trade at your own risk. 

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Underweighting the Negative Signs

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Cycles The 13 week cycle up phase is maturing. The projection range is now xxxx-xxxx (subscriber version).  Around xxxx is trend support. Above there, the up phase stays in progress. A breakdown through that level would signal a down phase.

Short term cycles are moving sideways in flat down phases, due to strengthen within a week or so. That could carry the averages a little higher while the 13 week cycle is due to top out.

On the third rail chart Support is at xxxx (subscriber version). on Monday and rises to around xxxx at the end of the week. The market faces a cluster of resistance trendlines at xxxx on Monday, rising to xxxx at the end of the week. Clearing that would signal acceleration with a likely target of 4800. If they don’t clear, it would set up the possibility of a downside reversal, but the market would also need to break support around 4650 to signal more downside.

On the weekly chart, updated long term cycle projections as of October 10, 2021 show targets ranging from xxxxx to xxxxx 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 xxxxx (subscriber version) at the end of November.

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 4300 in November. They’d need to break that to show any sign of possibly ending the bull market. Clearing the long term trendline around xxxxx would set a course toward xxxxx in November and possibly xxxxx (subscriber version)  in December or January. The monthly long term cycle momentum indicator remains bullish.

Cycle screening measures sent quite a few indications that the market should be making a short term top here. But for the past year or more, the market averages have often trended higher on the basis of a few big stocks pushing the averages while perhaps the majority languished. So I will continue to underweight these indications.

Swing trade chart picks will be posted later Monday morning.

Technical Trader subscribers click here to download the complete report.

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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. 

Beware- Debt Ceiling Uncertainty Darkens the Outlook

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We approach another debt ceiling drop dead date. The next month is thus fraught with unknowns. It makes projecting our QE and PONTs charts beyond the next two weeks all but impossible. We’ll just have to wait and see along with everybody else. Of course we view the world a little differently than everyone else.

Here’s the view through that prism.

Word is that Yellen says the new drop dead date (DDD Day) when the Treasury runs out of money will be December 18. You’ll get no argument from me on that score. The extrapolations of Treasury cash spending and revenue seem to support a mid December deadline. At that point, all new debt issuance will stop, and Treasury spending will be severely curtailed. The Federal government will be unable to pay somewhere around 40% of its bills on average.

Everybody else thinks that a debt default would be a catastrophe. I’m not so sure. No doubt it will throw the Treasury market into chaos, but there will still be vultures buying any dips, knowing that a technical default will be cured sooner or later. A stoppage of issuance will mean that new supply will be zero. How much supply will come from panicked sellers, and whether that will overwhelm demand from dealers flush with QE cash, and hedge funds that are short Treasuries, remains to be seen.

The consensus seems to be that a default will trigger a really bad something something something, in the stock market and economy. The economy? Make me laugh. Irrelevant for our purposes.

But the stock market? A complete halt in government debt issuance could be very bullish…

Get the rest of the story and ideas on how to handle what’s to come all spelled out and illustrated in the subscriber version.

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Gold Breaks Out, Sets New Targets, Miners Move

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Gold has broken out of a 5 month base, with a measuring implication of xxxx-xxxx (subscriber version). There’s resistance at xxxx but cycle projections now point to the xxxx-xxx range.

The HUI mining stock index has broken out of a reverse head and shoulders bottom. The upsloping neckline results in a measured move target of xxxx (subscriber version). There’s not enough data for a 10-12 month cycle projection yet, but if these gains stick, the implied projection would be at least xxxx-xxx .

Today, there are 2 buys and 6 sells from the swing trade screens of 52 gold mining stocks. This followed a flood of buy signals the week before. That suggested the possible onset of a new upleg.  Now we’re in the momentum follow-through stage after the initial surge of buy signals.

Current open picks and one that was sold last week, had an average gain of +21% with an average holding period of 34 calendar days. That compared with +16.3% and an average holding period of 37 calendar days the week before.

I didn’t see any charts I wanted to add this week. I will stick with the ones that “brung us,” with no stops. I’ll close them out of the list when their charts turn less favorable. For now, I give the benefit of the doubt to the upside.

See table and charts (subscriber version).

Subscribers, click here to download the report. 

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Buys and Sells in Balance in Swing Trade Screens

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This Friday’s screens had 29 buys and 30 sells.  It compares with 68 buys and 22 sells the Friday before. That indicated a new, moderate buy side thrust. It was not the kind of surge that comes off a significant low, but it suggested a second wind for the rally.

Initially it didn’t happen, but Friday’s rebound showed promise so I’m sticking with most of the picks from last week and earlier.

1311 stocks met the initial screening criteria in the current screen. 4.5% of them rendered signals on Friday. That’s a typical percentage of new signals on a given day. But the fact that they were evenly split between buys and sells suggests that the market is going nowhere fast. The theory of this method is that more of  the picks will move in the right direction than not. Otherwise, why bother.

Given the mixed picture, however, I didn’t see much new and interesting in this week’s signal list. I added just one on the long side, and no shorts.  I’ll start tracking the new pick as of Monday’s opening price. I’ll also close out 2 shorts and one buy as of Monday’s opening price. Those charts show increased potential to go the wrong way.

This will bring the list to 13 open picks, of which 12 will be longs, and 1 is a short.

As of Friday, the average gain of older and newly opened picks was 5% with an average holding period of 22 calendar days. That was a drop from an average gain of 8.5% on an average holding period of 25 calendar days the week before.

All of that drop was due to new picks mostly starting out in the hole. There’s nothing unusual about that. Gotta give the newbies room to breathe, with the idea that enough of them will move the right way to give us a positive result overall.

The table and charts of open picks are below (subscriber version only).

Table (subscriber version only)

Charts (subscriber version only)

Technical Trader subscribers click here to download the complete report.

The strategy and tactics opinions expressed in this report illustrate one particular approach to trading. No representation is made that it is the best approach, or even suitable for any particular investor.

These picks are illustrative and theoretical. Nothing in this report is meant as individual investment advice and you should not construe it as such. Trade at your own risk. 

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Benefit of the Doubt to the Upside Until Proven Otherwise

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Cycles There’s no sign of thrust in the 10-12 month cycle up phase. But there’s also no obvious resistance on the chart that would stop the market from drifting higher.

The 6 month cycle is now mid up phase. There’s no projection yet.

The 13 week cycle up phase is maturing. The projection now points to a range of xxxx-xxxx (subscriber version) . Above support at xxxxx the up phase stays in progress. A breakdown through that level would signal a down phase.

On the third rail chart SPX faces a resistance trendline cluster in the xxxx-xxxxx (subscriber version)  range. Clearing that would signal acceleration within the short term channel. If they don’t clear, they could still stay within the short term channel. The lower limit starts the week at xxxxx and rises at 12.2 points per day (PPD). That would bring trend support to xxxxx at the end of the week.

On the upside, if they clear xxxxx, the immediate target would then be xxxxx .

On the weekly chart, updated long term cycle projections as of October 10, 2021 show targets ranging from xxxxx to xxxxx 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 xxxxx (subscriber version) at the end of November.

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 4300 in November. They’d need to break that to show any sign of possibly ending the bull market. Clearing the long term trendline around xxxxx would set a course toward xxxxx in November and possibly xxxxx (subscriber version)  in December or January. The monthly long term cycle momentum indicator remains bullish.

Cycle screening measures remain bullish.

Swing trade chart picks will be posted Monday morning.

Technical Trader subscribers click here to download the complete report.

Subscription Plans

Not a subscriber? Get price and time targets, and weekly swing trade chart picks, risk free for 90 days!  

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. 

The Fed Pulls The Plug, Macro Liquidity Cruiser Starts Its Turn

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In the financial markets, money talks. I have observed and reported for many years that talking about a change in monetary policy, announcing that change, and actually executing it, are entirely different matters. The market tends not to anticipate change, it responds to actual changes in liquidity.

While the Fed and the mouthpieces of the mob have talked about tightening policy for months, the Fed only announced that it will finally tighten policy this month. The policy has yet to begin. That changes next week.

The new policy implementation begins now. The Fed actually will reduce its QE purchases for the first time since September 2019. That’s when the Fed undertook its emergency “Not QE” policy in response to the money markets freezing up. That came about from a Fed policy of non-intervention after Powell ended Yellen’s balance sheet normalization in December 2018. From December 2018 until September 2019, the Fed stood by while an onslaught of Treasury supply crushed the money markets.

The new policy that begins now is a tightening because it will reduce QE purchases. Anything that isn’t the status quo purchase rate of a total of $200 billion or so a month including MBS replacements, is effectively a tightening. The Fed will be buying less paper each month.

And so, the actual effects of the new policy begin now. The Fed will reduce its Treasury purchases by $10 billion for the mid November- mid December period. It will cut MBS purchases by $5 billion. It will continue to roll over maturing Treasury holdings and prepaid MBS. The net effect will be a reduction of $15 billion in the first month, and then $15 billion the following month.

They said they’d be flexible. In other words, if the markets tank, they’ll be back with more QE. The idea that they’ll continue cutting purchases for the 7 months it would take to get to zero, is a pipe dream. But it’s possible that they could cut for at least xxx-xxx months (subscriber version) before running into problems big enough to stop them.

I wrote months ago that the Fed could only reduce QE if the Treasury cuts issuance. That’s on the schedule this month, particularly as the new debt ceiling again restricts issuance.

But reduced issuance isn’t no issuance. After the dust settles and the debt ceiling is finally lifted or suspended for the long haul, the US Treasury will still be issuing an average of $150 billion per month in net new debt. If the Fed cuts QE for two months to new purchases of $90 billion per month after two months, and MBS replacement purchases average another $50 billion or so, the Fed will still be taking down directly or financing indirectly 93% of new issuance. No problem there. The market could sail right along with that.

But higher bond yields mean higher mortgage rates. Higher mortgage rates mean fewer refinances and fewer MBS prepayments. We don’t know exactly how much. But it will be an exacerbating factor. At the peak of the refi boom, Fed MBS purchases totaled $120-130 billion per month. Now they’re down to $100-110 billion per month, and they will drop more as mortgage rates rise.

If the stock market remains relatively stable going into January, the Fed will continue to cut its total outright purchases of Treasuries and MBS. They’ll go to $75 billion in January, and $60 billion in February. At that point, let’s say MBS replacements drop to around $40 billion a month. Then total Fed purchases would be around $115 billion and Treasury issuance would still be $150 billion. Then we’re talking about 77% of new issuance.

The benchmark for the Fed for the past dozen years has been to directly absorb and indirectly fund a total of  xx% (subscriber version) of new issuance. The only time they went lower for any length of time was during the Yellen balance sheet bloodletting from October 2017 to December 2018. That did not go well. Once the 10 year breached 3%, the panic was on. Powell took over, panicked, reversed course, and began QE to infinity and beyond.

Now we’re going to find out again how far they can push the “tapering” fantasy. They told the market that they’re going to be “flexible.” Which means that they’ll reverse course at the first sign of trouble.

The issue is where that will be. First benchmark to watch on the 10 year is txxxx xxxx xxxx xxxx (subscriber version). If that’s cleared, and I have little doubt that it will be, the pressure will be on.

The Fed’s media mouthpieces will start floating the trial balloons around then. But remember! Guidance schmidance. Money talks, and BS, even Fed BS, walks. Once the pressure on the markets begins to manifest itself, the market won’t reverse course just because of a few words from the Fed. The market will only reverse when the money starts to flow again.

As Johnnie Cochrane famously said, “The Fed must pump, or the market will dump.”

With that in mind, we look at the macro liquidity chart (subscriber version) to this point and see that nothing has changed. Stock prices continue to track with rising liquidity. But that rise is about to slow, and month after month for the next xxx-xxx months (subscriber version) months at least, the Fed will tighten the screws. My guess is that around xxxxxxxx (subscriber version), we should start to see negative impacts in the financial markets. Treasuries will come under pressure first. Stocks will follow.

Be ready for things to change. The Fed is tightening. Rule Number One now points in the other direction for the first time since the Yellen bloodletting of 2017-18.

All spelled out and illustrated in the subscriber version.

Subscribers, click here to download the report.`

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Gold Cycle Projections Hold Good News

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There’s a lot of good news in the cycle projections table (subscriber version). Cycles are in gear to the upside and projections point higher. Now those projections just need to come to fruition. A breakout through xxxx (subscriber version)  should get the ball rolling uphill. Failure to do so within the next couple of weeks would not be good.

Gold made a little progress over the past week but it still needs to clear xxxx (subscriber version) to break out of the trading range. That would essentially end the risk that this year-long consolidation would break down and lead to another downleg in a bear market. Until that upside breakout, the outlook would continue to hold that risk.

On the long term chart of the gold stock index, the neckline of a potential reverse head and shoulders bottom is now at xxxx (subscriber version). Clearing that would be bullish. Failing, and subsequently falling back under xxxx (subscriber version), would be bearish.

Today, there are 24 buys and 2 sells from the swing trade screens of 52 gold mining stocks. This is a big departure from the small numbers of signals in recent weeks, suggesting the possible onset of a new upleg. I expected to see some charts with good setups but I found only two that I liked enough to add to the list, xxxx  and xxxx (subscriber version). The rest were still below big resistance.

Current open picks and one that was stopped out last week, had an average gain of 16.3% and an average holding period of 37 calendar days.  I will drop (xxxx) as of the opening price on Tuesday and track the two new picks also as of the opening price on Tuesday.

See table and charts (subscriber version).

Subscribers, click here to download the report. 

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Swing Trade Screens Have Buy Side Surge

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This Friday’s screens had 68 buys and 22 sells, which is far more signals than is usual. It compares with 11 buys and 33 sells the Friday before. This indicates a new, moderate buy side thrust. It’s not the kind of surge that comes off a significant low, but it does suggest a second wind for the rally.

1317 stocks met the initial screening criteria in the current screen. 6.8% of them rendered signals on Friday. That’s almost double the signal rate of recent weeks, suggesting again, more stocks making initial moves off a minor low. It was a sign that, when reviewing the charts, I should find some interesting buy side setups.

I did, adding 7 buys to the list. I’ll start tracking those as of Monday’s opening prices. This will bring the list to 15 open picks, of which 12 will be longs, and 3 are shorts.

Including the pick that I closed as of last Monday’s open, there were 9 picks total last week, of which 6 were longs and 3 were shorts. The average gain was 8.5% on an average holding period of 25 calendar days.

The table and charts of open picks are below (subscriber version only).

Table (subscriber version only)

Charts (subscriber version only)

Technical Trader subscribers click here to download the complete report.

The strategy and tactics opinions expressed in this report illustrate one particular approach to trading. No representation is made that it is the best approach, or even suitable for any particular investor.

These picks are illustrative and theoretical. Nothing in this report is meant as individual investment advice and you should not construe it as such. Trade at your own risk. 

Subscription Plans

 

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