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Author: Lee Adler

Cycle Analysis Target Projections Point Higher Still

Near term cycle projections have risen as the relentless mania just trends right along. We may as well take advantage, right? I’ve added a couple of swing trade chart picks that look well positioned to do just that.

What about all those sell signals? Failed again. Short sellers are setting themselves up as targets in a carnival shooting gallery. That’s typical of an entrenched mania.

When and where will it end? I’ve posted near term and longer term projections based on current trends and cycles.

Technical Trader subscribers click here to download the report.

Not a subscriber? Follow Lee’s weekly swing trade chart picks with Lee Adler’s Technical Trader, risk free for 90 days!  

These reports are for informational purposes, aimed at a broad 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. 

You Can See How Dark Matter and Dark Energy Drive Stocks Higher

I have tried in these reports for the last twenty years to identify the most important forces driving the stock market. To some extent, I’ve been successful at that, although sometimes a bit early, or a bit late, in recognizing just what the hell is going on. I just hope that my analysis has helped you along the way.

But there are many forces to which people like me, operating on the outside of the system, are not privy. And there are forces at work that no one can see or understand.

Stock market analysis requires many disciplines. Unlike, physics, for example, it’s not rocket science. Hell, it’s not even science. But while physicists and astrophysicists understand more and more about how the universe works, there is much more that they don’t understand. For every theory that they confirm, more questions arise.

They say that approximately 80% of the mass of the universe is “dark matter.” They don’t know what it is. And there’s “dark energy,” that they don’t understand either. They see their effect, but they can’t see the cause, and don’t know what either of them is. So they observe and measure the effects, and make predictions and develop theories based on that.

Liquidity analysis isn’t science, but like physics, when we observe things, we find plenty of dark matter and dark energy. They move things. I don’t know what those dark forces are, but you and I can see their effects in the markets. We can measure those effects, and make predictions from observing them. We call that study, “Technical Analysis.” It’s the other facet of my research.

When darkness engulfs the forces driving the effects, then we all must pay particular attention to the patterns of those effects and learn what we can from them, that is, the technical analysis. Liquidity analysis provides, to the extent of the forces that we can see and measure, the context.

The Composite Liquidity Indicator is a hybrid of fundamental liquidity analysis and technical analysis. When I last reported on it about two months ago, I was forced to conclude, much to my surprise, that the stock market was oversold.

In other reports, I have shown my analysis and conclusion that when the 10 year yield rose above 1%, the Primary Dealers would be in trouble, leading to the potential for a crash.

Those two conclusions aren’t mutually exclusive. It’s a matter of timing. Markets only turn on a dime at bottoms. Tops take time, a lot of time. They can last a year or two.

The current situation reminds me of 1987, however. Then, the bond market began to crash in May. Stocks crashed in October. Will there be a similar 5 month lead time now? Doubtful. It’s a different ballgame today with the Fed aggressively supporting the market week in and week out, and vowing to do whatever it takes to keep the bubble from bursting.

In addition, we know that the dealers and other leveraged players are hedged. Apparently, those hedges are working well enough for now. They’re also getting a boost from individual stock traders.

So is my analysis and conclusion about the likelihood of a stock market crash following on the collapse of bond prices since August just flat out wrong? Or is it merely a matter of time?

I think the latter, but the financial system has far more moving parts than even the biggest institutions can track and understand thoroughly. Furthermore, there’s always something new that we hadn’t thought of before.

To sum up, I made the huge call that the stock market would follow the bond market in crashing, because Primary Dealers were overloaded with long inventory and overleveraged in financing it. I set a line in the sand of 1% on the 10 year. Last month, they crossed that. Stocks are still going up.

Here’s what the components of the Composite Liquidity Indicator show us about that, from the perspective of the space-time continuum, dark energy, black holes, Black Scholes, Einstein’s Theory of General Relativity, Maslow’s Hierarchy of Needs, and, of course, Hobbes’s, “It’s solitary, poor, nasty and brutish to be short this market.”

The facts, figures, outlook, and strategy are reserved for subscribers. Click here to download the report.

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The Composite Liquidity Indicator (CLI) Says Honor Thy Father and Thy Mother

This was inadvertently posted a moment ago with the wrong headline and post link. Sorry for the error!

Macro Liquidity continues to bulge. The stock market has followed. It became oversold versus the surge in liquidity that the Fed initiated in March 2020. And it hasn’t looked back since. Should we expect to see stock prices become overbought again before the next big crash?

Stock prices have caught up with liquidity but with liquidity expected to continue rising stock prices could continue to rise along with it.  But the balance is shifting and we may not need to see Overbought again on this chart before the next crash. Here’s why, and how I’m approaching it.

The facts, figures, outlook, and strategy are reserved for subscribers. Click here to download the report.

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Lots of Signals, Mostly Sells, Means Good Shorts Ahead

Short term cycles have topped out and concurrent down phases are ideally due to last 2-3 weeks. With weak upward momentum in the 6 month cycAle, the potential exists for a significant downdraft. That, in turn would signal the onset of a 6 month cycle down phase. This is the best shot that bears have had for a turn in the tide since August-September.

As a result, I’m shifting my focus to be alert for more swing trade chart picks on the short side.

Technical Trader subscribers click here to download the report.

Not a subscriber? Follow Lee’s weekly swing trade chart picks with Lee Adler’s Technical Trader, risk free for 90 days!  

These reports are for informational purposes, aimed at a broad 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. 

Here’s Why Front Loaded Stimulus Will Be Catastrophic for the Market

Both bonds and stocks have weakened over the past 2 weeks. It’s a sign that the Fed isn’t supplying enough QE.

We’ve known for a long time that it wasn’t enough to support twin bull moves in both asset classes. Have we reached the tipping point where it’s insufficient for either to move higher while the other descends?

The answer, my friends, is blowing in the wind—the wind of margin calls now blowing through dealer balance sheets as leveraged fixed income positions continue losing value.

Meanwhile the $2.9 trillion Biden stimulus proposal may boost the US economy, but it will be a disaster for the increasingly fragile stock and bond markets. Here’s why, and what you should do about it.

The facts, figures, outlook, and strategy are reserved for subscribers. Click here to download the report.

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How to Play the S&P Heading for 4200

This report shows why that’s the target, and adds a few more swing trade picks to take advantage.

Technical Trader subscribers click here to download the report.

Not a subscriber? Follow Lee’s weekly swing trade chart picks with Lee Adler’s Technical Trader, risk free for 90 days!  

These reports are for informational purposes, aimed at a broad 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. 

Now That We’re Through the Month-end QE Shortage

We have a little tightness in the market at the end of every month. That’s because the Treasury issues a big wad of TP and the Fed isn’t there to absorb it. The Fed is just doing its piddly little $20 billion a week of Treasury purchases, and the Treasury is slugging the market with $100 billion or so of new supply.

Last week the actual numbers were worse. The last QE injection was $6 billion on December 23. They then didn’t do another one until Monday January 4, with $8.8 billion. Meanwhile, the Treasury plopped $164 billion in new supply on to the market on December 31.

We got through the deluge relatively unscathed. But there’s a lot to look forward to for the rest of the month.

The facts, figures, outlook, and strategy are reserved for subscribers. Click here to download the report.

Not a subscriber yet?

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