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Author: Lee Adler

The Fed’s Slush Fund is Working

Lee Adler

The Fed’s Reverse Repo (RRP) operations act primarily as a money market fund for money market funds (MMFs.) The MMFs were forced out of their T-bills in 2021-22 because the US Treasury was paying them down. The Treasury redeemed the T-bills and the MMFs got cash back. Not what they wanted. They need to earn interest on those funds.  Non-subscribers, click here for access.

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The MMFs were therefore in trouble. The Fed came to the rescue by opening its RRP operations to the MMFs. Previously, only Primary Dealers could participate. In effect, the Fed began subsidizing MMFs. As the Fed raised the rate it paid on RRPs, that increased the subsidy to MMFs, and their holders, mostly big investors. Non-subscribers, click here for access.

In this program, the MMF’s could place their excess cash with the Fed overnight and get a nice big fat, risk free, interest payment in return. The Fed imagines that money into existence. Non-subscribers, click here for access.

But the interest payments cut into the Fed’s surplus (aka profit). If the Fed loses money, that reduces the amount of surplus and ultimately, the taxpayer ends up paying for that. Nice. Taxpayers fund welfare payments to MMFs which are typically held by the wealthiest of the wealthy anyway. Therefore the Fed’s interest payments on RRPs are welfare for the rich. Non-subscribers, click here for access.

But I digress.

Once the RRPs were opened up to MMFs, RRPs outstanding ballooned. They got up to $2.6 trillion when the Fed rescued those couple of failed banks in March. Non-subscribers, click here for access.

Meanwhile, I have constantly warned that when the debt ceiling was lifted and the US Treasury started issuing T-bills again, MMFs would pull cash from RRPs to buy T-bills. It’s now happening. RRP balances have fallen by $275 billion since May 24, as the Treasury has been issuing wads of T-bills, including a net of $175 billion this week. Non-subscribers, click here for access.

The RRPs aren’t funding all of that, but they’re absorbing most of it. With T-bills being perfect collateral, they can be, and are, used for repurchase agreements from banks (RPs) whereby the bank will provide credit up to nearly the amount of the T-bill. RPs are like margin loans in that respect, except that the haircut is almost nothing. So the reintroduction of T-bills into the market provides collateral for more credit. More credit means more money to buy hot paper. Non-subscribers, click here for access.

And they’re buying it. Non-subscribers, click here for access.

Some of you have pointed out correctly that MMFs, particularly government MMFs, can only buy T-bills with their cash. But MMFs are only intermediaries. Who holds MMFs? That’s right, major investment institutions, hedge funds, and you and me, aka Ma and Pa investor.
We investors, both big and small, participate in the Fed’s RRP program through these intermediaries. And when we as a group start feeling bullish on balance, for no reason in particular, then we pull money out of MMFs and buy stocks, bonds, real estate etc. etc. etc. Non-subscribers, click here for access.

That’s what is happening now. The rationale for it DOES NOT MATTER. The fact that interest rates are higher now than last October when stocks bottomed, DOES NOT MATTER. The fact that the Fed is still steadily tightening monetary policy via QT DOES NOT MATTER. Non-subscribers, click here for access.

Yet.

QT will matter.

I’ll tell you when, and why, and what it will mean for your dining, listening, and investing pleasure. Non-subscribers, click here for access.

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Swing Trade Chart Picks – Adding Late Cycle Buys

Lee Adler

Swing trade stock screens produced 121 charts with multiple buy signals as of the last two trading days of the past week. There were just 42 charts with a second sell signal. That’s roughly the same ratio as the week before. Non-subscribers click here for access.

Technical Trader subscribers click here to download the complete report.

Average swing trade chart pick theoretical profit rose to 10.8% last week, on an average holding period of 27 calendar days. Whenever the list profit has reached an average of 10% over the past 18 months, the market has subsequently reversed. While many charts are extended, and/or at or near resistance levels, I’m not seeing signs of reversal here yet. Non-subscribers click here for access.

I’m adding four late cycle buy signals to the list. Picking up laggards is risky when a rally is this far along but I liked these charts enough to add them to the list. There were more that I could have added and didn’t because the list is already so loaded. Those that I did add were the best looking ones. Non-subscribers click here for access.

Five picks hit stops last week and will no longer appear on the list. I am pulling two stocks from the list as of today’s opening price. I have adjusted stops on others. These moves, along with the new additions will leave 16 buys and one short on the list over the coming week. Non-subscribers click here for access.

Technical Trader subscribers click here to download the complete report.

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Rally Broadens as It Gains Momo

Lee Adler

Technical indications show that the rally is no longer limited to just a few big cap tech stocks. The troops are getting in position to advance behind the leaders. This report shows exactly how high you can expect the S&P 500 to go, and when it will get there.  Non subscribers click here to access.

Technical Trader subscribers click here to download the complete report.

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. 

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Swing Trade Chart Picks – Let Your Profits Run

Lee Adler

Average swing trade list theoretical profit rose above 10% last week, on an average holding period of 3 weeks. It would have been even greater had I not added 3 shorts last week. That was at least premature. Non-subscribers click here for access.

Technical Trader subscribers click here to download the complete report.

Swing trade stock screens produced 127 charts with multiple buy signals as of the last two trading days of the past week. There were just 51 charts with a second sell signal. Signals tilted more to the buy side than in previous weeks, suggesting a modest broadening of the rally. However, whenever the list profit has reached an average of 10% over the past 18 months, the market has subsequently reversed. Non-subscribers click here for access.

In view of that, and given the duration of the rally already, I am reluctant to add more longs now. There were a number of setups that looked pretty good, mostly in the energy sector, along with a few REITs, about which I’m skeptical. But with so many longs already, I’ll ride with those and start adding stops for profit taking purposes. Non-subscribers click here for access.

I looked hard at the sells. Most of them were fixed income and gold ETFs. Among the few common stocks that had sell signals, the setups were not good for shorting. Nor do I like the looks of the 3 shorts already on the list, so I added or adjusted stops to those. Non-subscribers click here for access.

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Gold Set Up for This Cycle Low

Lee Adler

Gold is due for a 13 week cycle upturn. Here’s what needs to happen. Non-subscribers, click here for access.

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The strategy and tactics suggestions in this report are informational and general in nature, and illustrative of one approach. They are not investment advice. No representation is made that it is the best approach, will be profitable, or even suitable for any particular investor.

Nothing in this letter is meant as personalized investment advice and you should not construe it as such. Trading involves risk of loss, and in the case of options, the loss can be 100% of the amount invested. Any trading that you do with reference to strategies and tactics suggested in this report should be done only after consulting with your financial adviser. Trade at your own risk. 

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Investors Breathe Sigh of Relief But D-Day Is Now

Lee Adler

The debt ceiling issue has been settled. Investors breathed a sigh relief and bought stocks. But they did it on margin, because the cash liquidity for it sure isn’t there. So we can probably count the longevity of this rally with the fingers of our hands, and it won’t be in months. And probably not weeks either. Non-subscribers, click here for access.

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Of course, liquidity isn’t a timing device. It merely establishes context. And the context ain’t bullish. Animal spirits and increased leverage have a shelf life, and this one is about to run out. The timing is likely to depend on the onslaught of new Treasury supply that’s about to hit, now that the debt ceiling has gone away for a couple of years. Non-subscribers, click here for access.

In the short run, anything can happen, especially when hedge funds have a record short position in Treasuries, which we have discussed elsewhere. But the liquidity context argues for the rally in stocks to end soon. Timing that is a matter for technical analysis. Non-subscribers, click here for access.

This report tells what to expect, why, and how. You need to know that so that you are prepared to react properly when the time is right. Non-subscribers, click here for access.

My swing trade screens for stock picks have led me to select only buys lately, until this week when I began to tentatively nibble on the short side. The liquidity picture now suggests that we start to look more closely for opportunities to go short, and to put in trailing stops on our long side trades. Non-subscribers, click here for access.

As for the bond market, once the potential for a short squeeze is out of the way, it will be time to get out yet again. Non-subscribers, click here for access.

Subscribers, click here to download the report.

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The Bulls Are Full of It

Lee Adler

And they should be. There’s just not much in the technical picture to think otherwise. Most projections and indicators point higher in the short to intermediate term, despite weakness in internal measures of the majority of stocks. If we’re trading the market averages, then we must accept that the big cap rules, and can continue to rule for the length of an era.

Meanwhile, here are the current targets and support levels to watch.  Non subscribers click here to access.

Technical Trader subscribers click here to download the complete report.

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. 

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Incomprehensible, That’s What You Are

Lee Adler

But First, A Number

Before I get into the withholding tax data for May, the Treasury just posted the following on the heels of the signing of the debt ceiling deal. My reaction? HOLEE COWWWWW!!! Non-subscribers, click here for access.

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Date Security Type Total Offering Total Publicly
Held Maturing		 Net New Cash or
(Pay Down)
06/08/2023 Bills $123,000 $101,998 $21,002
06/06/2023 Bills $164,000 $135,979 $28,021
06/05/2023 Bills $65,000 $25,000 $40,000
06/02/2023 Bills $25,000 $0 $25,000

That’s $95 billion in new supply in 6 days. And that’s only the beginning, whoa whoa whoa whoa whoa whoa oh oh oh oh oh oh oh uh oh. Non-subscribers, click here for access.

You would think that that would leave a mark in T-bill trading, but so far at least, nothing has moved. It might be because the market was already at 5.42, which is 37 bp above the Fed’s RRP rate. Once again, the market leads, the Fed lags. The T-bills should start sucking money out of the Fed’s RRP slush fund. Non-subscribers, click here for access.

It’s all dead money anyway until investors decide that they want to use it for something else. If it stays in the RRPs, yes it’s available to spend on stocks and bonds, but there’s a reason that $2.2 trillion or thereabouts has just sat there for the past year. And if it gets pulled out to go back into the Treasury’s cash account for rebuilding to the desired $600 billion, that cash won’t be spent in the markets, or the economy either. Non-subscribers, click here for access.

That money is dead to me. It won’t be used to support stock and bond prices. As Treasury issuance explodes and the Fed continues to insanely pull $95 billion per month out of the banking system, something will break. That’s a given. Non-subscribers, click here for access.

Subscribers, click here to download the report.

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Swing Trade Chart Picks – Growing Long Side Gains

Lee Adler

Swing trade stock screens produced 102 charts with multiple buy signals as of the last two trading days of the past week. There were 116 charts with a second sell signal.  That’s a virtual tie. Lot’s of signals on both sides, but a preponderance were in the context of rangebound noise, and therefore meaningless. Non-subscribers click here for access.

Technical Trader subscribers click here to download the complete report.

Last week wasn’t bad performance wise. Including two stopouts and 16 picks still open, the average gain was 5.6% on an average holding period of 19 calendar days, or less than 3 weeks. Non-subscribers click here for access.

The list had only one active short. The rest were buys. Non-subscribers click here for access.

There were too many signals this week to visually review all of the charts. I only added 2 picks on the buy side, and 3 shorts. If I had gone through all of the charts, there probably would have been a few more of each, but the list is big enough, so I stopped. Non-subscribers click here for access.

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That Seventies Show

Lee Adler

There are conflicting indications between the broad market averages and cycle screening measures which take the temperature of the market on a micro basis. It suggests that a new Jive Five will be like the Nifty Fifty of the late sixties and 1970s. They kept the market averages perking along while the bulk of stocks were locked in long term bear markets.

That too was an era of high inflation and slow, or no growth.  Non subscribers click here to access.

Technical Trader subscribers click here to download the complete report.

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. 

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