Author: Lee Adler

The cycle screening data has now been updated. 

When a technical signal is rendered and then suddenly reverses, we call that a whipsaw. Whipsaw signals are often signs of powerful moves ahead. Last week we had a helluva whipsaw of the post Labor Day short term buy signal for the market.

That massive turn has put the market in position for a big decline. It doesn’t guarantee it, but it does set up the conditions for one.

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The buying the previous week actually weakened the market in an environment where longer term demand is limited by the constant shortage of money (liquidity) caused by two related forces. One is the Fed’s policy of removing $95 billion from the banking system every month. The other is that the US Treasury keeps adding $100 billion per month on average to the supply of investment paper in the market. Both processes suck cash out of investment accounts, requiring stocks to be liquidated. Non subscribers click here to access.

I cover this vicious spiral in depth in the Liquidity Trader Money Trends reports.

Cycles- .  The 6 month cycle has topped out. The down phase will ideally last until the window of xxxxxxxxxx xxxxx xxxxxxxx. The 10-12 month cycle still appears to be in a top phase with a high due at any time from xxxxxxx x through xxxxxx xx. The 13 week cycle projection has dropped to xxxx-xxxx. Non subscribers click here to access.

Key swing cycles could be simultaneously on the downside in the first xxxxx xxxx xxxxx xxxx x xxx., a setup for a big decline at that time. Non subscribers click here to access.

Third Rail The bottom of an intermediate channel starts the week at xxxx and finishes at xxxx. There’s another support line waiting at xxxx. Below that is wide open spaces down to the xxxx area. To break the new downtrend channel the market would need to end the week above xxxx. Non subscribers click here to access.

Long Term Weekly Chart –  Long term cycle momentum has broken down, reconfirming the bear market. The 18 month – 2 year cycle wave channel slope has turned flatter, but is still down sloping. Its lower boundary is approaching 3500. A weekly close below xxxx this week would confirm a 6 month cycle down phase. Non subscribers click here to access.

Monthly Chart –  The bottom of the current downtrend channel and possible target for the current move is at xxxx in September. To break the new downtrend channel the SPX would need to end September above xxxx. Non subscribers click here to access.

Cycle Screening Measures – Thanks to my bank and data provider I was unable to update this portion of the report over the weekend as usual. Due to an overly aggressive fraud detection procedure, my bank, in its infinite wisdom, rejected my monthly payment for my market data that allows me to do my regular cycle screens. It’s a payment that I’ve made automatically every month since I joined this bank 7 years ago. And of course, neither the bank nor the data provider had any customer service available over the weekend. I will post an updated report as soon as possible. Non subscribers click here to access.

Likewise, I will be unable to post the weekly Swing Trade Stock Screen Chart Picks until data is restored. I will post that as soon as possible also. Non subscribers click here to access.

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. 

Trailing stops did their job last week, taking out all 11 remaining older picks on the short side with profits on 9 of the 11. Unfortunately, the 2 new picks are still festering, and I’ll excise them as of the open this morning.

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As of Friday, September 9, there were 89 charts with second or third buy signals on the last two days of the week. There were 10 charts with second or third sell signals to end the week, but all 10 were inverse ETFs, so they were also sell signals. Thus the final score was 99 to nothing on the buy side. I don’t care what sport it is, that’s quite a shutout. On Friday alone there were 122 buy signals and just 2 sell signals (that weren’t inverse ETFs). Non-subscribers click here for access.

I guess the question is whether this signals a new bull market, or overdone hysteria on the buy side, the possible result of a massive bull raid on short positions that triggered squeezes across a broad spectrum of stocks. I’ll guess the latter, but that doesn’t mean it can’t persist for a few weeks. But it also doesn’t mean that it’s a high percentage trade opportunity. Non-subscribers click here for access.

After visual review of this week’s screen results,  I chose exactly zero charts to add to the buy list, and there weren’t any shorts to even look at. I just can’t buy this rally. To do so would be with unclean hands. So we will go through this week empty handed, rather than dirty handed. 😄

Yes, there were multiple short term buy signals, but the trend structures sucked. Virtually every chart was trading just below a thicket of resistance. I have no desire to get caught in a churn and burn meat grinder, so I’ll sit this one out for the time being. Non-subscribers click here for access.

The screen results come from a universe of approximately 1200-1500 stocks daily that meet the criteria of trading above $6.00, and with average volume greater than a million shares per day.  I start the weekly process by screening for daily buys and sells from the previous Friday through Thursday. I then rescreen that output, for additional signals in the progression on Thursday and Friday. Non-subscribers click here for access.

The percentage gain is based on 100% cash positions, with no margin and no use of leverage or options. Non-subscribers click here for access.

Last week 11 picks were stopped out. All were shorts. 9 of the 11 were closed out with profits and two with fractional losses. The average was a gain of 4.3% on an average holding period of 13 calendar days. Non-subscribers click here for access.

The two picks added last week will be dropped from the list using the opening price on Monday. They currently have an average loss of 8.8% on a 6 day holding period. Non-subscribers click here for access.

9/5/22 16 picks were closed out in August. The average gain was 3.4% with an average holding period of 2 weeks. Since last November, when I last tweaked the screening and selection methodology, 108 picks were closed out with an average gain of 2.9% and an average holding period of 17 calendar days. Non-subscribers click here for access.

8/1/22 July had been a narrowly rangebound meatgrinder market until last week. Only two picks were closed out during the month for an average loss of 2.6%. Non-subscribers click here for access.

7/4/22 Picks closed out in June averaged a gain of 10.1% on an average holding period of 17 calendar days. That works out to an average of 4.1% per week. There were 12 closed picks. The win rate was 75%. I would hope to continue that, but it is by no means a given. Non-subscribers click here for access.

June’s performance is not something we should expect to duplicate too often, if at all. The average weekly gain since I tweaked the methodology in mid January is just 1.29%, while trending upward lately. Non-subscribers click here for access.

6/6/22 Picks closed out in May averaged a gain of 3% on an average holding period of 2 weeks. That worked out to an average of 1.5% per week.  There were 28 closed picks. 25 were shorts. Non-subscribers click here for access.

5/9/22 April was a challenging month. The final tally of closed picks in April had an average loss of 0.4% with an average holding period of 11 calendar days. My system does not do well when the average low to low cycle duration drops below 4 weeks. Non-subscribers click here for access.

March was better. Picks closed in March had an average gain of 4% with an average holding period of 23 calendar days. Non-subscribers click here for access.

Subscription Plans

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. This is a developmental and experimental exercise, for the purpose of providing experienced chart traders with ideas and concepts to use or not use as they see fit. 

Nothing in this letter is meant as individual investment advice and you should not construe it as such. These picks are illustrative and theoretical. The method behind these picks is experimental, and may change over time.  I may trade my own account, and may buy, sell, sell short or cover short, or have positions in any of the stocks on the list at any time, based on a particular trading style that is unique to me. My entry and close out levels are likely to differ from those published due to the exigencies of my trading style and time constraints. I post these items in good faith for informational and educational purposes, and do not take positions in opposition to those which are published. All chart picks are actively traded stocks, and I assume that no subscriber to these reports, nor the total of all subscribers taking positions, would do so in a size that would influence the market price. 

Performance tracking assumes 100% cash basis, no margin, no options. You should not assume that recent performance as reported can or will be repeated in the future. Trading involves risk of loss. In the case of options, the loss can be 100% of the amount invested. When leverage is used the loss can exceed the account equity under certain conditions.

The opinions expressed here assume that readers are experienced investors or are working with an investment advisor.

As the decline matures the number of new sell signals naturally diminishes and the number of buy signals starts increasing. That happened last week but there was a slight increase in sell signals from the prior week.

The overall picture this week is ambiguous, neither bullish nor overwhelmingly bearish. It looks too soon for adding new buys to the list, and mostly too late for new sells. But I did add two shorts this week.

Technical Trader subscribers click here to download the complete report.

Non-subscribers click here for access.

As of Friday September 2, there were 33 charts with second or third buy signals on the last two days of the week. There were 29 charts with second or third sell signals to end the week, versus 18 the week before. On Friday alone there were 32 buy signals and 23 sell signals. But many of the buy signals were inverse fund sell signals, and were duplicative, such as funds that were 1x, 2x, and 3x the same or similar indexes. Non-subscribers click here for access.

After visual review of this week’s screen results, I have added 2 picks to the list on the short side, and none on the buy side. The new shorts are XXX and XXXX. This will result in the list having 13 picks, all shorts. Charts below. Non-subscribers click here for access.

As usual, I’ll start them with no stops for the first week, to give the market manipulators room to play with them before the expected swing sets in. Tracking of the new picks will start as of the opening price on Tuesday. Non-subscribers click here for access.

I have added and adjusted stops on existing open picks. Non-subscribers click here for access.

The screen results come from a universe of approximately 1200-1500 stocks daily that meet the criteria of trading above $6.00, and with average volume greater than a million shares per day.  I start the weekly process by screening for daily buys and sells from the previous Friday through Thursday. I then rescreen that output, for additional signals in the progression on Thursday and Friday. Non-subscribers click here for access.

The percentage gain is based on 100% cash positions, with no margin and no use of leverage or options. Non-subscribers click here for access.

16 picks were closed out in August. The average gain was 3.4% with an average holding period of 2 weeks. Since last November, when I last tweaked the screening and selection methodology, 108 picks were closed out with an average gain of 2.9% and an average holding period of 17 calendar days. Non-subscribers click here for access.

Last week 4 picks were stopped out —  2 shorts and 2 buys – all wins. The gains ranged from 2.7% to 15.1% and averaged 9.6%.  The average gain of open and closed picks for the week was 7.7%. The average holding period was 12 calendar days. We can’t annualize that, of course, but profits over the past 3 weeks have beaten the averages since November.

The performance of currently open picks and those closed last week is shown on the table above (subscriber version).  Charts of open and new picks are below (subscriber version). Non-subscribers click here for access.

8/1/22 July had been a narrowly rangebound meatgrinder market until last week. Only two picks were closed out during the month for an average loss of 2.6%. Non-subscribers click here for access.

7/4/22 Picks closed out in June averaged a gain of 10.1% on an average holding period of 17 calendar days. That works out to an average of 4.1% per week. There were 12 closed picks. The win rate was 75%. I would hope to continue that, but it is by no means a given. Non-subscribers click here for access.

June’s performance is not something we should expect to duplicate too often, if at all. The average weekly gain since I tweaked the methodology in mid January is just 1.29%, while trending upward lately. Non-subscribers click here for access.

6/6/22 Picks closed out in May averaged a gain of 3% on an average holding period of 2 weeks. That worked out to an average of 1.5% per week.  There were 28 closed picks. 25 were shorts. Non-subscribers click here for access.

5/9/22 April was a challenging month. The final tally of closed picks in April had an average loss of 0.4% with an average holding period of 11 calendar days. My system does not do well when the average low to low cycle duration drops below 4 weeks. Non-subscribers click here for access.

March was better. Picks closed in March had an average gain of 4% with an average holding period of 23 calendar days. Non-subscribers click here for access.

1/18/22 I will continue to (mostly) forego stops in the first week that a pick is added to the list. I continue to feel that stops should only be used as trend violation triggers for exiting trades that I want to close out. That would include both those that have gone well and those that have not. I still do not like arbitrary stop loss as a strategy to reduce loss, because it has equal or greater potential to reduce profits on trades that ultimately turn into big winners. Stop running, and using false breakouts and breakdowns are time honored strategies of dealers and big speculators. Such whipsaws often lead to big moves. Non-subscribers click here for access.

Technical Trader subscribers click here to download the complete report.

Non-subscribers click here for access.

Subscription Plans

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. This is a developmental and experimental exercise, for the purpose of providing experienced chart traders with ideas and concepts to use or not use as they see fit. 

Nothing in this letter is meant as individual investment advice and you should not construe it as such. These picks are illustrative and theoretical. The method behind these picks is experimental, and may change over time.  I may trade my own account, and may buy, sell, sell short or cover short, or have positions in any of the stocks on the list at any time, based on a particular trading style that is unique to me. My entry and close out levels are likely to differ from those published due to the exigencies of my trading style and time constraints. I post these items in good faith for informational and educational purposes, and do not take positions in opposition to those which are published. All chart picks are actively traded stocks, and I assume that no subscriber to these reports, nor the total of all subscribers taking positions, would do so in a size that would influence the market price. 

Performance tracking assumes 100% cash basis, no margin, no options. You should not assume that recent performance as reported can or will be repeated in the future. Trading involves risk of loss. In the case of options, the loss can be 100% of the amount invested. When leverage is used the loss can exceed the account equity under certain conditions.

The opinions expressed here assume that readers are experienced investors or are working with an investment advisor.