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Our Chart Pick List Was Short Up the Wazoo, Woohoo! Now What?

Lee Adler

Technical Trader subscribers click here to download the complete report.

The extra layer of screens that I instituted for swing trade chart picks last week, and a cooperative market, paid off in a big way.

The list had been empty for two weeks after the market shook me out of a slew of earlier short picks that were just a tad too early. I added 9 picks as of the open last Tuesday, all on the short side.

At Friday’s close the average gain was 9.5% and the average holding period was 4 calendar days! That’s all cash, no margin, no options, no leverage of any kind. It more than reverses the battle I lost with my own stupidity at the turn of the year.

Although maybe it wasn’t stupidity. As it turned out, those short picks would have been huge winners had I just stayed asleep for another couple of weeks, Rip Van Winkle like.

Meanwhile, last week was by far the best weekly record since I began this experiment for you a couple of years ago. Considering that the S&P 500 lost 5.7% on the week, I’ll allow for some self back-patting after my self-flagellation of prior weeks. Let’s face it, sometimes the market whips us. That’s why they’re called whipsaws. First they whip you. Then they saw you in half.

Please, no calls from trading rights activists. No actual trades are harmed in the performance of these lab experiments. Results have not been peer reviewed nor replicated under real world conditions. If you attempt to replicate these experiments, your results may differ.

Daily Data Table (subscriber version only).The raw daily data for last week as a whole tilted to the sell side, which would seem obvious. But it wasn’t lopsided. There’s no sign of massive capitulation or widespread downside thrust either.

I must assume that this means that this selloff can get a lot worse. That’s not carved in stone of course, but I want to be open to the possibility, and not cut off the profit potential of an extended decline by setting trailing stops too tight.

Screening on all days of the week, as opposed to just Friday is an extra layer of work that allows me to see the progression of short term sell signals on every one of over 10,000 stocks on the NYSE and Nadsac. I had been running just Friday’s screens, in the belief that once a week was enough. But the results were ragged. So I went to daily screens with the added filter of a Friday re-screen on the charts that qualified.

The next step is to take all the stocks that had signals on any day during the week, and run the buys through a re-screen for buy signals on Friday, and the sells through another screen for sell signals on Friday. That resulted in a buy side screen on the 85 charts that had had one or more buy signals over the prior 5 sessions. The final sell side screen was run on the 122 charts with prior daily sell signals.

Those final screens for Friday resulted in 21 charts with buy signals and 46 with sell signals. The buy setups looked like they might be candidates for dead cat bounces after mostly getting slaughtered last week. No thanks. I’ll leave them off this week. This is not about grabbing quick pops.

The sells had mostly been beaten to death. They could get worse, but they might also have vicious 2 day spike rallies from already deeply extended positions. No thanks to those, too. But there were two that weren’t so extended and looked to be early in downturns. I added those to the list as you can see on the table below (subscriber version only), and in the charts that follow.

Meanwhile, I added trailing stops to the 9 charts already on the list. These have daily price adjustments as shown, with Monday’s starting stop price, minus the reduction per day thereafter.

The table and charts of open and new picks are below (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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Pop Goes the Bubble

Lee Adler

Technical Trader subscribers click here to download the complete report.

Technical indicators support what the market averages did last week. That popping sound was no mirage. It was the sound of a bursting bubble.

The good news for bears is that the technical indicators rolled over, but only the shortest term indicators got “oversold.” Intermediate indicators are not yet near extremes. And if short term indicators go lower early in the week, that would increase the odds of a crash, right now.

Cycles – All cycles remain xxxx xx xxxx xxxx (subscriber version). Only short term cycles point to xx xxxx later in the week. That currently projects in a range of xxxx xxxx . The odds of getting deep into that projected range look good.

Initial projections for the 6 month and 10-12 month cycles point to xxxx-xxxx (subscriber version), but the 6 month cycle low would ideally come between late February and xxxx xxxx . That’s plenty of time for that projection to shift lower. The 13 week cycle projection is xxxx. I think that is a good benchmark to watch for at this time.

Third Rail Chart-  The first top is complete. xxxx xxxx is now key support. If they try to bounce on Monday, I expect resistance at 4450 stop any rally attempt.  On the other hand, a crash is possible, if not likely if they take out xxxx xx xxxx xxxx (subscriber version). The conventional measured move target would be xxxx.

Long Term Weekly- Long term cycle momentum has broken a 2 year uptrend, signaling that the bull market xxxx xxxx .. When long term momentum and 3-4 year cycle momentum break their midyear 2021 lows, and the SPX ends a week below xxxx, then I’d call it a bear market. That would imply that prices are headed a lot lower for a lot longer. We’re not there yet, but we will be quickly if this keeps up like last week.

I have revisited long term cycle projections. Last week’s move suggests more frequent updates than the usual quarterly schedule will be needed on these. So far, there’s no material change in the projections, but I now believe that they are wrong and will not be met. I explain why in the report. I’m giving these no weight, and instead focusing on the price patterns, support breaks, and cycle indicators to show us the way.

Monthly Chart – The market is now below two long term trendlines. It would need to get back above xxxx by the end of January to reverse the bearish implications of this break. If that does not happen, the target in February would be xxxx xxxx. Ouch.

Cycle screening measures broke down after behaving in a way that suggested changing market dynamics in the previous week. The numbers are not yet extreme on the downside. They could get a lot worse before a significant bottom is in.

Technical Trader subscribers click here to download the complete report.

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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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Gold Positioned To Pop

Lee Adler

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Gold There are signs of cycles getting in gear to the upside, but no sign of thrust yet. Initial upside projections point to xxxx – xxxx (in subscriber version).  Gold needs to clear xxxx to break the 13 week cycle MA and signal at least a little more upside in the short run.

On the very long term monthly chart, gold remains above a critical trend area around 1790. If it ends January below that, it’s in danger of falling into the xxxx  xxxxx range (in subscriber version).

HUI – HUI remains locked in a range with no sign of an imminent breakout. A 13 week cycle up phase is flat and is ideally due to last xxxx xx xxxxx (in subscriber version). There’s no sign that longer cycles will xxxx xx xxxxx (in subscriber version).  A 10-12 month cycle high is ideally due between xxxx xx xxxxx.  If there’s no upside breakout before that, the rest of the year would set up xxxx xx xxxxx.  On the long term weekly chart HUI has broken its 6 month cycle MA. Here’s what that implies for the outlook (in subscriber version)..

On the ultra long term monthly chart, HUI remains entrenched in a 16 month downtrend. Ultra long term momentum remains precariously neutral. With HUI ending December below xxxx (in subscriber version) the target is xxxx–xxxx in the first quarter of 2022. It faces major resistance in the xxxx range. It would need to break that to end the downtrend.

Chart Picks – The numbers surged over the past week but 6 month cycles remained deeply negative. That needs to show much more improvement for us to have confidence that there will be an extended rally. But this is a start. So I’m continuing to nibble.

I’ve tweaked the method to use screens from each day of the past week instead of just the last day of the weekly period. Charts that show up more than once, with buy signals yesterday are preferred. From that list I pick those with structures I like. This week I’m adding one to the list as shown below.  I’m staying with the existing picks, and allowing breathing room with no, or very loose stops. Currently open picks show an average gain of 9.4% on an average holding period of 3 weeks.

Picks closed out over in November-December had an average gain of 10% on an average holding period of  46 calendar days.

See table and charts (subscriber version).

Subscribers, click here to download the report.

The strategy and tactics suggestions in this report are for informational and entertainment purposes, and illustrative of one approach. Nothing in this report is meant as personalized investment advice and you should not construe it as such. No representation is made that it is the best approach, will be profitable, or suitable for you.

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Getting Short Up the Wazoo

Lee Adler

Technical Trader subscribers click here to download the complete report.

Starting fresh this week, after closing out the last pick as of last Monday’s open, I am making some tactical adjustments going forward. First, I am now incorporating screens from the whole week, not just Friday. In that way I hope to snare charts going through a progression of short term buy signals leaving them more likely to move sooner, and in the right direction.

I will continue to (mostly) forego stops in the first week that a pick is added to the list. But I will avoid the stupidity of being overconfident after having some success for a few weeks, and then going on vacation without having trailing or protective stops in place.

I continue to feel that stops should only be used as triggers for exiting trades that we 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 false breakouts and breakdowns are time honored strategies of dealers and big speculators. Such whipsaws often lead to big moves.

The raw data for last week as a whole showed a preponderance of buy signals. But lo and behold, when I ran a screen on Friday just on the universe of stocks that had had signals earlier in the week, there were just 4 that had short term buy signals on Friday, versus 42 on the sell side!

I reviewed those 46 charts for structures that looked promising. I chose 9 shorts, shown on the table below.

Sticking my neck out, for sure, but those 9 charts look well positioned to roll over in the weeks ahead. I think that some patience will be needed. They may or may not pop a bit in the short run, so I’m giving them room to breathe without stops for now. It’s a risky strategy, but it’s consistent with the liquidity outlook and the intermediate term technical outlook for the overall market.

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

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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Still Looking for that Rigor Mortis Rally

Lee Adler

Technical Trader subscribers click here to download the complete report.

The market averages and technical indicators have weakened, but look ready for xxxx xx xxxx xxxx (subscriber version)  before xxxx xxxx (subscriber version)  in.

Cycles – The short term wave looks like it should xxxx (subscriber version)  around xxxx to xxxx over the next week or so. A weak bounce or no bounce should lead to the 10-12 month cycle wave xxxx xxxx .

Third Rail Chart-  The market needs to get below xxxx to break the intermediate uptrend. Failing that, another assault on the highs would be likely.

Should the market break xxxx, the next area of likely support would be around xxxx. And below that, the xxxx-xxxx area would be significant. Breaking that would complete a nice top pattern.

Liquidity is turning bearish, but it will be a gradual process that would allow for possible extension of the stock market rally consistent with the above projections.

Long Term Weekly- SPX would need to end a week conclusively below xxxx(subscriber version)to signal the likely start of a bigger top.

Long term cycle projections point to xxxx to xxxx (subscriber version) ideally due this year. 

Monthly Chart – S&P remains in a narrow uptrend channel with resistance at xxxx (subscriber version). Above that is room to run to xxxx this month.  It would need to end the month below xxxx to break the uptrend and open a chasm to the next support around 4000.

Cycle screening measures are behaving in a way that is unlike the patterns that were prevalent throughout the bull market. Are the dynamics changing finally? Too soon to say, but a downturn from here would signal that the answer is more likely to be yes. The pattern would turn bullish again if the market xxxx x xxxxx xxxx (subscriber version).

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. 

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Fed Will Administer Volckera to Cure Inflation Pandemic, and We’ll All Die

Lee Adler

Subscribers, click here to download the report.

It’s that time of the month and that time of the quarter when all should be well for the markets. Except it’s not.

“That time of the month” is the Fed’s regular once a month MBS settlement week at mid month. This month it runs January 13-20, with total settlements of $90 billion. That’s still a big number, but it isn’t doing much good. And it will shrivel over the next several months as the Fed cuts new MBS purchases and replacement purchase shrivel due to rising mortgage rates. Therefore, right now is as good as it gets for the bond market, and secondarily for stocks.

It’s also the week for quarterly estimated Federal income taxes to come in from individual filers and corporations. That shrinks the monthly deficit in January. In normal times it would result in a surplus for the month. Typically the Treasury would then pay off some maturing T-bills, and the holders of those bills would be stuck with excess cash. Some of them roll that out to longer dated paper and a few even buy stocks. So it’s typically a short term bullish seasonal influence around the third week of January.

This year, not so much. The Treasury still is trying to refill its cash account and has $160 billion to go to reach its stated goal of holding $650 billion in cash. So the “January effect,” which is really just bullish seasonality resulting from the regular January T-bill paydowns, looks like a non starter this year. The performance of the stock and bond markets so far in January are a testament to that.

If the market doesn’t perk up over the next few days, then here’s what we have to look forward to.

February will be worse. xxxx xxxx xxxx xxxx (subscriber version). February always runs the largest cash deficit of the year as tax receipts dwindle and cash outlays mushroom due to the February tax refund bulge. The Treasury often draws from its cash account to pay for that, rather than issue new debt. But this year, the Treasury is trying to raise more cash. There’s going to be a ton of new Treasury supply in February and that will pressure not only the xxxx xxxx xxxx xxxx, but should have a secondary impact on xxxx xxxx xxxx xxxx. This report describes those impacts, and their timing.

My mantra is the same. I’m xxxx xxxx xxxx xxxx (subscriber version) bonds. I’m looking for stocks to short over the next few weeks for what should be a bearish month in February. I’ll post those in Technical Trader updates as they come up.

With the Fed cutting QE to zero, or so it says, the rest of the year could be xxxx xxxx xxxx xxxx(subscriber version). The Fed is worried about inflation. Rightfully so. A little too late, but what else is new.  Might it now be willing to pull a “Volcker,” allowing rates to soar, and allowing the chips to fall where they may? If they dare try it, the market’s retribution will be xxxx xxxx xxxx xxxx.

I’ll keep you updated on the developments and outlook. Get the full story in the subscriber version.

Subscribers, click here to download the report.

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What the Signs of Emerging Gold Would Be

Lee Adler

Subscribers, click here to download the report.

Gold Cycles remain mixed with still no sign of an imminent breakout from the trading range. Here are the levels to watch.for signs of emergence (in subscriber version).

On the very long term monthly chart, gold remains above a critical trend area around 1790. If it ends January below that, it’s in danger of falling into the xxxx  xxxxx range (in subscriber version).

HUI – HUI remains locked in a range with no sign of an imminent breakout. A 13 week cycle up phase is flat and is ideally due to last xxxx xx xxxxx (in subscriber version). There’s no sign that longer cycles will xxxx xx xxxxx (in subscriber version).  A 10-12 month cycle high is ideally due between xxxx xx xxxxx.  If there’s no upside breakout before that, the rest of the year would set up xxxx xx xxxxx.  On the long term weekly chart HUI has broken its 6 month cycle MA. Here’s what that implies for the outlook (in subscriber version)..

On the ultra long term monthly chart, HUI remains entrenched in a 16 month downtrend. Ultra long term momentum remains precariously neutral. With HUI ending December below xxxx (in subscriber version) the target is xxxx–xxxx in the first quarter of 2022. It faces major resistance in the xxxx range. It would need to break that to end the downtrend.

Chart Picks – Short term screens for chart pick purposes did a little better. They’re more sensitive, more oriented toward swing trade timing than the longer cycle screens which have done so poorly. 12 of the 51 charts screened had signals, and 11 were on the buy side. I liked one of them enough to add to the list as shown on the table.

Picks closed out over in November-December had an average gain of 10% on an average holding period of  46 calendar days.

See table and charts (subscriber version).

Subscribers, click here to download the report.

The strategy and tactics suggestions in this report are for informational and entertainment purposes, and illustrative of one approach. Nothing in this report is meant as personalized investment advice and you should not construe it as such. No representation is made that it is the best approach, will be profitable, or suitable for you.

Subscription Plans

Try Lee Adler’s Gold Trader risk free for 90 days!

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No Mercy

Lee Adler

Technical Trader subscribers click here to download the complete report.

The extrication plan that I posted last week did not go well. All of the shorts hit their stops, resulting in losses in all but one of them. The list overall suffered a loss of 3.8% on an average holding period of 23 days. That was worse than the previous week’s 0.8% loss on an average holding period of 29 days.

I’ll close out the one long on Monday with a small gain.

Why so many sell signals from two weeks before failed so badly is a question that I can’t answer. It may be that the sell signals were too obvious, and that many traders were just gunning for the shorts. It is never a good idea to be so confident as to take a week off without stops. That’s one condition where stops are important.

Or don’t put positions on before year end. I’ll try to remember that one at the end of this year.

This Friday’s screens had 19 buys and 22 sells. That’s nearly even. It follows 16 buys and 34 sells the previous Friday. There was no sign of any emergent moves on any of the charts with signals. Most resulted from rangebound jiggles.

There’s just nothing to do this week. I await clearer setups.

Below is the record of last week’s drubbing. It was enough to wipe out all of the 3.1% average gain for picks closed out in December, with a few tenths left over.

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

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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Don’t Be Surprised, or Fooled, By a Rigor Mortis Rally

Lee Adler

Technical Trader subscribers click here to download the complete report.

The stock market is again at a fulcrum. It may or may not have one more rigid upright position left in its dying body. Don’t be surprised if it does. And don’t be fooled into thinking it’s a new upleg.

Third Rail Chart-  The S&P remains within uptrend channels. The most important support line runs from xxxx to xxxx (subscriber version)  this week. That would need to be broken to signal a downside reversal.

Cycles – The 10-12 month and 6 month cycles now appear to be in synchronized xxxx xxxx (subscriber version). But there’s still a yet to be negated 6 month cycle projection of xxxx. The 13 week cycle remains in an up phase for now, with a projection of xxxx. But short term cycles have entered down phases, with projections of xxxx to xxxx . If that is reached, would probably negate the 13 week cycle projection.

Liquidity is turning bearish, but it will be a gradual process that would allow for possible extension of the stock market rally consistent with the above projections.

Long Term Weekly- SPX would need to end a week conclusively below xxxx(subscriber version)to signal the likely start of a bigger top.

Long term cycle projections point to xxxx to xxxx (subscriber version) ideally due this year. 

Monthly Chart – S&P remains in a narrow uptrend channel with resistance at xxxx (subscriber version). Above that is room to run to xxxx this month.  It would need to end the month below xxxx to break the uptrend and open a chasm to the next support around 4000.

Cycle screening measures are at yet another inflection point. They need a solid xxxx xxx to turn the picture bearish, and a big up day to suggest a stronger bullish trend. Small moves would leave the status quo of a choppy uptrend in place.

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. 

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Breakout Under Way!

Lee Adler

Subscribers, click here to download the report.

We have some consequential new data in the past few days since I posted the QE/Treasury supply update on January 3. Treasury yields are breaking out. The RRP slush fund has reversed, and T-bill issuance is continuing at a breakneck pace. An initial jobs report shows tremendous growth, as foretold by the daily withholding tax data.

The ADP private payrolls data was released yesterday, and it accurately reflected what the withholding tax data for December already told us— that jobs growth is still going strong, or even accelerating. Whether the BLS Nonfarm Payrolls farce release on Friday shows this or not is anyone’s guess. You know the truth.

The US economy is going gangbusters, but the Fed has created and is imminently facing the greatest crisis in its history.

Here’s the latest in this ongoing financial soap opera for the ages.

Get the full story in the subscriber version.

Subscribers, click here to download the report.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days!

Act on real-time reality!

FREE REPORT – Proof of How QE Works – Fed to Primary Dealers, to Markets, To Money

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