The all important 6 month and 10-12 month cycles are coming into the idealized time window for a low. Whether last week was it is doubtful at the moment. Indicators on cycles all the way down to 4 weeks are not yet on buy signals. 4 week cycle indicators are on the cusp. This report shows you where things stand and what needs to happen to trigger the next big move.
Last week the swing trade chart pick list showed an average gain of 1.2% on an average holding period of 10 calendar days. Unfortunately, one pick was an absolute disaster, crushing the list average. 8 picks were stopped out. 4 remain. One will be closed as of Monday’s open.
Technical screens of 8700 listed issues generated 79 charts with swing trade signals based on Friday’s close. 74 of those were buy signals. Only 5 were sell signals. After visual review of those 79 charts, I have selected 10 additions to the swing trade chart pick list.
These reports are not investment advice. They are for informational purposes, 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.
Last month, I headlined this report, “We Don’t Need No Effin’ Stimmy.” That’s even more true now. Withholding tax collections are skyrocketing. It’s good news for the economy, but terrible news for the financial markets.
We are only days away from Infinite QE.
Here’s how we know, and why it won’t be bullish this time.
Last week’s selloff did less damage than it may have felt like. The drop stopped in the area of 3 crossing uptrend lines, ranging in length from short term to long term. Here’s what would tell us whether the uptrend is still in force, or signal that something evil this way comes.
I have added 8 new stocks to the swing trade chart pick list, including 2 shorts.
These reports are not investment advice. They are for informational purposes, for 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.
The bear market in Treasuries that started in August devolved into an outright crash last week. Meanwhile, evidence shows that cash in Primary Dealer accounts has exploded to the highest level in history, with the biggest weekly increase in history. There’s also circumstantial evidence that that cash came directly from US Treasury, away from the publicly visible means that we already saw last week.
We are not surprised there’s a crisis. You and I have been watching the situation deteriorate for months. My first guess was that the trouble would start when the 10 year yield crossed 0.8%, That was premature. It was just a preliminary. Then I guessed it would be 1%. Sure enough, within a few weeks after crossing that level, things deteriorated rapidly into last week’s climax.
While the Fed sat on its hands, saying, “Nothing to see here, all is well,” the US Treasury sent in the cavalry. As I covered in the bulletins I sent you over the past week, the Treasury has announced $160 billion in T-bill paydowns. These put cash directly into the accounts of those who hold the expiring bills. This includes dealers, banks, and big investment firms of all types.
Two of those paydowns, totaling $96 billion settled on February 23 and 25. The Treasury, no doubt working with the Fed, absolutely wants the crash in bond prices to reverse. They know damn well that the stability of the system is at stake here. I believe that we have passed the point of no return. They must get Treasury prices back up, or else.
The Treasury will almost certainly continue these cash injections. They still have plenty of money left to do it. It is still sitting on $1.38 trillion in cash.
But oddly, dealer cash accounts rose by more, and Treasury cash fell by more, than what we can account for with these paydowns, and the other things we know about. Here’s the evidence, the implications of it, and a strategy to potentially profit from the coming crisis.
The US Treasury announced today that it would inject another $30 billion into the markets, in an attempt to forestall systemic meltdown. It will pay down another $30 billion in T-bills on March 4.
This brings the 2 week total to $155 billion and it is NOT ENOUGH. Investors and dealers got back $55 billion in cash on Tuesday and another $41 billion today, but they are not buying longer term paper with that cash. The continue to hold short term paper. Some bought stocks yesterday, but today margin calls against losses in longer term Treasuries have spread into stocks.
I have been forecasting this since the bond market turned last summer. The process is unfolding as expected. We had guessed that once the 10 year yield rose above 1%, the problems would start and cascade as bond prices fell and highly leveraged dealers got slaughtered.
Because these massive cash injections from the Treasury are not stemming the meltdown, the Fed is likely to follow up with its own intervention.
This could have an effect opposite to the one desired. It could trigger a collapse in market confidence. Instead of buying more paper, dealers might opt to use the cash to pay down debt and deleverage.
It’s likely at this point that they are approaching zero capital. At this point, they are merely straw front men for the Fed.
I will post updated reports for Liquidity Trader subscriber, with more details and charts, and an ongoing look forward on what to expect on Friday and/or Saturday. For access, take a risk free trial today.
The Treasury is injecting still more cash into the market, on top of the $96 billion it already staged last week. It announced on Tuesday (Feb 23) that it will do a third round of T-bill paydowns, this for $25 billion, settling on March 3. This is on top of the $55 billion that is settling today, February 23, and the $41 billion to be settled on Thursday, February 25.
This means that the US Treasury will have injected a total of $125 billion in cash into the market in a week.
These announcements have done no good so far. The prices of longer term Treasuries continue to crash, as this chart of the 20 year Treasury bond ETF shows. It remains to be seen if the actual settlements of the cash, starting today, will help.
As collateral calls go out to dealers, the selling has begun to impact stock prices, as I have long forecast would occur. The crisis that I have warned about is upon us.
Do not be lulled into a false sense of security by the sanguinity of Jaysus Powell and his henchmen at the Fed and in the Wall Street media establishment. The financial system is yet a again at an existential crossroads, and the Fed has yet to indicate that it understands the seriousness of the problem that it has caused with its ever larger and larger systemic bailouts and encouragement of ever increasing moral hazard.
At some point the problem becomes too big to rectify.
The Treasury is spending this money out if its $1.6 trillion cash hoard. Treasury officials are obviously in a panic over the plunge in Treasury note and bond prices that accompanies the surge in the 10 year Treasury yield.
With good reason.
This will have an effect similar to Fed QE. Treasury paydowns put cash directly into the accounts of the dealers, banks, and investors who hold the expiring paper. The paydown of the expiring paper will simultaneously create a shortage of paper in which to reinvest cash.
The Treasury’s goal is to force the former holders of the short term bills to reinvest the cash further out on the yield curve in order to stem the rise in yields and the fall in bond prices.
The injection of $96 billion comes just before the Treasury settles the regularly scheduled net issuance of new notes and bonds at the turn of the month. This cash will help the market to absorb that new paper. Net issuance of that paper will be $174 billion. This was as forecast by the TBAC.
The declining bond prices are crushing the leveraged portfolios of Primary Dealers, with the resulting collateral calls. There’s been an imminent threat of contagion into stocks, and ultimately a systemic crash. We’ve seen vestiges of it in the form of downdrafts in stock prices in recent days. So far, they have not been sustained.
I have been warning about this approaching catastrophe for months. It now appears to be upon us. The Treasury’s injection, and any subsequent ones, will mitigate against that risk for the time being.
See these reports for more details, charts, and explanation, as well as strategy viewpoints.
The good news is that the 13 week cycle appears to have entered an up phase. And it did so before materially breaking the previous low. The bad news is that 9-12 month cycle indicators are showing no signs of strength early in this up phase. Here’s what it means, and a suggested trade.
We may be skating on very thin ice here, but the weight of the evidence still supports a weak bull case for the near to intermediate term. So I’m adding buy picks on the chart pick list and adjusting trailing stops to account for the risk.
These reports are not investment advice. They are for informational purposes, for 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.
The Treasury is injecting more cash into the market. It announced today that it will do a second round of T-bill paydowns next week, adding another $41 billion in T-bill paydowns, to be settled on February 25. This is on top of the just announced $55 billion T-bill paydowns settling on February 23.
This means that the US Treasury will inject a total of $96 billion in cash into the market in two days. The Treasury is spending this money out if its $1.6 trillion cash hoard. Treasury officials are obviously in a panic over the plunge in Treasury note and bond prices that accompanies the surge in the 10 year Treasury yield.
With good reason.
This will have an effect similar to Fed QE. Treasury paydowns put cash directly into the accounts of the dealers, banks, and investors who hold the expiring paper. The paydown of the expiring paper will simultaneously create a shortage of paper in which to reinvest cash.
The Treasury’s goal is to force the former holders of the short term bills to reinvest the cash further out on the yield curve in order to stem the rise in yields and the fall in bond prices.
The injection of $96 billion comes just before the Treasury settles the regularly scheduled net issuance of new notes and bonds at the turn of the month. This cash will help the market to absorb that new paper. Net issuance of that paper will be $174 billion. This was as forecast by the TBAC.
The declining bond prices are crushing the leveraged portfolios of Primary Dealers, with the resulting collateral calls. There’s been an imminent threat of contagion into stocks, and ultimately a systemic crash. We’ve seen vestiges of it in the form of downdrafts in stock prices in recent days. So far, they have not been sustained.
I have been warning about this approaching catastrophe for months. It now appears to be upon us. The Treasury’s injection, and any subsequent ones, will mitigate against that risk for the time being.
See these reports for more details, charts, and explanation, as well as strategy viewpoints.
Lee Adler
