2/16/21 Every week I run technical stock screens covering all NYSE and NASD stocks trading above $6 and averaging more than 1 million shares a day. This typically results in between 15 and 50 charts to review visually. I’m looking for low risk, high reward price structures, which I’m not smart enough to program into the screening process. But it’s ok. I like to look at charts. 😊

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Volatile rangebound trading is a meat grinder for swing trades. Last week lived up to that. List performance slipped to an average of +0.2%, down from +2.1% the week before, on an average holding period of 10 days, up from 8 days the week before. In trending markets this number would normally be around 13-14 days. The percentage change assumes cash trades, no margin, no options.

10 picks hit stop triggers, leaving 8 on the list. All are longs, and all look well positioned for additional gains, but I have kept stops tight, just in case. I have adjusted  most stops.

I have always been reluctant to post midweek updates. Last week’s market action was a perfect example why. We had the beginning of a crash. I responded, and immediately reversed. We know why it reversed. All that cash that the Fed and Treasury poured into the market last week worked its magic. I assuredly do not know what caused it to start on a crash path however. That history is yet to be written.

Meanwhile, I will try to cut through noise and focus on the message of the technical indicators. We had a confusing little detour last week. I need to stay focused on the direction, even if a solar flare knocks out the GPS from time to time.

Cycles now appear to be opposed, with no coherent structure to support a breakout. The 10-12 month and 6 month cycles appear to be topping out. The 13 week cycle is still in a flat down phase. The short term cycles have probably bottomed.

Cycle projections for the 10-12 month cycle now point to xxxx (subscribers only), suggesting xxxx. There are no projections for shorter cycles.

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Cycle time projections point to a final top to occur in xxxx (subscribers only).

The third rail chart did not break its intermediate uptrend in the selloff. Resistance is at xxxx (subscribers only) subscribers on Monday, rising to xxxx (subscribers only) on Friday. If broken, the initial target zone would be xxxx (subscribers only).

On the weekly chart, the market recovered to close above a long term trendline now at xxxx. The uptrend remains intact.

On the monthly chart, May began with trend support at xxxx, and resistance at roughly xxxx (subscribers). The long term cycle momentum indicator is xxxx (subscribers).

Cycle screening measures weakened. The short term pattern suggests more upside. The intermediate term outlook is xxxx (subscribers).

The chart pick list had an average gain of 2.1% with an average holding period of 8 calendar days last week.

For the week as a whole, there were 224 buy signals and 125 sells, a spread of +99. That compares with 168 buys and 96 sells, a spread of +72, the week before. It was as if the vicious mid-week selloff never happened. But it happened to the chart pick list. 10 picks were stopped out, including both directions  I added 8 buys to the list this week, bringing it to 14 longs, no shorts.  That report is published here. (subscribers)

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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. 

Mea culpa. I did not see this coming. There were signs. I dismissed them.  I was in a hypnotic trance, because there wasn’t much different in the TA than we’ve had before during this era of endless central bank money pumping, tilting the market playing fields. You are getting bullish. Very bullish.  Bullish, bullish, bullish.

We’ve had a dozen years where negative divergences between technical indicators and the market averages meant nothing. Over the past two days, the market snapped its fingers. This time, they divergences meant something. But I had stopped believing a long time ago. To me, those negative divergences had become the Boy Who Cried Wolf.

That’s all I say about what I missed. As Satchel Paige said, “Don’t look back. Something might be gainin’ on you.” There is a time for post mortems. This is not one of them. This is the time to “read and react.” (Lombardi)

So let’s read, see what we can, and react. Technical Trader subscribers click here to download the report.

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Initial cycle projection on the SPX point to a low around XXXX (subscribers see full report). If that doesn’t hold, there are several trend support areas below that, which could be likely targets for a V bottom bounce. XXXX and XXXX are potential support areas, but they look minor. The big one would be XXXX.

As an aside from my liquidity research, massive amounts of liquidity are coming into the market right now. It started on Tuesday with a big Treasury bill paydown. Another one will hit today. And they’ll do it again next Tuesday. Today also begins Fed MBS settlement week, where it settles all the MBS it bought under forward purchase contracts 30-60 days ago. That’s $122 billion coming into dealer accounts from the Fed, and around $50 billion a week into dealer and other major investor accounts from the US Treasury.

So we have the tinder for a V bottom between XXXX and XXXX (subscribers see full report). But from where? And is this damage fatal to the long term uptrend? Those are the questions.

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In the interest of getting to the point and getting this report out to you, below is a brief chart review (subscribers see full report) with brief comments.

Technical Trader subscribers click here to download the report.

Not a subscriber? Follow Lee’s market analysis and outlook, with 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.