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Author: Lee Adler

What Selloff? Here We Go Again

Short term cycles have entered down phases. But this looks like a consolidation, not a top.Here’s why and what to do about it.

The chart pick screens are spitting out a ton of interesting patterns. I’m adding 9 picks this week, 7 long and 2 short. 4 picks were stopped out last week and one which was a symbol error was also closed. That will leave 18 open picks, including 14 longs, and 4 shorts.

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Past performance doesn’t indicate future results. There’s always risk of loss. Chart picks are for informational purposes only. These reports are geared toward professional investors and experienced individual traders. Do your own due diligence before trading.

Intervention Attention

The market has the benefit of $115 billion in Fed mid-month QE MBS purchase settlements this week. That would normally be very bullish.

It’s notable that the market has not done more with it. And why not? Still massive Treasury supply along with surging corporate debt and equity issuance is absorbing most QE. There’s not enough left to power an endless bull trend in stocks.

That has been our thesis for the past month or few, and the market seems to be bearing that out. Stocks are stuck in a broad trading range and bonds are weakening.

$83 billion of the MBS settled last Thursday. That helped put $82 billion in Treasury coupon issuance to bed the next day. Whodathunk that the Fed would pump into dealer accounts almost the exact amount that the market needed to absorb the Treasury issuance!

Amazing how that works.

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Normally this much QE every month would be wildly bullish. But the supply of financial assets has risen to meet the demand driven by QE. We’ve reached stasis – equilibrium, so to speak.

But it is fragile. Bonds are teetering on the brink of an abyss. If they go over, and bond prices fall (yields rise), the system would collapse without another round of massive Fed intervention.

So we need to pay attention. Do bonds go over the cliff? How long would it take the Fed to react if they do? And will it be enough, yet again?

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“Slow” Fed Balance Sheet Growth Hides The Truth

The Fed’s balance sheet has now grown by over $2.8 trillion since March. That’s when the pandemic panic was at its extreme and the Fed went into high gear.  Lately that growth has slowed drastically, to around $51 billion per month on average since July. But that is decidedly not the whole story.

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Bullish Signals Abound

Scheduled liquidity data has told us for a couple of months that October would be bullish. That played out like a charm in terms of the technical analysis last week. We also know that liquidity only gets more bullish this week. The technical picture confirms that outlook. We must give the bullish factors the benefit of the doubt.

My stock pick screens confirm that. I’m adding 7 picks from those screens this week, 5 long and 2 short. That will leave 13 open picks, including 11 longs, and the 2 new shorts.

Four chart picks were stopped out last week. Needless to say, all were shorts. The two older picks had nice gains, partly offset by small losses in the short side picks from last week.

The list performance improved sharply last week as the average holding time increased a bit. Gains doubled from an average 3.2% to an average of 6.4%. The average holding period last week was 20 calendar days, up from 17 days the previous week. The average holding period has ranged from 16 to 22 days, or just over two to three weeks.

Technical Trader subscribers, click here to download the report.

Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!  

Past performance doesn’t indicate future results. There’s always risk of loss. Chart picks are for informational purposes only. These reports are geared toward professional investors and experienced individual traders. Do your own due diligence before trading.

Federal Tax Collections Now Say Damned If They Do, or if They Don’t

Tax collections have leveled off at a negative year to year rate. The Fed has gone to Congress begging for fiscal support for the US economy, as a result.  Without a deal to raise spending, the economy will continue to languish, and the Fed will continue to print money to support the markets.

Ironically, if and when a new pandemic relief spending program is enacted, that would be bearish.

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

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If Bonds Sell Off, Dealers are in Trouble and So Is the System

Primary dealers have maintained huge and heavily leveraged long bond positions. They are only lightly hedged. Just today, the bond market is threatening to reverse the long term downtrend in yields/uptrend in prices. It’s bad news for the bond market, and for the system as a whole. And that includes stocks.

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Gold’s Constructive Consolidation

Here’s where to look for gold’s constructive consolidation to turn up. Meanwhile, I’ve added another pick to our list of miners.

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Tick Tock – Market Is a Broken Clock

Mixed cyclicality has led to a rangebound market. There’s no sign that that will change this week. But look out if it does!

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The Endless Bull is No More, Bear Awaits

The outlook for the most of the rest of October is bullish. But it’s not an endless bull any more.

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