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

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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 Results have not been peer reviewed nor replicated under real world conditions.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

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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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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. 

Getting Short Up the Wazoo

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

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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.

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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. 

No Mercy

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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

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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. 

It’s The Most Blunderful Time of the Year

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In the last episode of how the trading cookie crumbles before the pre-holiday break, I asked the age old question, “Is it time to quit if your chart picks crushed the market?” The answer, of course, is, “Yes.” But I did not heed. I took the time off nearly fully short, with no stops on new picks, and now must find the best way to extricate from these trades and minimize the losses that wiped out a good part of the previous month’s gains.

Prior to Christmas, the previous Friday’s screens had 24 buys and 72 sells. So I went into the holiday period overconfident that I’d be sitting pretty with all shorts.

In the Christmas week, which I took off, the last screen before the holiday had 67 buys and 16 sells.

That should have been the takeout signal for the shorts. Unfortunately, I was enjoying a little vacation, and working on my French long term stay visa application. In other words, asleep at the switch.

So now the question is, given where these picks now stand on their charts, what’s the best course of action. This Friday’s screens had 16 buys and 34 sells.

After reviewing the charts, I decided that rather than bail immediately on the shorts, I want to give them just a tad more rope, because there seems to be some potential for a pullback. At the same time, I want to set my stops at a level where it would be appropriate to abandon hope, all ye fools who enter there. So the list now has tight stops on all picks.

The charts of the current screen output are mostly trendless, jiggly, and muddy. I saw nothing compelling either as a buy or a short, so I’m adding nothing to the list this week.

The list now has 8 open picks, ending the week with an average loss of 0.8% on an average holding period of 29 calendar days. That wiped out a gain of 5.8% on an average holding period of 22 calendar 2 weeks earlier.

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

Table (subscriber version only)

Charts (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. 

Subscription Plans

The Rigor Mortis Stock Market Rally

Technical Trader subscribers click here to download the complete report.

In the long run, we’re all dead, and so is this bull market, whose end is ideally due this year. But in the short run, it still has room to run. We must give the uptrend the benefit of the doubt until there’s more hard evidence that a turn is under way.

Third Rail Chart- The S&P is trading near the center of a short term uptrend channel. The first support line rises from xxxx to xxxx (subscriber version) this week. A second line is just below that. The S&P would need to break both lines to have a shot at a downside reversal.

Cycles The 10-12 month and 6 month cycle tops are ideally due any time between now and xxxx  xxxxxx xxxx (subscriber version). Cycle projections now point to highs of xxxx to xxxx.

The 13 week cycle is in an up phase ideally due to top out xxxx to xxxx (subscriber version). The cycle projection is xxxx, which is an outlier at this point. The 13 week and 6 month cycle up phases would remain in force as long as the market stays above xxxx.

Short term cycles have projections of xxxx to xxxx (subscriber version), and are due to top out in January.

Cycle Screening data is at an inflection point. The current negative divergence between these indicators and the market averages doesn’t mean much yet. It only will if there’s downside follow through this week. Otherwise, the benefit of the doubt still goes to the bullish case. 

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

Long Term Weekly SPX would need to end a week conclusively belowxxxx (subscriber version) to signal what could be the start of a bigger top.  

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

Monthly Chart – In the clear for a run to xxxx to xxxx (subscriber version) in January. It would need to end the month below xxxx (subscriber version) to break the uptrend.

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. 

Holiday Wishes and Publication Schedule

I want to wish you and your family Merry Christmas, Happy New Year, Happy Holidays, and Happy Festivus, the holiday for the rest of us.

I will celebrate by looking around Warsaw for an open Chinese restaurant where I can get takeout. I won’t be eating in this year (I wonder why).

Today at Malbork Castle, Malbork, Poland
Today at Malbork Castle, Malbork, Poland 12/22/21 

I want to thank you especially for allowing me the privilege of doing this work that I love, for you for the past 21 years. Whether you’ve been a subscriber for the past 21 days, but especially if you’ve been around for most or all of those years, your interest and confidence in me is a gift that I always appreciate! I hope that you enjoy and learn nearly as much from my reporting as I do from doing it.

I know that you will probably be enjoying the coming days with your families and hopefully not paying much attention to the markets. I’ll use that opportunity to take a break myself over this week. There will be no Liquidity Trader, Technical Trader, or Gold Trader posts between now and New Years weekend. Regular publication will resume in the New Year, with a bevy of reports. So be sure to stay tuned for that.

If anything strikes me as noteworthy over the coming week, I’ll throw up some quick comments on the Capitalstool message board and in my Twitter feed.

So to you and yours, Happy Holidays! See you in the New Year!

Lee

PS. I apologize for the fact that if you subscribe to more than one of the services, you have gotten this email once for each of them.  Sorry for clogging the inbox! 😁

Is It Time to Quit if Your Chart Picks Crushed the Market Last Week?

Technical Trader subscribers click here to download the complete report.

This Friday’s screens had 24 buys and 72 sells. That compares with the previous Friday’s 15 buys and 9 sells.

I concluded last week that the small number of signals, particularly buy signals suggested that the rally was exhausted, despite the buys having the edge. I chose not to add any charts to the list, long or short, but held on to all of the shorts that had been on the list.

That looks to have been the correct judgement.  The list had 8 open picks, ending the week with an average gain of 5.8% on an average holding period of 22 calendar days, i.e. 3 weeks and a day. That’s the second best weekly performance of the last month and one of the best since I began this exercise a couple of years ago. It was up from +3.1% and 15 days the previous week.  This is cash basis, no leverage.

By contrast the S&P 500 lost 1.7% over the past 22 days and nearly 2% last week.  Maybe we should follow the old adage, quit while you’re a head, because you never know what might be a foot. Especially when it comes to the TA and the market. Sometimes the TA beats the market, and sometimes the market kicks your ass.

Which is why your trading strategy needs to include a mechanism to minimize losses, or what traders euphemistically call “drawdowns.” Mine is to avoid stops initially, but to minimize risk by spreading it across multiple picks, with the expectation that one or two will run big –  enough to offset the Biggest Loser. It’s not glamorous, but it works.

I then use trend support and resistance based picks to close out picks as they mature.

This week, 1465 stocks met the initial screening criteria. 6.6% of them rendered signals on Friday, which above the average 3 to 5%. 4.9% of the stocks that met the minimum criteria had sell signals. That is also a significant number, but indicates neither thrust, norm maximum momentum. So staying mostly short looks like the way to go this week, but as existing picks have aged a bit it’s time to tighten some of those stops and protect profits.

After reviewing the charts from the screen, I’m adding 5 of them to the list this week, all on the short side. That will bring the list to a full complement of 13 picks, only one of which is long.

I have updated the stops on some of the picks and added a stop to the one long pick. The rest of the stops remain in place. As usual, I’ll roll the dice on the new picks, give them a chance to breathe, and let them ride for at least this week.

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

Table (subscriber version only)

Charts (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. 

Subscription Plans

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