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The Rigor Mortis Stock Market Rally

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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.

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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. 

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! 😁

Gold Shows Every Sign of Doing This Now (and Forever)

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Gold shows all the signs of going nowhere fast. Cycles are juxtaposed and the price is locked in a tight range. The 13 week cycle is due for an upturn in the next xxxx (in subscriber version), which would be conducive to a run to at least xxxx, but it would need to clear xxxx to get a real bull move started.. A breakdown below xxxx would be a bearish sign as it would complete a head and shoulders top pattern with a measured move target of around xxxx.

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

HUI – The 13 week cycle appears to have joined shorter cycles in an up phase. It’s ideally due to last 6-10 weeks but is due to remain flat. There’s no sign yet that longer cycles will turn xxxx (in subscriber version), .  On the long term weekly chart HUI is holding precariously at the 6 month cycle MA.

On the ultra long term monthly chart HUI remains entrenched in a 16 month downtrend. Ultra long term momentum remains precariously neutral. If HUI ends December below xxxx (in subscriber version). The target could be xxxxxxxx in the first quarter of 2022. Even if above xxxx, it would still face major resistance in the xxxx range. It would need to break that to end the downtrend.

Chart Picks – There are 11 buys and 2 sells from the swing trade screens of 52 gold mining stocks from Tuesday’s action. The rest had no signal. I looked at the charts, and, in a change from recent weeks, there were 3 charts where I liked the setups. I’ll start tracking them as buys as of this morning’s open.

New Buys: xxxx, xxxx, xxxx, (in subscriber version).

There were no open picks over the last week as the last one had been stopped out. Picks closed out over the past month 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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Gold Trader Publication Schedule Note December 21, 2021

This report will be posted on Wednesday morning, December 22, instead of Tuesday this week. I’m  traveling today.

See you Wednesday! And if I don’t see you before, Merry Christmas and happy holidays! Thanks for your support!

Lee

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

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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. 

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How to Tell When This Inconclusive Market Turns Dangerous

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The timing of a likely 10-12 month cycle top is uncertain. The 6 month cycle, however, has begun to show signs of topping out. This report shows you what to look for.

The shorter cycle setup suggests that nothing significant will happen this week, but at the same time, that anything could happen. We wait for a tipping point that signals the next big move, day to day. But liquidity is trending bearish. 

On the cycle chart, all channels are still rising. The SPX would need to end the week below xxxx (subscriber version) to signal a potential change of direction in the longer term cycles of 10-12 months or more.   

On the Third Rail Chart the SPX is churning in two crossing channels. One is a short term channel with a slight downslope. Support descends from xxxx to xxxx (subscriber version) this week. Uptrending support below that rises from xxxx to xxxx . All would need to be broken to start anything significant on the downside. If the market starts off to the upside there are wide open spaces to the first trend resistance line at xxxx.

On the weekly chart the uptrend is tenuous but intact, despite the negative divergence in 3-4 year cycle momentum. SPX would need to end a week conclusively below xxxx to xxxx (subscriber version) to signal that this might be the start of a bigger top.

The monthly chart now shows the conditions suggesting the formation of a 7 year cycle top. If the S&P ends December below xxxx (subscriber version), the uptrend would be broken, and the target would then be the trendline now at 4000. Conversely, if the xxxx area remains intact, the way would be clear for a move to xxxx-xxxx in early 2022.

Cycle screening measures are inconclusive after dropping last week. Up days early this week would tend to xxxx xxxx xxx xxxx (subscriber version) intermediate term outlook. But weakness would suggest at least xxxx, or even something much bigger. Here again, we await signs of a tipping point. This report shows you the trigger levels.

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. 

Get Ready for a Slow Moving, but Perfect Storm

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The conditions we were looking for last month have happened.

11/21/21 Whether there’s a default or not, the debt ceiling will be lifted, probably sooner rather than later. When it is, a tsunami of Treasuries will flood the market, mostly in T-bills. But there could also be a huge slug of makeup supply at the long end. That would send bond prices into the dumpster, and T-bill rates and bond yields flying.

How much chaos would the Fed bear before issuing another huge emergency round of QE? That’s the question, ultimately. But in the interim, the event that everyone would see as a positive, raising the debt limit, could be the quintessential “sell the news” trigger leading to a broad based crash in all asset classes.

This is what we need to be on the lookout for as this saga progresses. Therefore, I still don’t want to xxxxx xxxxxx xxx xxxxxxx xxx xxxx (subscriber version). From the liquidity perspective, I hate the intermediate term outlook for xxxx.

But I’m still comfortable following the trend on stocks, remaining long until the market tells us otherwise, especially if that happens around the lifting of the debt limit.

So that’s where we are. Will it? This report has the answer.

The debt ceiling was lifted yesterday, December 16, and stocks have been getting pounded for the last two days. This could be the moment we’ve all been waiting for, in terms of market action in stocks. I’ll address that in more detail in the Technical Trader reports.

Right now in the third week of the month we’re in peak QE week, as the Fed settles its MBS purchases this week. It’s the most bullish QE vs. supply imbalance we’re ever going to have. This is the end my friends. I can’t believe, but we’re on the Eve of Destruction.

That’s because the Treasury will now issue a massive amount of new supply in a very short period of time. It has a goal that calls for raising $600 billion to restore its cash account to the desired level. Plus it must raise additional funds – who knows how much – to repay other internal government accounts it raided to stay below the debt ceiling.

It means that there will be a lot of supply, A LOT, over the next couple of months.

What’s worse, the Fed is cutting its QE purchases at the same time. Talk about a Perfect Storm. Fed QE has funded more than 100% of the Treasury market in recent months. The norm since the Fed began QE in 2009 has been 85-90%. When it cuts QE to zero in March, it will still have a small amount of MBS replacement purchases, but that won’t even be a rounding error in terms of the amount of debt the market will need to fund.

The canny Fed and Treasury have, however, created a $1.6 trillion slush fund to help absorb those Treasuries. It’s the Fed’s RRP program, where money market funds, banks, and dealers can deposit the cash they got back from the T-bill paydowns that they got from the US Treasury since February. This report has the charts to show exactly how that worked. The correlation is perfect.

The Treasury paid off that paper systematically so that it would stay under the debt ceiling. That money is now just sitting there in overnight, same as cash, RRPs, waiting to re-absorb all the new Treasury supply that’s on the way.

Or is it? Nobody is forcing the money managers holding those RRP funds to rebuy Treasuries. They may like holding riskless Fed RRPs even more than they like holding Treasuries. So maybe not all of that $1.6 trillion will be available to absorb new supply. That’s where the problems start. When the RRP holders decide they’ve had enough. The slush fund won’t last forever. We’re tracking it closely and should know exactly when it is signaling a big problem.

Of course the Fed could force the issue, by ending the RRP program, but there’s still the point where that fund hits zero, and simply isn’t there to absorb new supply. At that point the market would face an intractable problem. Lots of supply and no ready cash to absorb it. We know exactly what would probably happen then, because we know the positioning of the Primary Dealers at all times.

Rates and yields would xxxxxxx xxx xxxx (subscriber version). Bonds would xx xxxxxxx (subscriber version). Dealers and banks would xxxxxxx xxx xxxx. Massive Fed intervention xxxxxxx xxx xxxxx  xxxxxx.

We should soon be able to estimate the timing of that.

For now, I really don’t foresee a way out of this. Only the timing is in question. I’m staying away from the xxxxxxx xxx xxxx (subscriber version), and looking for xxxxxxx xx xxxxxxx xxx xxxxxx xxxx.

Get the rest of the story and ideas on how to handle what’s to come  spelled out and illustrated in the subscriber version.

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

Gold Hangs By a Thread on the Eve of Destruction

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Weak short term cycle up phases are in danger of early breakdowns  The 13 week cycle is due to remain in a down phase for xxxx (in subscriber version), with a projection of xxxx (in subscriber version). A breakdown below xxxx  would be a bearish sign as it would complete a head and shoulders top pattern with a measured move target of around 1650.

Gold begins December below a couple of key trendlines on the monthly chart. It would need to end the month comfortably above xxxx to reduce the risk of another slide that could carry into the xxxxx. Conversely, if it ends the month above xxxx, that would be a bullish sign.

As for the mining stocks, The short cycle up phase is in danger of an early breakdown, as the 13 week cycle down phase targets xxxx – xxx (in subscriber version).

There are 13 buys and 3 sells from the swing trade screens of 52 gold mining stocks from Tuesday’s action. The rest had no signal. I looked at the charts, and, once again, these buy signals did not impress me as anything more than a dead cat bounce that would probably fizzle out. I decided to wait for better setups before re-entering. This may require some patience.

The last remaining pick from the most recent group hit its stop over the past week and was closed as of the stop price with a loss of 4.4%. Previous picks closed out over the past month had an average gain of 13.4% on an average holding period of  48 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!

Swing Trade Screens – More Buys Than Sells Again This Week

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This Friday’s screens had 15 buys and 9 sells. That compares with the previous Friday’s 50 buys and 16 sells, a solid precursor to last week’s rally.

1439 stocks met the initial screening criteria in the current screen. Only 1.7% of them rendered signals on Friday, which is far below the normal 3-5%. Only 1% of the stocks that met the minimum criteria had buy signals. That could mean that the move is already exhausted.

I’m making no new additions to the list this week, either long or short. Last week, I added just one long. Everything else on the list was short, leading to a bad week.  Including picks that were stopped out, and those still open, the list ended the week with an average gain of just 3.1% on a 15 calendar day average holding period. That compared with the previous week’s average gain of +8.1% with an average holding period of 18 days.

The list will now have 8 open picks, of which just one is a long, and the rest are shorts. I’ve added stops to all of the shorts, in case they don’t roll over again.

The table and charts of open 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

Here’s Why Not to be Dumbfounded in Disbelief

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The 10-12 month cycle now appears to be in trending mode. The timing of a likely top is uncertain. The 6 month cycle has returned to its up phase path. The up phases in those two cycles that appeared to abort the week before have reasserted themselves. The 6 month cycle projection is now xxxx (subscriber version). There’s a 4 week cycle projection of xxxx (subscriber version).

On the Third Rail Chart the SPX is now in a meltup channel that is targeting xxxx (subscriber version). If it stops at xxxx instead, it could be a top, but I wouldn’t bet on that unless and until it dropped back below xxxx.

On the weekly chart, last week’s rebound repaired the technical damage of the week before. The uptrend is intact, despite the negative divergence in 3-4 year cycle momentum. SPX would need to end a week conclusively below xxxx (subscriber version) to signal that this might be the start of a bigger top.

The monthly chart now shows the conditions suggesting the formation of a 7 year cycle top. If the S&P ends December below xxxx (subscriber version), the uptrend would be broken, and the target would then be the trendline now at 4000. Conversely, if the xxxx area remains intact, the way would be clear for a move to xxxxxxx xxxxx in early 2022.

Cycle screening measures screamed higher in a pattern similar to October-November 2020. That led to a breakout and long upleg. It doesn’t guarantee the same outcome here, but we need to be cognizant, and prepared for the possibility. We don’t want to be dumbfounded in disbelief, and get caught flatfooted. I’ll keep you updated on conditions and signals in these reports.

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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