Liquidity Trader

A couple of weeks ago the market averages came right to long term downtrend lines from the January peak. At that point, there were multiple signs that the rally would continue. We considered all the “what ifs,” including the one that entailed stopping dead at the trendlines and reversing. That seemed unlikely. But it’s what happened. It reaffirms the bear market for now. Now the cycle setups and conventional technical analysis indicate that there’s xxxxxx xxxxxxx xxxxxxx xx xxxxxx for this downturn to xxxxxxx.

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Cycles– Both the 6 month and 10-12 month cycles now appear to be xxxxx xxxxxxxx. The 13 week cycle appears to have the potential for xxxxxx xxxxxx. There are no projections yet but the cycle low is not ideally due until xxxxxxxx xxxxxxxx. That’s plenty xxx xxx xx more xxxxxxxxx to develop after short term cycles finish an up cycle due between xxxxx and xxxx xxxx xxxx. Non subscribers click here to access.

Short term cycle lows are due xxx xxxx. Non subscribers click here to access.

Third Rail – The S&P 500 is now within a short term downtrend channel whose lower line starts this week at xxxx and drops by xxx points per day (PPD) to end the week around xxxx. The centerline now represents resistance. It drops from xxxx to approximately xxxx this week.

Should the S&P drop below xxxx early in the week, it would suggest a possible crash. The most significant support would be in the xxxx xxxxxx range. The next target below that would be xxxx. Non subscribers click here to access.

Long Term Weekly Chart – Last week’s selloff miraculously preserved the long term downtrend channels. Long term and 3-4 year cycle indicators are on the verge of xxxx xxxxxx xxxxxx. Failed signals are normally strong trend continuation indicators. In this case, they would xxxxxx xxxxxxxx xxxxxxx. Non subscribers click here to access.

Monthly Chart  – The S&P turned down right at the long term downtrend channel line on the monthly chart. Long term momentum is back on the cusp of xxxxxxxx xxxxx xxxxxxxx xxxx xxxxxx a secular bear market if it happens. Non subscribers click here to access.

Cycle Screening Measures – The aggregate indicator remains short term xxxxxxxx and is near xxxxxxx intermediate term. The indications suggest a 13 week cycle xxxx xxxxxx and 6 month cycle xxxxxxxx. Non subscribers click here to access.

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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. 

For the week ended December 9, there were 36 charts with second or third buy signals as the week ended, and 52 with second or third sells. Interestingly, 7 of the sells were fixed income ETFs. I take that as a sign that the bond rally is probably finished. Which in the world of tight liquidity isn’t such great news for stocks either.

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The residual momentum of the 174 to 18 win for the buy side 4 weeks ago was finally exhausted last week. There was a modest bulge in sell signals on Monday that was the extinguisher. That subsided later in the week, but it set a tone. 12/2/22 Often the results of such surges don’t begin to show up until the second week after the bulge in signals. Without any in-depth statistical analysis, my sense is that a signal surge like this has a shelf life of 3-4 weeks. Consequently, I think that time is up on this rally. Non-subscribers click here for access.

In my visual review of the screen output this week I leaned toward giving the benefit of the doubt to the sell side but I did find one interesting buy which I added to the list, as shown on the table below.
At the same time, I found 4 that I liked on the sell side, and added those as shorts. This week I elected to go with post entry protective stops for the new picks. Non-subscribers click here for access.

All previously open picks and those closed out last week are shown on the table below (subscriber version). After adding the new picks, there will be 4 buys and 12 shorts. Non-subscribers click here for access.

For the week, performance was positive, with an average gain of 3.7% on an average holding period of 13 calendar days. This was an improvement on last week’s +2.5% on a 2 week average holding period. Non-subscribers click here for access. 

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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. This is a developmental and experimental exercise, for the purpose of providing experienced chart traders with ideas and concepts to use or not use as they see fit. 

Nothing in this letter is meant as individual investment advice and you should not construe it as such. These picks are illustrative and theoretical. The method behind these picks is experimental, and may change over time.  I may trade my own account, and may buy, sell, sell short or cover short, or have positions in any of the stocks on the list at any time, based on a particular trading style that is unique to me. My entry and close out levels are likely to differ from those published due to the exigencies of my trading style and time constraints. I post these items in good faith for informational and educational purposes, and do not take positions in opposition to those which are published. All chart picks are actively traded stocks, and I assume that no subscriber to these reports, nor the total of all subscribers taking positions, would do so in a size that would influence the market price. 

Performance tracking assumes 100% cash basis, no margin, no options. You should not assume that recent performance as reported can or will be repeated in the future. Trading involves risk of loss. In the case of options, the loss can be 100% of the amount invested. When leverage is used the loss can exceed the account equity under certain conditions.

The opinions expressed here assume that readers are experienced investors or are working with an investment advisor.