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Catch a Falling Knife

Lee Adler

Gold’s short term cycles have entered up phases but they haven’t shown anything so far and aren’t likely to. The longer swing cycles have yet to indicate that they’ve bottomed, and they still have lower projections. There’s still risk that they’ll be reached over the next month or two.

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Over the past week the mining sector generated 19 charts with a second or third buy signal on Monday, and no multiple sell signals. Sounds good, right? Non-subscribers, click here for access.

Uhh…. Non-subscribers, click here for access.

This market reminds me of the old Perry Como song. “Catch a falling knife and put it in your pocket. Never let it stab your leg.” Bottom picking for counter trend rallies in bear markets is not my favorite pastime. But given that any bottom could lead to a big rally, I will put one big toe in the water, and steel myself for its amputation. So, from my bottom picking perspective, I’ll go with XXX, tracking it as of the opening price on Tuesday. And, what the hell, XXX has room to pop, with nice positive divergences in the indicators, so I’ll add that as well. Non-subscribers, click here for access.

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Survive the Meat Grinder and Market Will Gladly Pay Us Back on Tuesday

Lee Adler

The final list of double screened output for last week resulted in 13 charts with multiple buy signals, and 35 with more than one sell signal. That’s surprising considering Friday’s strength, but the field of buy signals from earlier in the week was tiny.

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These numbers remain very small relative to the universe of more than 10,000 screened stocks. The low output continues to reflect a rangebound market with no motive thrust either way. It’s a meatgrinder market. Non-subscribers click here for access.

Looking at Friday on a standalone basis there were 47 buy signals and 21 sell signals. Again, these are relatively low numbers. Just as the sell side edge was too small to get excited about last week, the same is true of the buy side edge this week. Non-subscribers click here for access.

Regardless, my task is to unearth trading opportunities, so I undertook the usual visual review of the charts that met the multiple signal criteria. The buy signals all looked like rangebound setups that were only good for a scalp at best. I said, “Skip it.” Non-subscribers click here for access.

The sell side was no better. Most of the charts were too ambiguous to do anything. They still look a few weeks away from good short side setups. So we sit tight this week. Non-subscribers click here for access.

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7/4/22 Picks closed out in June averaged a gain of 10.1% on an average holding period of 17 calendar days. That works out to an average of 4.1% per week. There were 12 closed picks. The win rate was 75%. I would hope to continue that, but it is by no means a given.

June’s performance is not something we should expect to duplicate too often, if at all. The average weekly gain since I tweaked the methodology in mid January is just 1.29%, while trending upward lately. Non-subscribers click here for access.

6/6/22 Picks closed out in May averaged a gain of 3% on an average holding period of 2 weeks. That worked out to an average of 1.5% per week. There were 28 closed picks. 25 were shorts. Non-subscribers click here for access.

5/9/22 April was a challenging month. The final tally of closed picks in April had an average loss of 0.4% with an average holding period of 11 calendar days. My system does not do well when the average low to low cycle duration drops below 4 weeks. Non-subscribers click here for access.

March was better. Picks closed in March had an average gain of 4% with an average holding period of 23 calendar days. Non-subscribers click here for access.

Subscription Plans

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.

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Major Swing Cycles Align for an Up Phase

Lee Adler

The cycle setup this week is a picture of juxtaposition, with the edge to the bulls. That’s because a hybrid of the two longer cycles seems to be in the bottoming process here. But short term cycles are mixed and opposed to one another. That suggests that the market won’t be able to get out of its own way. xxxx is more likely than a xxxxxxx xxxxxxxx.

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Third Rail Channels –   The market is “triangulating.”  XXXX is the critical level. A close above that would open the way for a move to the XXXX area. On the other hand, a close below XXXX on Monday would keep the sharpest downtrend channel intact. Non subscribers click here to access.

Long Term Weekly Chart – A weekly close above XXXX this week would signal a 6 month and possible 10-12 month cycle upturn. The target would then be around XXXX. Non subscribers click here to access.

Long term downside cycle projections have already been reached but it’s too early to conclude that these downside projections are final. I will give more weight to classical technical indicator positions and trends such as a conventional measured move target of xxxx-xxxx. However, a 6 month and 10-12 month cycle up phase should xxxxx for a xxxxx xxxx xxxxx xxxxx lasting into xxxxxxxxxxxxxx-xxxxxxxxxxr.  Non subscribers click here to access.

Monthly Chart – Breaking xxxx in July could send the SPX hurtling toward the next major support line at xxxx. Conversely, if they stay above xxxx, there’s room to run to around xxxx in July. Non subscribers click here to access. 

Long term momentum remains on a sell signal and is now sitting just above the bottom of a 3 year uptrend channel. Closing any month below that line would be another long term bearish signal. .Non subscribers click here to access.

Cycle Screening Measures – The short term pattern is xxxxxxx. The intermediate pattern has bipolar disorder. I’m a liquidity analyst, not a shrink. I won’t try to make sense of it. However, a couple of the moving average indicators for these measures are now at pivotal points on their charts. If this morning’s market xxxxxxxx xxxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxx. If this rally is a bottle rocket and the market ends lower through Tuesday, the xxxxxx xxxxxx xxxxxxxxx xxxxxxx . 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. 

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As Good As it Gets, Before the End of Time

Lee Adler

The setup for both bond and stock market bulls will be as good as it gets for the next 3 weeks. So don’t be fooled. Get ready to do some more selling, or short selling, if you’re of that disposition.

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The US Treasury announced in its May Quarterly Refunding statement that it wanted to hold $650 billion in its cash account at the end of Q3. After the April tax windfall, its cash had risen to nearly $1 trillion, so it had to whittle that down by redeeming T-bills. Each month it paid down $100 billion or more of existing T-bills to reach its goal. Finally, last week the Treasury hit the mark. Non-subscribers, click here for access.

Based on recent trends I had projected that this would happen in July, and that when it did, the T-bill paydowns would end. Last week the Treasury announced that on June 19 it would issue $15 billion in net new bills its first new bill issuance since just before the April tax windfall began. Non-subscribers, click here for access.

It’s the beginning of the middle of the end. Non-subscribers, click here for access.

This report looks at the trends in Treasury cash, Fed RRPs, the TBACs Treasury supply schedule, and the technical charts of interest rates and bond yields to review how we got here, and estimate how it all plays out, based on known facts and government issuance schedules. And I suggest what you can do about it to protect yourself and play what’s to come. Non-subscribers, click here for access.

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More Bad News Ahead for the Golden Boys

Lee Adler

The 6-7 week cycle low is overdue and the 4 week cycle low was due yesterday, but everything else says there’s more bad news ahead.

The mining stocks look no better. For the past week, there were just 2 charts with final buy signals after earlier ones, and 4 with  a final sell after earlier sell signals. Those low numbers suggest no thrust, but the downtrend is well established. In the week before there were 22 with multiple sell signals.  Here’s what I’m doing now.

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Are the Fed and Treasury Geniuses, or Just Lucky? Part One

Lee Adler

We’ve been in a bad bear market in stocks for over 6 months. And a really bad bear market in bonds for almost two years. It could have been worse. Why hasn’t it been? Because even though the Fed hasn’t been absorbing any Treasury supply, supply has been so light that stock and bond prices have reached an  equilibrium range. It’s been volatile. It’s been unsteady. But it hasn’t collapsed.

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In June, the Fed began actually withdrawing cash from the banking system at the rate of $47.5 billion per month. They call it QT, or Quantitative Tightening. $30 billion of that is in Treasuries, and $17.5 billion is in MBS. They plan to double those amounts in September. I’m doubtful they’ll even get through August, but we’ll see.

Reason number one that the end of QE and beginning of QT has not triggered a collapse is that these withdrawals are not simply the opposite of QE. QE was injected into the financial markets directly through the conduit of bond purchases from Primary Dealers. The Fed paid for the purchases by crediting the dealers’ accounts at the Fed with new cash. The dealers than used that cash to accumulate more securities, promote and mark up those securities, and distribute them. As long as the Fed was pumping money into dealer accounts, this process pushed stock and bond prices higher.

Under QT, the withdrawals are not done in trades with Primary Dealers. The money is not sucked directly out of dealer accounts. The QT process only hits the dealers indirectly, and in reduced amounts relative to QT.

The Fed withdraws the money from the financial system by telling the Treasury to repay some of its debt to the Fed. The Treasury must raise the cash to repay the Fed through sales in the market. The buyers of the new paper pay for it by withdrawing cash from their bank accounts. The Treasury sends that cash to the Fed in repayment of the debt. And just like that, the money disappears into the Treasury Black Hole Account.

OK, I kid. It’s not a black hole, but the effect is similar. The Fed sucks the money in, and it disappears from the financial universe. Indeed, the Fed can make it reappear whenever it wants to, but for now, it’s like the South Park episode where Kyle deposits $100 in a new bank account. And it’s gone. The banking system shrinks. There’s more Treasury debt to be absorbed week in and week out, and less cash to absorb it week in and week out. Drip, drip, drip.

Only the boyz have had it good since March. Tax collections have been so enormous on the big quarterly and annual tax due dates that the US Treasury has been able to continue paying down T-bills at a rate in excess of $100 billion per month. Withholding taxes also surged in June.

The result has been that net Treasury supply of coupons less the bill paydowns has only been in the neighborhood of $30 billion over the past month. In April and May, and part of June, the Treasury was actually disgorging cash into the market. It had so much cash it paid down more in T-bills than it issued in coupons. In June it issued only $25 billion net, and over the past 4 weeks only about $35 billion.

The market can handle that. Shakily, yes, but it can absorb that without the Fed’s help.

That all ends now.

This report illustrates how we got here, estimates how it all plays out, based not on conjecture, but known facts and government issuance schedules. And I suggest what you can do about it to protect yourself and play what’s to come.

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Swing Trades This Week – Once Upon a Time Old Traders Told Me, Never Short A Dull Market

Lee Adler

Sounds good to me right now.

In fact, it is a good time to take a nap on the beach. Under an umbrella! Seriously. I’ve lived in sunny beach areas for 35 years. Let’s just say the sun hasn’t loved back the sun lovers. Not pretty. Not pretty at all. That glamorous tan you get at 25 and 25 and 45 doesn’t look so glamourous at 55 and 65 and 75. Unless you like deeply creased leather.

You’re better off sitting in front of a computer screen. Get your 15 minutes of sun, and your 30 minutes of exercise every day, and then sit in front of that screen and trade your ass off all day long. Live long and prosper, and play with your kids or grandkids every day if you have them! Life is short.

The final list of double screened output for last week resulted in 15 charts with multiple buy signals, and 24 with more than one sell signal. These numbers are very small relative to the universe of more than 10,000 screened stocks. The minuscule output reflects a rangebound market with no motive thrust either way.

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Looking at Friday on a standalone basis there were only 6 buy signals and 28 sell signals. Again, these are very low numbers. The edge to the sell side is too small to hang our hats on. Like last week, I see no reason to get excited about the market’s direction, either way.

Regardless, my task is to unearth trading opportunities, so I undertook the usual visual review of the charts that met the multiple signal criteria. I found two that were interesting enough to add on the buy side. I didn’t like any of the potential shorts well enough to add them. There will be more opportunities on the short side soon enough, but I’m not seeing them at the moment.

The screen results come from a universe of approximately1200-1500 stocks daily that meet the criteria of trading above $6.00, and with average volume greater than a million shares per day. I start the weekly process by screening for daily buys and sells from the previous Friday through Thursday. I then rescreen that output, for additional signals in the progression on Thursday and Friday.

The percentage gain is based on 100% cash positions, with no margin and no use of leverage or options.

7/4/22 Picks closed out in June averaged a gain of 10.1% on an average holding period of 17 calendar days. That works out to an average of 4.1% per week. There were 12 closed picks. The win rate was 75%. I would hope to continue that, but it is by no means a given.

June’s performance is not something we should expect to duplicate too often, if at all. The average weekly gain since I tweaked the methodology in mid January is just 1.29%, while trending upward lately. Non-subscribers click here for access.

6/6/22 Picks closed out in May averaged a gain of 3% on an average holding period of 2 weeks. That worked out to an average of 1.5% per week. There were 28 closed picks. 25 were shorts. Non-subscribers click here for access.

5/9/22 April was a challenging month. The final tally of closed picks in April had an average loss of 0.4% with an average holding period of 11 calendar days. My system does not do well when the average low to low cycle duration drops below 4 weeks. Non-subscribers click here for access.

March was better. Picks closed in March had an average gain of 4% with an average holding period of 23 calendar days. Non-subscribers click here for access.

This week we start with 2 open picks, both buys with new or adjusted stops. The two picks hardly moved. We had no stopouts. The net result was a big fat zero. I won’t try to generate fake excitement when there’s not a damn thing to be excited about. Non-subscribers click here for access.

There are two new picks, both buys. Are they likely to generate excitement? No, but like the two existing picks, they’re positioned well enough to maybe generate a few shekels over the next few weeks. Non-subscribers click here for access.

The 4 picks are shown on the table in the report. Charts are below that.

Technical Trader subscribers click here to download the complete report.

Non-subscribers click here for access.

Subscription Plans

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.

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Advantage Bulls, But It’s Over If This One Thing Happens This Week

Lee Adler

Cycles- The cycle picture this week is a mixed bag, with the edge to the bulls. The bullish outlook hinges on there xxxxxxxxxxxxxxx  this week. That would validate the 6-7 week cycle up phase projection of xxxx, and raise the possibility, if not the likelihood, that the 6 month and 10-12 month cycles have merged into a shorter hybrid that xxxxxxx xxxxxxxxx xxxxxxx of xxxxx xxxxx. That would then point to that hybrid cycle staying xxxx xxxxxx xxxxxxx until August-September.

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On the other hand if the market xxxxx xxxxxxxx xx xxxx this week, that would keep the 6 month cycle projection of xxxx in play. Non subscribers click here to access.

Third Rail Channels – The SPX is centered in the lower half of its short term uptrend channel. The bottom of the channel rises from xxxx to xxxx this week. There are multiple crisscrossing resistance lines in the xxxx-xx area this week. A daily close above 3950 would result in a conventional measured move target of around xxxx. So I would not want to be short on a move above xxxx, or maybe xxxx at the outside. I might nibble on the short side on a rollover that ends the week below that green trend channel. Non subscribers click here to access.

Long Term Weekly Chart –Long term downside cycle projections have already been reached but it’s too early to conclude that these downside projections are final. I will give more weight to classical technical indicator positions and trends such as a conventional measured move target of xxxx-xxxx. Non subscribers click here to access.

Meanwhile, the market is in a counter trend rally. If it clears xxxx this week, it’s likely to head for major resistance around xxxx in July. Conversely, if it doesn’t clear the top of the trend channel near xxxx, the downtrend would remain intact. That would lead to a test of the low, with a good chance of a breakdown that would target xxxx. Non subscribers click here to access.

Monthly Chart – Breaking xxxx in July could send the SPX hurtling toward the next major support line at xxxx. Conversely, if they stay above xxxx, there’s room to run to around xxxx in July. Non subscribers click here to access.

Long term momentum remains on a sell signal and is now sitting just above the bottom of a 3 year uptrend channel. Closing any month below that line would be another long term bearish signal.

Cycle Screening Measures – The cycle screening aggregate was stable in a firmly positive range. The short term and intermediate patterns are xxxxxx. Non subscribers click here to access.

6 month cycle measures are now both on the buy side which is a sign that xxxxxxx xxxx xxxxxx xxxxxxxx xxxx. The current status measure is only modestly positive, so a down week this week would send it back to the sell side. But if the market moves higher that would make this indicator more xxxx xxx xxxxxx.

Technical Trader subscribers click here to download the complete report.

.Non subscribers click here to access.

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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. 

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Gold’s Worst Projections Are Happening

Lee Adler

Last week’s warning signs came to fruition. Here’s how much worse it’s likely to get. Once that happens, it should be a good buying opportunity.

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For the past week, there were 8 charts with multiple buy signals. There are 22 with multiple sell signals. The 8 buy signals were mostly on Friday, and they got soundly reversed on Tuesday, when there were just 3 buys and 22 sells.

The patterns look desperate. Is it a capitulation? Too soon to say, but I’m staying away, for now.

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Recession? What Recession?

Lee Adler

Federal tax collections rebounded sharply in June, including the all-important withholding taxes. I can’t explain why this happened, nor does it matter. My job is to report the data, and follow wherever it leads.

As Professor Lawrence Berra taught us, you can observe a lot by watching. And the observation that taxes rebounded in June tells us that we are not currently headed into recession.

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But that’s beside the point.

The point, the only point, is that tax revenue rebounded sharply. We will therefore not see an immediate increase in Treasury supply beyond the TBAC’s optimistic forecast. However, that still leaves plenty of coupon supply on the way in the third quarter. The recent rally notwithstanding, the market will have trouble absorbing any net supply at all without the Fed taking its share. And the Fed is not only not taking any, it’s forcing the Treasury to add supply that the public must pay for to repay the Fed for its holdings that it is redeeming.

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Then there’s also the fact of the increasing interest expense of the Federal government. That too will add to the deficit, and add to Treasury supply. Non-subscribers, click here for access.

Tax collections are reality — actual hard data, in real time, and not statistically massaged. The economic data will follow with a varying lags. Just like the past month when econ data weakened after I tabulated and reported the collapse in May tax data. I reported that on June 2. Now “everybody” agrees that we’re on the verge of recession. Non-subscribers, click here for access.

Except, oops, we’re not. Tax collections are soaring. We will now see the opposite to the process we witnessed last month. The seers and soothsayers are now all looking for signs of recession. They will be gobsmacked when the lagging econ data starts going the other way again. Non-subscribers, click here for access.

And so will the bond market. The xxxxxxxxx in bond prices, and xxxxxxxx in yields, will xxxxxxxx. The recent rally will soon xxxxxxxxxxx xxx xxx xxxxxxxx. The market has given bond sellers and would be bond sellers xxxxxxxxxxxx.  Non-subscribers, click here for access.

You have to wonder how the Fed and econ soothsayers will now react to a return to booming data AND booming inflation. I suspect xxxxxxxx xxxxxxxx xxxxxxxxx. Some will conclude that inflation expectations are becoming embedded, and that consumers will increase spending now to beat inflation tomorrow. The data suggests that this is already happening. Businesses wouldn’t be increasing payrolls if they weren’t seeing higher sales.  Non-subscribers, click here for access.

There are already reports that the Fed is worried about this and is resolved to prevent it. Now the revenue rebound in June suggests that, as usual, not only is the rent too damn high, but the Fed is too damn late. The other fact is that when things finally do slow down, the Fed will again be too late to respond. Instead of being too loose for too long, it will stay too tight too long. Non-subscribers, click here for access.

Therefore, the strategic message of this data remains the same. If you xxxxxxx xxxxxxxxxx xxxxxxxxxxx xxxxxxxxxxx xxxxxxxxxx. That applies to both bonds and stocks.

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