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Tons of Cash, Not In Use, Signals this Huge Change in the Market

Lee Adler

The Treasury Borrowing Advisory Committee (TBAC) told us in early February that it estimated that the US Treasury would pay down $358 billion in T-bills in the second quarter. That’s a lot of cash to stuff into the accounts of money market funds, banks, Primary Dealers, and other investors who use T-bills as a near-cash holding.

There’s nothing unusual about that. It’s an annual occurrence. The Treasury gets a tax windfall in March and April and uses the money to temporarily pay down outstanding T-bills. Those paydowns stuff cash into the accounts of those holding the expiring bills that are being redeemed. Then those former holders of the bills must find a place to reinvest that cash.

There are fewer T-bills in the market for them to roll into. When the Treasury pays them off, they’re gone. Poof. The Treasury will only start issuing new T-bill supply in a couple months when it needs to start borrowing short term again to fund government spending. Meanwhile, there’s a surfeit of cash in the accounts of money funds, banks, dealers, and investors.

Some recipients of the paydowns buy bills in the secondary market. That pushes the rate down. Some roll out a bit on the yield curve toward longer maturities. That normally pushes short term coupon paper, such as the two year note, prices upward, and yields lower. That buying ripples out through all maturities along the curve.

And a few at the margin decide to park the cash in stocks, which pushes stock prices up.

As a result of that process, we invariably saw rallies around the time of annual tax collections. Likewise, in the third week of every month, the Fed added to the cash tsunami with its regular settlement of its previous forward MBS purchases under QE. Because there’s a built in lag in that process, even though outright QE has ended, there was still a big Fed MBS settlement last week totaling $98 billion.

All told, there has been a helluva lot of cash pumped into the market in the past couple of weeks. But the markets have not rallied as I have expected them too.

Apparently, I missed something important. It’s obvious, but I underweighted the fact in my thinking. Here’s what it is, why it’s a huge deal, and what it tells us about how to trade and invest to protect, and even grow, our capital.

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Sell Gold in May and Go Away?

Lee Adler

I don’t expect much upside in the near term but the outlook should brighten later this year.

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Four Year Cycle indicators remain bearish. A cycle low is ideally due xxxx-xxxx (non-subscribers, click here for instant access), but normal variance would allow for an upturn at xxxxx xxxx. However, there’s still risk of a final decline until momentum gives a clear buy signal. A down week this week would break the 6 month cycle moving average with bearish implications for the next xxx-xxx months. Conversely, a weekly close above xxxx would be bullish, particularly if 3-4 year cycle momentum breaks its downtrend. Such a breakout would signal a likely move to xxxx as the next target, with a conventional measured move target of xxxx-xxxx (non-subscribers, click here for instant access).

Swing Trade Screen Picks –

Over the week ended April 18, 30 charts of the 52 mining stocks that I track had at least one buy signal. 21 had at least one sell signal. This remains typical of a consolidation phase with no sign of a strong push in either direction.

The signals anticipate swings of 3-5 weeks. But when a market or sector is rangebound, there are lots of whipsaw signals. This is why it’s necessary to look at the charts for the overall pattern.

I rescreened the stocks that had at least one buy signal over the prior 5 day period, for repeat buy signals on over the past two trading days. There were only 5. There were 3 repeat sell signals. Again, these are small numbers reflecting a sector going nowhere.

I looked at the charts of the 5 repeat buy signals. Again I was not enamored with what I saw. Too many charts looked like intermediate term tops, just like the week before. At best it looks like more ping pong ahead. I feel like giving up on the sector. Perhaps that’s a bullish sign. But until the charts give me something more concrete to go on, this week at least, I’m sitting tight and doing nada.

One existing pick hit its stop last week and I’m dropping another as of the opening price this morning. That will leave just one pick on the list this week. One pick hit its trailing stop last week. As of yesterday, including both closeouts and the remaining open pick, last week’s 3 picks had an average gain was 3.4% on an average holding period of 9 calendar days. 8 picks were closed out in March. The average gain was 10.8% on an average holding period of 27 days. Two picks have been closed out in April so far.

Since November, after tweaking the screening methodology to use multiple days in making selections, 25 picks have been added and closed out. The average gain was 6.8% on an average holding period of 29 calendar days. Averages assume 100% cash, no margin, no options. The use of margin or options will magnify both gains and losses. See disclaimer below the charts.

Table and charts below (non-subscribers, click here for instant access).

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. Past performance does not imply future results. 

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Swing Trade Chart Pick Screens Flip to Buy Side

Lee Adler

Last week’s daily screens tilted to the buy side, going against weakness in the market averages. The final score for the week was 97 Buys to 37 Sells. That reversed 3 straight weeks with a plurality of sells.  Prior to this 3 week run, buy signals had held the edge for 3 weeks.  Cycles!

However, on Thursday April 14 alone, there were just 6 buys and 33 sells, portending a soft start for this week.

Technical Trader subscribers click here to download the complete report.

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. The final numbers show the number of stocks with at least one buy signal or sell signal during the week.
I start the weekly process by screening for daily buys and sells from the previous Friday through Thursday for the holiday shortened week. I then rescreened that output, for additional signals in the progression on Wednesday and Thursday. The final lists this week resulted in 67 chart pick candidates on the buy side and just 8 on the sell side. Slim pickings for shorts this week.

I reviewed the charts from the final output visually. From that review, I chose 4 buys and no shorts to add to the list, shown on the table below (Non subscribers click here for access).

Last week we started with 9 picks on the list. 3 were buys, 6 were short sales. Five picks hit their trailing stops and were closed as of the stop price. Including those and the picks still open at the end of the week gave us average gains of 2.8% with an average holding period of 11 days.

Picks closed out in March had an average gain of 4% with an average holding period of 20 calendar days. Picks closed out in April so far have had an average gain of 1.8% with an average holding period of 11 days.

It would be nice if we could annualize these numbers, but reality doesn’t work that way.

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

This week we will start with 7 picks on the list including the 4 new ones. 6 are buys. 2 are shorts.

The new picks, along with picks that remain open, and those closed out last week, are shown on the table below (non-subscribers click here for access). Charts of new and open picks are below that.

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The Dow, Macro Liquidity, and the Fate of Russian Generals

Lee Adler

I began to warn in December 2021 that the process of the CLI flattening was beginning, and that that would lead to bad things happening. Subsequently, the line maintained a steady rise until March 2022 when the Fed ended QE. It’s hard to see on the scale of this chart( I began to warn in December 2021 that the process of the CLI flattening was beginning, and that that would lead to bad things happening.

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So far, those bad things that I predicted have barely scratched the surface of the potential of what’s to come as this line stays flat. The Fed has warned us that it will start shrinking its balance sheet after the May FOMC meeting. That will pull money out of the banking system. That’s when we should start to see really “bad things.”

Meanwhile, the stock market is has reached the low side of its normal band of motion from the CLI. If history is any guide, the stock market will remain vulnerable to further severe declines until a week or two after the line representing the S&P 500 penetrates the bottom of the normal range of motion from the liquidity line.

In 2011, touching the bottom of the band was a bullish signal. But I don’t think that will work today. Back then the Fed was loose and committed to stay loose. Now, it’s in just the opposite posture. They won’t be sending the cavalry to help the stock market any time soon.

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Stocks Are Not Breaking Bad

Lee Adler

We’re on the doorstep of massive T-bill paydowns over the next 4 weeks, that are a bullish influence every year at this time. But stocks aren’t acting like it. Or are they? Surprisingly, cyclical breadth momentum indicators are not acting as badly as the market averages.

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What’s it mean? The market still looks xxxx xxxxx xxxxx (non subscribers click here to access), but that xxxx looks like it will come from xxxx xxxx first. There’s little sign of an immediate collapse, just a xxxx xxxx xxxx xxxxx, then finally, the rally that fools the majority.

Here’s how it should play out (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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Gold’s Last Chance Before Summer Vacation – LINK CORRECTED

Lee Adler

My apologies! I sent this out earlier this week with a link to the previous weekly report. Now corrected. 

Happy Easter and Happy Passover!

A 13 week cycle upturn is ideally due xxxx xxxx xxxx xxxx (subscriber version) couple of weeks. It’s the best shot at a rally to test that March high before the 9-12 month cycle goes into its usual second half hiatus. The 10-12 month cycle projection of xxxx may still be reached (non-subscribers, click here for instant access).

Subscribers, click here to download the report.

A weekly close below xxxx (non-subscribers, click here for instant access) would invalidate the implications of the breakout.

A long term cycle high is due in xxxx.

Swing Trade Screen Picks -Over the week ended April 11, 39 charts of the 52 mining stocks that I track had at least one buy signal. 36 had at least one sell signal. I’d liken that to a close game of ping pong. It remains typical of a consolidation phase.

The signals anticipate swings of 3-5 weeks. But when a market or sector is rangebound, there are lots of whipsaw signals. This is why it’s necessary to look at the charts for the overall pattern.

I rescreened the stocks that had at least one buy signal over the prior 5 day period, for repeat buy signals on Friday and Monday. There were 17. There were 8 repeat sell signals.

Looking at the charts of the 17 repeat buy signals, I was underwhelmed. Too many charts looked like intermediate term tops. At best it looks like more ping pong ahead. But just in case that’s wrong and a breakout is coming, I picked two to add to the list this week to keep a few toes in the water. They were xxxxxx xxxxxxx XXX and XXX.

That will leave 3 picks on the list this week. One pick hit its trailing stop last week. Including that and the one new pick, the average gain was 3.9% on an average holding period of 11 calendar days. 8 picks were closed out in March. The average gain was 10.8% on an average holding period of 27 days.

Since November, after tweaking the screening methodology to use multiple days in making selections, 23 picks have been made and closed out. The average theoretical gain was 7.3% on an average holding period of 31 calendar days. Averages assume 100% cash, no margin, no options. The use of margin or options will magnify both gains and losses.

Table and charts below (non-subscribers, click here for instant access).

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. Past performance does not imply future results. 

Subscription Plans

Try Lee Adler’s Gold Trader risk free for 90 days!

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Gold’s Last Chance Before Summer Vacation

Lee Adler

A 13 week cycle upturn is ideally due xxxx xxxx xxxx xxxx (subscriber version) couple of weeks. It’s the best shot at a rally to test that March high before the 9-12 month cycle goes into its usual second half hiatus. The 10-12 month cycle projection of xxxx may still be reached (non-subscribers, click here for instant access).

Subscribers, click here to download the report.

A weekly close below xxxx (non-subscribers, click here for instant access) would invalidate the implications of the breakout.

A long term cycle high is due in xxxx.

Swing Trade Screen Picks -Over the week ended April 11, 39 charts of the 52 mining stocks that I track had at least one buy signal. 36 had at least one sell signal. I’d liken that to a close game of ping pong. It remains typical of a consolidation phase.

The signals anticipate swings of 3-5 weeks. But when a market or sector is rangebound, there are lots of whipsaw signals. This is why it’s necessary to look at the charts for the overall pattern.

I rescreened the stocks that had at least one buy signal over the prior 5 day period, for repeat buy signals on Friday and Monday. There were 17. There were 8 repeat sell signals.

Looking at the charts of the 17 repeat buy signals, I was underwhelmed. Too many charts looked like intermediate term tops. At best it looks like more ping pong ahead. But just in case that’s wrong and a breakout is coming, I picked two to add to the list this week to keep a few toes in the water. They were xxxxxx xxxxxxx XXX and XXX.

That will leave 3 picks on the list this week. One pick hit its trailing stop last week. Including that and the one new pick, the average gain was 3.9% on an average holding period of 11 calendar days. 8 picks were closed out in March. The average gain was 10.8% on an average holding period of 27 days.

Since November, after tweaking the screening methodology to use multiple days in making selections, 23 picks have been made and closed out. The average theoretical gain was 7.3% on an average holding period of 31 calendar days. Averages assume 100% cash, no margin, no options. The use of margin or options will magnify both gains and losses.

Table and charts below (non-subscribers, click here for instant access).

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. Past performance does not imply future results. 

Subscription Plans

Try Lee Adler’s Gold Trader risk free for 90 days!

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Primary Dealers Still Long and Wrong, But A Gift Rally Looms!

Lee Adler

After a disastrous couple of months in the bond market, conditions are now set up for x xxxxxx  there. Treasury bill paydowns will be enormous over the next month. No one expects this, because the market has been so horrible, and the Fed is so tight and will soon get even tighter. But the markets will be xxxx xx xxx from these Treasury paydowns. They’ve already started, and they will surge to enormous levels over the next 2-3 weeks.

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Non subscribers, click here to read this report.

So what would I do with this information? The same thing I’ve been doing for the past 20 months. They’re gifts to us on the way to Dante’s Inferno. If I owned bonds, I would xxx xxxx. If I owned stocks, I would xxxx xxxx. And I would keep looking for stocks to xxxx on the xxxxxx.

I know. Cash is trash when inflation is high and interest rates are negative to inflation, but it’s less trashy than assets that are actively losing value. The strategy that I think makes the most sense in such an environment is to trade stocks from the xxxx side. I publish the weekly swing trade chart picks for those who are looking for ideas along those lines.

Meanwhile, the Primary Dealers are STILL positioned wrong. They’ll get this little rally in the short run to help salve their wounds. But I stress – short run.

Dare I say, “Sell in May and go away?” But make that the xxxx xx xxxx. The Treasury paydowns should continue lubricating the market well xxxx xxxx xxxx.

The problem after that is that the Primary Dealers and the biggest banks who own them have enormous hidden losses that aren’t showing up yet on bank earnings statements or balance sheets. As market conditions tighten in the second half of this year and margin calls beget losses, which beget more margin calls, those hidden losses will start to show up. Banks will be forced to liquidate some of their assets and will be forced to report some of those losses.

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Swing Trade Chart Picks Maintain Sell Side Tilt

Lee Adler

Last week’s daily screens tilted to the sell side again. The final score for the week was 125 Sells to 82 Buys. This was the third straight week with a plurality of sells. Prior to this 3 week run, buy signals had held the edge for 3 weeks.

On Friday April 8 alone, there were 11 buys and 41 sells, portending a soft start for this week.

Technical Trader subscribers click here to download the complete report.

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. The final numbers show the number of stocks with at least one buy signal or sell signal during the week.

I start the weekly process by screening for daily buys and sells from Monday through Thursday. I then rescreen that output, for additional signals in the progression on Thursday and Friday. The final lists this week resulted in 8 chart pick candidates on the buy side and 15 on the sell side.

I reviewed the charts from the final output visually. From that review, I chose 1 buy and 2 shorts to add to the list, shown on the table below (subscriber version).

Last week we started with 9 picks on the list. 5 were buys, 4 were short sales. Three picks hit their trailing stops and were closed as of the stop price. Including those and the picks still open at the end of the week gave us average gains of 5.3% with an average holding period of 11 days.

Picks closed out in March had an average gain of 4% with an average holding period of 20 calendar days. The percentage gain is based on 100% cash positions, with no margin and no use of leverage or options. The use of leverage and options will magnify both gains and losses.

Likewise, it would be nice if we could annualize these numbers, but reality doesn’t work that way. Some months have what traders euphemistically call “drawdowns” — losses by any other name.

This week we will start with 9 picks on the list including the 3 new ones. 3 are buys. 6 are shorts.

The new picks, along with picks that remain open, and those closed out last week, are shown on the table below (subscriber version only). Charts of new and open picks are below that.

Technical Trader subscribers click here to download the complete report.

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There are Profit Opportunities in a Rangebound Market

Lee Adler

Big T-bill paydowns are coming in the second half of April. That will continue to support a “rally that fools the majority.”

But it doesn’t guarantee it. We’ll let the market do the talking, based on what it does with these key support and resistance levels (subscriber version).

Technical Trader subscribers click here to download the complete report.

Cycles – There’s no thrust in either direction. Cycles are likely to remain in juxtaposition for the next couple of months. It’s a recipe for a xxxxxxxxxx xxxxxxx (subscriber version).

That doesn’t mean that there’s nothing to do. Some stocks will make swing moves, whether up or down. The swing trade chart pick screens should be able to pick some of them out.

Third Rail Chart – The trendline to watch starts the week at xxxx (subscriber version) and ends at xxxx. A daily close below that line would invalidate wider uptrend hypothesis. A daily close below xxxx would be needed to signal a new short term downtrend.

If the uptrend channel holds, look for resistance around xxxx first. If that’s cleared, the next likely target would be resistance around xxxx.

Long Term Weekly– The February-March lows appear to have been a two year cycle low. That only tells us that an up phase is due. It does not tell us the absolute direction of that up phase. That depends on the longer cycles.

The 3-4 year cycle is in a top phase, but it still has an unmet projection of xxxx (subscriber version) that can’t be ruled out until the top breaks down. That would require a weekly close below xxxx.

A 7 year cycle top is due this year in a projection range of xxxx– xxxx. It’s not yet possible to say whether the top is complete or a new high is still on the docket.

Monthly Chart – The mid March rebound has formed another equal width uptrend channel. Its lower line is around xxxx in March and xxxx in April. Resistance is around xxxx in March and xxxx in April.

Cycle Screening Measures – These indicators were mixed and neutral in the short run, xxxxxxxxxx xxxxxxx (subscriber version) for the intermediate term. They still support the liquidity analysis based thesis of a xxxxxxxxxx xxxxxxx (subscriber version) that could last into mid May.  

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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