Cycles are still in gear to the downside in both the metal and the miners and cycle projections still point lower. But there was one mining stock that I liked enough to restart the chart pick list. It’s bottom fishing, but when the sector turns, this big miner looks poised to lead.
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Thanks to an appointment I have with the Government of France on my schedule for today, I will push back posting of the Gold Trader update until early Wednesday.
Not that there’s anything to report. 😉
Thanks for your patience and support. See you tomorrow!
Lee
There were more buys than sells in last week’s daily screens. That may be because there so many charts that had triggered sell signals in the prior three weeks, and they were still playing on the sell side. But whatever the cause, the final score for the week was 235 Buys to 147 Sells. That compared with 114 Buys to 118 Sells the week before. However, on Friday alone, there were just 44 buys and 71 sells. Most of the time, Friday tends to set the tone for the next week.
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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. I then rescreen that output, for additional signals in the progression on Thursday and Friday.
The final lists this week resulted in 43 chart pick candidates on the buy side and 17 on the sell side. Again, the plurality of buy signals may have merely begin that there were so few charts that had not already gone to the sell side in recent weeks.
I reviewed the charts from the final output visually. From that review, I chose 3 buys (all oil and gas related) and 4 shorts to add to the list, shown on the table below.
Last week we started with 21 picks on the list. There were no buys. 21 were short sales. That was an unprecedented tilt in number and unanimity. 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 9 days.
I’d like to repeat that every week. Pretty soon we’d be talking real money. 😋
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. Normally that doesn’t happen too often, but we must roll with the punches when it does.
March was better. Picks closed in March had an average gain of 4% with an average holding period of 23 days. The 5 picks closed out in May so far had an average gain of 4.3% on and average holding period of 12 days.
The percentage gain is based on 100% cash positions, with no margin and no use of leverage or options.
This week we start with 23 picks including the 7 new ones. 20 of the 23 picks are short sales.
I’ve added new stops to the picks from last week, and adjusted stops on the remainder. This week’s new picks will be added without stops as usual. I like to give them breathing room at the beginning, and manage risk by having multiple picks.
The new picks, along with picks that remain open, and those closed out last week, are shown on the table below. Charts of new and open picks are below that.
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This market is in the process of completing a huge top. Bear markets that are preceded by huge top patterns tend to last at least 18 months and may go on for as long as 30 months before reaching a final bottom. 1929-33 was an outlier at 42 months. That one lost 90%. We’ve had a couple of 50% off sales in the past 90 years since then.
Cycles – The 13 week cycle appears to be in a down phase headed for a low in xxxx xxxx or the xxxx xxxx xxxx xxxx, with a projection range of xxxx-xxxx (Non subscribers click here to access). 6 month and 10-12 month cycles seem to be in down phases that are out of sync with where they should be. That implies that the next longer cycles are in bear markets and are skewing the big intermediate swing cycle waves lower for longer.
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Third Rail Chart – The market would need to end the week above xxxx to break the 4 crash channels currently defining the trend. And even if they are clear of xxxx on Friday, that only gives them room for a bigger bounce while not completing a reversal pattern (Non subscribers click here to access)
On the other hand, a daily close below xxxx would open the floodgates on the downside. The proximate target would then be xxxx, and below that xxxx. Such a breakdown would complete an enormous top pattern with a conventional measured move target of xxxx (Non subscribers click here to access).
Long Term Weekly- The 3-4 year cycle top is nearly complete. A breakdown below xxxx (non subscribers click here to access) would confirm. This also looks like a 7 year cycle top. Confirmation will lag.
Monthly Chart – Trend support broke at the end of April. They’d need to end May above xxxx (non subscribers click here to access) to recover within that channel. Trend support is indicated around xxxx in May. If that doesn’t hold, then the target would be a support convergence around xxxx, with the next target xxxx if that fails.
Cycle Screening Measures – These measures rebounded a bit last week but remain negative overall, and in a xxxxxxxxxx (non subscribers click here to access) pattern on the chart..
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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.
Federal tax collections were once again extremely strong in April, including withholding taxes, and individual non-withheld income taxes in particular. In fact there were strong gains in all types of taxes.
This means that, if reported accurately, subsequent economic data reports will be very strong. The weak Q1 GDP was an artifact of a slowdown in February. That was reversed in March, and they added on in April.
You may think that this strong economic data is good news for the markets. But it’s not. A red hot economy will continue to feed raging inflation. The Fed xxxxx xxxxxxxx xxx xxxxxx xxxxx tightening policy.
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The markets will get a brief respite thanks to seasonal Treasury paydowns but after that, the tightening monetary conditions should have xxxxxxxxxx xxxx. Non-subscribers, click here for access.
The Treasury just posted its quarterly refunding requirement for the balance of this quarter and for Q3. New Treasury supply will fall sharply. That surprised some Fintwit “experts.”
That’s something that we knew would happen and even predicted here in these reports, simply because we follow the Federal tax collection trend in real time. This isn’t rocket science. It’s published real time data. Track it and whack it. That’s what we do. And it gives us an edge.
One analyst went so far as to predict that because of this “surprise” supply reduction, this is the bottom. Well, it’s not a surprise. And its not the bottom. Primary Dealers and other members of the TBAC- the Treasury Borrowing Advisory Committee, all knew this was coming. AND YET, they still sold bonds.
It’s simply the law of supply and demand at work. The market can’t handle the truth. And never ending supply in excess of demand is a fact. Any excess of supply over demand is a problem. Even massively reduced supply, when the Fed isn’t standing in the middle of the pit taking all of it, leaving only a pittance for the market to absorb on its own.
The fact is that bond yields were only stable at low levels when the Fed was directly buying or indirectly funding more than 90% of net new issuance. Whenever the Fed reduced that percentage, bond prices fell and bond yields rose.
Janet Yellen gave us a demonstration in the 2017-2019 attempt at “normalizing” the Fed’s balance sheet, bless her heart. Powell shit his pants when the 10 year went over 3%. But then he wasn’t dealing with 8% headline inflation prints, which doesn’t include housing inflation running 20%. They suppress that. Now that he’s dealing with this inflation monster he’s crapping himself again, but this time he’s forced to tighten instead of easing, which is his more natural response.
So, since March, the Fed has essentially left the Fed Puts building. It’s still buying MBS, but not enough to keep the bond market price needle from collapsing and the yield needle from soaring.
Price and yield are the meters of supply and demand in the markets. They tell us what’s happening in the Treasury market trading pits. The direction of price is the direction of the relationship between supply and demand.
The Fed has left the trading pits, leaving the markets in the pits. And soon, perhaps as soon as the next week or two, the Fed will actually force the Treasury to increase the amount of supply it offers to the public. The Treasury will have to do that in order to pay back the Fed, when the Fed starts redeeming up to $60 billion per month of its maturing holdings of Treasuries, and another $35 billion of MBS that someone in the market will also have to buy in the vacuum left behind by the Fed.
With no help from the Fed, and despite sharply reduced Treasury supply, fixed income prices have been crashing. The Fed is about to begin piling on to that trend. So forget about the fact that tax revenues are soaring and Treasury supply is shrinking. It’s not shrinking enough to xxxxxxxx xxxxxxxxx xxx xx xxxxxxxxxxx xxxx xxxxxx xx xxxxxxxxx. Non-subscribers, click here for access.
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The bottom line is still: XXX all rallies. That goes for both bonds and stocks.
Late Addition- As I was preparing to post this, the TBAC issued its supply forecast. Yes they’re cutting issuance, but there will still be net new coupon supply of $153 billion May 16-31. And $171 billion June 15-30. https://home.treasury.gov/system/files/221/TBACRecommendedFinancingTableQ22022-05042022.pdf In Q3 they see net new coupon supply of $335 billion. The paydowns will all be in T-bills, as they have been. This will have no impact on the outlook as we have been seeing it. https://home.treasury.gov/system/files/221/TBACRecommendedFinancingTableQ32022-05042022.pdf
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There are signs of a V bottom in the miners. Is it time to reach out and catch the golden knives?
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Ending QE has created the perfect storm in the markets. Our warnings about the bond market going to hell and leading the stock market have been coming to fruition.
The Law of Supply and Demand is still the law of market land. The US Treasury is still issuing supply, but the Fed is no longer providing demand nor stimulating it. The Fed has gone from the biggest buyer in the marketplace to being absent by design, thanks to the raging consumer price inflation that the Fed itself created.
Now the Fed is likely to announce that not only will it not be the biggest buyer in the market, it will force the US Treasury to issue even more supply. By demanding that the Treasury repay a portion of the money that the Fed lent it via the Fed’s purchases of Treasury securities, it will force the Treasury to sell more debt to the public to raise the cash to repay the Fed. That cash will then be extinguished. It will leave the banking system and be gone. Poof. Just like that. That will further weaken demand.
But the Treasury will keep needing more cash. It will have to come from somewhere, and that somewhere will be the liquidation of other Treasury securities, stocks, and other assets of all kinds. Commercial real estate is being decimated. You think home prices are safe? Think again. What about commodities? Not yet, but that’s coming. Once the downward spiral starts, nothing will be immune.
Here’s how it will play out, along with what you can do about it to protect yourself and even profit.
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Last week’s daily screens were surprisingly neutral for the week as a whole. The final score for the week was 114 Buys to 118 Sells. However, many of those buys were inverse funds, so that there was still a modest tilt to the sell side. And on Friday alone, there were just 12 buys and 44 sells, a negative sign for this week.
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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. I then rescreened that output, for additional signals in the progression on Thursday and Friday. The final lists this week resulted in 32 chart pick candidates on the buy side and 131 on the sell side. However, of the 32 on the sell side, 15 were inverse funds. That means that nearly 90% of the charts that made the final cut were on the short sale side.
I reviewed the charts from the final output visually. From that review, I chose no buys and 13 shorts to add to the list, shown on the table below. While I don’t track this number, the 13 picks on the short sale side were certainly a record.
Last week we started with 13 picks on the list. 5 were buys, 8 were short sales. Four picks hit their trailing stops and were closed as of the stop price. I closed another as of the opening New York price last Monday. Including those and the picks still open at the end of the week gave us average gains of 2.4% with an average holding period of 10 days.
April was a challenging month. Picks closed out in April had an average gain of 0.9% with an average holding period of 10 calendar days. Yep, it was choppy. March was the first full month where I used multiple days of screening. Picks closed in March had an average gain of 4% with an average holding period of 23 days.
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 21 picks on the list including the 13 new ones. All 21 picks are short sales. That’s a first. If there’s a V-shaped reversal, it’s gonna leave a mark.
I’ve added new stops to the picks from last week, and adjusted stops on the remainder. This week’s new picks will be added without stops as usual. I like to give them breathing room at the beginning, and manage risk by having multiple picks.
The new picks, along with picks that remain open, and those closed out last week, are shown on the table in the report. Charts of new and open picks are below that.
Technical Trader subscribers click here to download the complete report.
Non-subscribers click here for access.
Downtrend channels are steepening as liquidity dries up, and wave amplitude increases. It is violent, and could be increasingly so to the xxxxxxxxx xxxx xxxx xxxxx (non subscribers click here to access).
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Cycles – The 6 month cycle up phase was truncated early. An initial downside projection points to xx-xxxxx (non subscribers click here to access). Both the 6 month and 10-12 month cycle lows are ideally due from xxxx xxxx xxxx xxxx (non subscribers click here to access).
The 13 week cycle low is ideally due xxxx xx to xxxx xx (non subscribers click here to access), with a new projection of xxxx. The 6-8 week cycle low is due xxxx, with the projection range reaching xxxx
The premature failure of the 6 month and 10-12 month cycle up phases have set up a test of a support convergence around xxxx (non subscribers click here to access). Breaking that would suggest a crash that could be similar to that of xxxxxxxxxx, or even worse.
Third Rail Chart – To break the crash they’ll now need to at least break a trendline running from xxxx to xxxx this week (non subscribers click here to access). On the other hand, if they break the February low of 4214 this could xxxx xxxx xxxx, xxxx. Minor support is indicated around xxxx and xxxx. A more likely target would be around xxxx on May xx. But it could just as easily get there by xxxx xxx xxxxxx if the market breaks down on Monday.
Long Term Weekly- The 3-4 year cycle top is nearly complete. A breakdown below xxxx (non subscribers click here to access) would confirm. This also looks like a 7 year cycle top. Confirmation will lag.
Monthly Chart – Trend support broke at the end of April. They’d need to end May above xxxx (non subscribers click here to access) to recover within that channel. Trend support is indicated around xxxx in May. If that doesn’t hold, then the target would be a support convergence around xxxx, with the next target xxxx if that fails.
Cycle Screening Measures – All measures are weak and support a xxxxxxxx xxxxxxx xxxxx term outlook.
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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.
The expectation of one last high before summer has been pre-empted. Longer term indicators look hurt too.
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Lee Adler