Lee AdlerThe Gold Trader weekly update will again be posted on Wednesday morning this week. It will return to its usual Tuesday posting next week.
Thanks for your patience and support as I get settled in my new home base of Nice, France!
Lee
Today is a big day. I’m about to board a flight to Nice, France, where I’ll be making my home, hopefully for many years of sunshine, good health, and the good life of the South of France. Not to mention, good times producing these reports for you! It is the culmination of years of planning and delays, but the day is finally here.
Normally I post the swing trade chart picks on Monday but because of today’s little jaunt, this week I will post that report on Tuesday.
II will see you in Nice!
A plus tard!!
Lee
Technical Trader subscribers click here to download the complete report.
We were expecting a short term cycle low by late in the week, at 4275 or so, and we got it.
Support bent. It stretched. It bent some more. But it didn’t break. So the shorts chickened out on Friday and started covering. The last hour was a stampede. There’s nothing more disconcerting than stampeding chickens.
But is it something more? The VIX says it’s an intermediate low, but intermediate cycle indicators say, xxxx xxxx xxxx (subscriber version). This week will be pivotal. Here’s the key.
Failure to xxxx xxxx xxxx would xxxx xxxx xxxx.
Cycle projections on the longer cycles point to xxxx-xxxx (subscriber version).
The 6 month cycle low is ideally due between xxxx and xxxx.
Third Rail Chart- Resistance is around xxxx xxxx. If they clear that, the next target would be xxxx (subscriber version).
If they don’t clear xxxx , then another test of the low is likely. If they don’t xxxx xxxx xxxx (subscriber version), the crash will probably resume, with the next key support around xxxx.
Long Term Weekly- Long term cycle momentum has broken a 2 year uptrend, signaling that the bull market xxxx xxxx .. When long term momentum and 3-4 year cycle momentum break their midyear 2021 lows, and the SPX ends a week below xxxx, then I’d call it a bear market. That would imply that prices are headed a lot lower for a lot longer. We’re not there yet, but we will be quickly if this keeps up like last week.
I have revisited long term cycle projections. Last week’s move suggests more frequent updates than the usual quarterly schedule will be needed on these. So far, there’s no material change in the projections, but I now believe that they are wrong and will not be met. I explain why in the report. I’m giving these no weight, and instead focusing on the price patterns, support breaks, and cycle indicators to show us the way.
Monthly Chart – The market is now below two long term trendlines. It would need to get back above xxxx by the end of January to reverse the bearish implications of this break. If that does not happen, the target in February would be xxxx xxxx. Ouch.
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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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There’s more evidence in the weekly data on the biggest US banks .of the sea change in psychology and financial conditions that is triggering this bear market environment
The Fed is mandated to control inflation. That means that it has no choice but to follow the conventional economic prescription for doing so. Tight money.
Tight money means death, destruction, and chaos, given how much debt and leverage now overburden the banking system in general, and the Primary Dealers in particular. As they become increasingly stressed, the effect will show up in the markets as lower prices. That will increase the stress, and so on.
The Fed will have its hands tied as long as the CPI and PCE measures remain elevated. Therefore, a resumption and continuation of the crash that has already begun in both stocks and bonds is baked in. It won’t be a straight line. There will be rallies, and they will represent profit opportunities for those willing to short them when they run out of steam.
The big surprise in this data is the evidence that both Primary Dealers and money managers are already hoarding cash. This is a reversal of their past behavior of immediately redeploying cash when speculation and bullishness ruled.
If this is the new mindset, we’re about to reap the whirlwind. Here’s what to do, along with the supporting charts, data, and analysis to help you understand what’s really going on behind and beyond Powell’s tortured dissembling.
Find out what to expect now and what to do about it in this report.
Subscribers, click here to download the report.
KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days!
Act on real-time reality!
FREE REPORT – Proof of How QE Works – Fed to Primary Dealers, to Markets, To Money
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The good news is that cycle projections are rising and all point higher. There are also some promising picks among the miners. We’ve had 3 on the list already, and they’ve been moving up.
See, analysis, table of picks and charts (subscriber version).
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.
Correction: In paragraph 4 I have corrected the line about the dealers’ net position to “net long.” In the original version I inadvertently wrote “net short.” That was an error. Sorry for the confusion!
Subscribers, click here to download the report.
The Fed provides us with a tremendous amount of information and data. Some of it is highly useful. Most is not, from my perspective of trying to figure out how it will influence, or even to some extent control, market direction.
One area of useful information is the data that the New York Fed publishes every week with a 9 day lag on Primary Dealer positions and financing. The dealers run the markets, after all, so it’s good to have some insight into their positioning and leverage. It can, at times, give us a heads up that trouble may be brewing. We saw that over the past year as the dealers began to reduce their massive, and massively leveraged, fixed income portfolios.
I have pointed out that that was a huge problem, because a decline in bond prices could put them under water again, just as during the pandemic panic of March 2020. The problem was so big then that the even more massive Fed bailout looked as though it wasn’t working for about 8 days. Then it did work, and the market turned. But it was a close call.
In recent months we saw the decline in the dealers bond positions, but they were still net long and still leveraged. I warned that as bond prices fell and yields rose, their profits would be pressured, and if it continued, their capital could be wiped out again.
The dealers are really just hollow shells acting as strawmen for the Fed, buying Treasuries from the US government, and MBS from Fannie and Freddie and the FHA on the Fed’s behalf. Meanwhile they play side games accumulating, marking up, and marketing all manner of other assets, particularly stocks.
But now the Fed is getting out of the buying business. No more backstopping the dealers with constant massive funding. Meanwhile, the dealers are still REQUIRED, by virtue of their status as Primary Dealers, to still buy Treasuries.
How exactly will they be able to do that without steadily being cashed out by the Fed to the tune of a hundred and some billion per month, month in and month out?
The Fed will probably tell us tomorrow that it’s going to zero purchases after March. The dealers must keep buying. There are only two ways they can fulfill that responsibility. They’ll either have to sell stuff first. Stuff, as in other Treasuries, other fixed income instruments, OR, drum roll please…… Stocks! Or they will need to borrow more money, that is, increase their leverage even more.
We’ve seen all of those processes in action in the past two weeks. We’ve also seen them report lower than expected profits. Why? Because they’re getting their asses kicked on those massively leveraged net long positions in fixed income.
And the Fed thinks that it can just withdraw from supporting the market with its massive money printing operations to buy virtually all of the debt the US government issues? Well as I told you before, oh, you can’t do that!
This little demonstration we’ve gotten over the past two weeks is just a taste of what’s to come until the market again forces the Fed to reverse course. We don’t know where or when that will be, so for now we just rely on Rules Number One and Number Two.
- Don’t fight the Fed. and,
- The trend is your friend aka, don’t fight the tape
Bounces in both the bond and stock notwithstanding, the Fed’s policy is clear, and the trend is clear.
In the last version of this Primary Dealer update in December I wrote, “At the very least, we need to be prepared for a sharp selloff in stocks, and what should turn into a resumption of the bear market in Treasuries.”
Nailed it.
Find out what to expect now and what we’re doing about it in this report.
Subscribers, click here to download the report.
KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days!
Act on real-time reality!
FREE REPORT – Proof of How QE Works – Fed to Primary Dealers, to Markets, To Money
I have unfortunately gotten a few days behind schedule on publication this week. I am currently working on a Primary Dealer update which I’ll post tomorrow, at least in part. I will post the Gold Trader update on Wednesday instead of the usual Tuesday.
This week, I’m in the process of getting ready to end my extended stay in Warsaw, to finally realize my long term plan to move to Nice, France next next Monday. That has involved finding a place to stay temporarily. I intend to settle there after these two years of moving around Europe. So I’m also looking for a place to buy once I get there. All of the preparations for the move have been time consuming.
As an aside, if you ever want to come to the South of France, I know it fairly well, particularly Nice and its immediate environs. I would be happy to chat with you about it, and would love to meet if we have the opportunity. You can reach me by the contact form on the support page.
Meanwhile, I’m also in the process of selling my home in Florida. I’m personally managing that remotely. That’s also setting me back time wise.
The last time I sold a house in Florida, I top-ticked the market for my house type in my neighborhood in mid 2005. Hopefully, I’ll be as lucky this time. Last time I sold, I did so directly without an agent. Today, with Zillow, the commissioned sales agent becomes mostly unnecessary. With online selling so prevalent today, and someone available to let prospective buyers in, it’s well worth it to have buyers contact me via a website.
The downside is that getting the information out, and taking calls has interrupted my workflow, which is frustrating because I want to give you consistent, high quality service. So I do apologize for being a few days later than usual in getting these reports out to you. I’ll do my best to stay as close to the regular schedule as I can during these transition weeks.
And I’ll try to make up for what I can’t do in quantity, by increasing the quality! 😁
As always, thanks for your patience and support!
Lee
Technical Trader subscribers click here to download the complete report.
The extra layer of screens that I instituted for swing trade chart picks last week, and a cooperative market, paid off in a big way.
The list had been empty for two weeks after the market shook me out of a slew of earlier short picks that were just a tad too early. I added 9 picks as of the open last Tuesday, all on the short side.
At Friday’s close the average gain was 9.5% and the average holding period was 4 calendar days! That’s all cash, no margin, no options, no leverage of any kind. It more than reverses the battle I lost with my own stupidity at the turn of the year.
Although maybe it wasn’t stupidity. As it turned out, those short picks would have been huge winners had I just stayed asleep for another couple of weeks, Rip Van Winkle like.
Meanwhile, last week was by far the best weekly record since I began this experiment for you a couple of years ago. Considering that the S&P 500 lost 5.7% on the week, I’ll allow for some self back-patting after my self-flagellation of prior weeks. Let’s face it, sometimes the market whips us. That’s why they’re called whipsaws. First they whip you. Then they saw you in half.
Please, no calls from trading rights activists. No actual trades are harmed in the performance of these lab experiments. Results have not been peer reviewed nor replicated under real world conditions. If you attempt to replicate these experiments, your results may differ.
Daily Data Table (subscriber version only).The raw daily data for last week as a whole tilted to the sell side, which would seem obvious. But it wasn’t lopsided. There’s no sign of massive capitulation or widespread downside thrust either.
I must assume that this means that this selloff can get a lot worse. That’s not carved in stone of course, but I want to be open to the possibility, and not cut off the profit potential of an extended decline by setting trailing stops too tight.
Screening on all days of the week, as opposed to just Friday is an extra layer of work that allows me to see the progression of short term sell signals on every one of over 10,000 stocks on the NYSE and Nadsac. I had been running just Friday’s screens, in the belief that once a week was enough. But the results were ragged. So I went to daily screens with the added filter of a Friday re-screen on the charts that qualified.
The next step is to take all the stocks that had signals on any day during the week, and run the buys through a re-screen for buy signals on Friday, and the sells through another screen for sell signals on Friday. That resulted in a buy side screen on the 85 charts that had had one or more buy signals over the prior 5 sessions. The final sell side screen was run on the 122 charts with prior daily sell signals.
Those final screens for Friday resulted in 21 charts with buy signals and 46 with sell signals. The buy setups looked like they might be candidates for dead cat bounces after mostly getting slaughtered last week. No thanks. I’ll leave them off this week. This is not about grabbing quick pops.
The sells had mostly been beaten to death. They could get worse, but they might also have vicious 2 day spike rallies from already deeply extended positions. No thanks to those, too. But there were two that weren’t so extended and looked to be early in downturns. I added those to the list as you can see on the table below (subscriber version only), and in the charts that follow.
Meanwhile, I added trailing stops to the 9 charts already on the list. These have daily price adjustments as shown, with Monday’s starting stop price, minus the reduction per day thereafter.
The table and charts of open and new picks are below (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.
Technical Trader subscribers click here to download the complete report.
Technical indicators support what the market averages did last week. That popping sound was no mirage. It was the sound of a bursting bubble.
The good news for bears is that the technical indicators rolled over, but only the shortest term indicators got “oversold.” Intermediate indicators are not yet near extremes. And if short term indicators go lower early in the week, that would increase the odds of a crash, right now.
Cycles – All cycles remain xxxx xx xxxx xxxx (subscriber version). Only short term cycles point to xx xxxx later in the week. That currently projects in a range of xxxx xxxx . The odds of getting deep into that projected range look good.
Initial projections for the 6 month and 10-12 month cycles point to xxxx-xxxx (subscriber version), but the 6 month cycle low would ideally come between late February and xxxx xxxx . That’s plenty of time for that projection to shift lower. The 13 week cycle projection is xxxx. I think that is a good benchmark to watch for at this time.
Third Rail Chart- The first top is complete. xxxx xxxx is now key support. If they try to bounce on Monday, I expect resistance at 4450 stop any rally attempt. On the other hand, a crash is possible, if not likely if they take out xxxx xx xxxx xxxx (subscriber version). The conventional measured move target would be xxxx.
Long Term Weekly- Long term cycle momentum has broken a 2 year uptrend, signaling that the bull market xxxx xxxx .. When long term momentum and 3-4 year cycle momentum break their midyear 2021 lows, and the SPX ends a week below xxxx, then I’d call it a bear market. That would imply that prices are headed a lot lower for a lot longer. We’re not there yet, but we will be quickly if this keeps up like last week.
I have revisited long term cycle projections. Last week’s move suggests more frequent updates than the usual quarterly schedule will be needed on these. So far, there’s no material change in the projections, but I now believe that they are wrong and will not be met. I explain why in the report. I’m giving these no weight, and instead focusing on the price patterns, support breaks, and cycle indicators to show us the way.
Monthly Chart – The market is now below two long term trendlines. It would need to get back above xxxx by the end of January to reverse the bearish implications of this break. If that does not happen, the target in February would be xxxx xxxx. Ouch.
Cycle screening measures broke down after behaving in a way that suggested changing market dynamics in the previous week. The numbers are not yet extreme on the downside. They could get a lot worse before a significant bottom is in.
Technical Trader subscribers click here to download the complete report.
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.
Subscribers, click here to download the report.
Gold There are signs of cycles getting in gear to the upside, but no sign of thrust yet. Initial upside projections point to xxxx – xxxx (in subscriber version). Gold needs to clear xxxx to break the 13 week cycle MA and signal at least a little more upside in the short run.
On the very long term monthly chart, gold remains above a critical trend area around 1790. If it ends January below that, it’s in danger of falling into the xxxx xxxxx range (in subscriber version).
HUI – HUI remains locked in a range with no sign of an imminent breakout. A 13 week cycle up phase is flat and is ideally due to last xxxx xx xxxxx (in subscriber version). There’s no sign that longer cycles will xxxx xx xxxxx (in subscriber version). A 10-12 month cycle high is ideally due between xxxx xx xxxxx. If there’s no upside breakout before that, the rest of the year would set up xxxx xx xxxxx. On the long term weekly chart HUI has broken its 6 month cycle MA. Here’s what that implies for the outlook (in subscriber version)..
On the ultra long term monthly chart, HUI remains entrenched in a 16 month downtrend. Ultra long term momentum remains precariously neutral. With HUI ending December below xxxx (in subscriber version) the target is xxxx–xxxx in the first quarter of 2022. It faces major resistance in the xxxx range. It would need to break that to end the downtrend.
Chart Picks – The numbers surged over the past week but 6 month cycles remained deeply negative. That needs to show much more improvement for us to have confidence that there will be an extended rally. But this is a start. So I’m continuing to nibble.
I’ve tweaked the method to use screens from each day of the past week instead of just the last day of the weekly period. Charts that show up more than once, with buy signals yesterday are preferred. From that list I pick those with structures I like. This week I’m adding one to the list as shown below. I’m staying with the existing picks, and allowing breathing room with no, or very loose stops. Currently open picks show an average gain of 9.4% on an average holding period of 3 weeks.
Picks closed out over in November-December 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.
