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The Monster In the Room Is Not Make Believe

Lee Adler

Back in September I wrote to you about why I was giving up on the banking system indicators. I’ve reposted that rant in an addendum to this report. Essentially it boils down to this. Every time there’s a critical problem in the banking system due to banker malfeasance, the Fed steps in to paper it over and reward the criminals.

That’s why we focus on the Fed more than anything else.

The banking indicators were useful once upon a time. The Fed has rendered them irrelevant. But I promised to keep an eye on them, so herein is a review. It makes me sick and should make you sick too, but we’re not here to fight the Fed. We’re here to make money by understanding and playing according to the Fed’s rules. The Fed’s first order of business is always to protect its banker clients. And it does that very well indeed.

Once again trouble is brewing, and the Fed will need to come up big again to prevent it from blowing up the banking sector. If history is any guide, the Fed will be there. It may be to the detriment of those who don’t own capital, but they don’t matter. The Fed doesn’t care about them, and refuses to take responsibility for the intractable problems that has caused our society.

Consequently, being a bear for the right reasons does not pay. To make money in these markets you must play on the side of the criminals that run the show, the Fed and its client banks.

These banking indicators help us to understand just what they’re doing, and where the landmines might be that one day could blow this whole game to smithereens.

This brings us to a recurring theme. The first sign of potential systemic blowup would be an upside breakout in the 10 year Treasury yield. It would mean that the Fed had lost control, and that the system was careening toward an abyss from which there might be no Fed response big enough to escape.

We’ll take a look at that, but also some other problems in the banking system balance sheet that the banks and the Fed are pretending don’t exist. Well, they exist and they’re bubbling up just below the surface, to burst forth one of these days in the not too distant future.

The facts, figures, outlook, and strategy are reserved for subscribers. Click here to download the report.

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Gold Gets Ready To Make Its Move

Lee Adler

A big cycle low appears to be forming. Here’s what needs to happen for the up phase to play well.

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Explosive Rally Ahead, or Plotz

Lee Adler

The current setup has the potential for an explosive rally. It doesn’t guarantee it, but we want to be prepared to take advantage if it happens. By the same token, we want to be alert for the signs that this could go south on us.

The charts, tables and discussion in this report show what to look for, with some ideas on how to trade it.

5 short term chart picks were closed out last week. 4 hit trailing or fixed stops. One was a proactive decision to close out. That left 10 open picks at the end of the holiday shortened week.

Including both the closed and open picks, the theoretical average gain (100% cash, no margin, no options) was +3.2% with an average holding period of 11 calendar days. That’s down from +4.3% and 11 days, the week before. The average gain has shrunken from 11% with an 18 day average holding time in the last 4 weeks as the market’s trading range has tightened.

This will leave us with 16 open picks. 3 will be shorts and 13 will be longs. That remains a strongly bullish bias. I have some thoughts in this report on how to tweak setting stops to improve list performance.

Technical Trader subscribers click here to download the report.

Not a subscriber? Follow Lee’s weekly swing trade chart picks with Lee Adler’s Technical Trader, risk free for 90 days!  

These reports are for informational purposes, aimed at a broad 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 Mining Picks Are Swinging

Lee Adler

As gold works on completing an important intermediate low our last round of mining picks are swinging higher. I have added stops to the newer picks and adjusted stops on existing picks to protect profits but give them room to run.

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Look Out Bears, We May Be Headed for Excess QE

Lee Adler

The Fed continues to fund roughly 85% of new Treasury issuance. It affirmed at last week’s FOMC meeting that it won’t cut QE for the foreseeable future, and it will add, if needed. That means that if the Treasury needs to borrow more, the Fed will add more QE.

But it’s now apparent that the Treasury won’t borrow more for the foreseeable future. The new stimulus bill that we now know is about to pass will cost $900 billion. But the Treasury has $1.6 trillion in cash on hand.

This has huge implications for the stock and bond markets.

The facts, figures, outlook, and strategy are reserved for subscribers. Click here to download the report.

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Charts Show Market Set Up For Santa Claus Rally and Rockin’ New Year

Lee Adler

Oh boy, bears are not going to like this setup. It’s bad. Really bad.

The 10-12 month cycle continues to trend upward against its supposed cyclical down phase. What happens when the next up phase starts?

Short Term Chart Picks – Trailing and fixed stops took out 2 shorts and one long last week. That left 7 open picks on Friday. I’m closing out one of them as of Monday’s opening price.

Including both the closed and open picks, the theoretical average gain (100% cash, no margin, no options) was +4.3% with an average holding period of 11 calendar days. This week I have 6 new picks, 5 of which are buys. Only one is a short. This will leave the list at an extremely lopsided 11 longs and one short.

Scary.

Technical Trader subscribers click here to download the report.

Not a subscriber? Follow Lee’s weekly swing trade chart picks with Lee Adler’s Technical Trader, risk free for 90 days!  

These reports are for informational purposes, aimed at a broad 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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Fed Balance Sheet Tells Bears To Float Like Butterflies, Sting Like Bees

Lee Adler

The Fed’s policy remains stable at about $170 billion per month in QE, give or take a few billion depending on the level of MBS replacements. The balance sheet is growing on trend.  The stock market is tracking with it, as usual.

This will lead to a huge problem when the economy begins to react to enlarged stimulus.

This report discusses how to position trading strategy to take advantage.

The facts, figures, outlook, and strategy are reserved for subscribers. Click here to download the report.

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5 New Mining Picks

Lee Adler

As gold’s pattern looks more promising, I’ve added 5 new picks to the chart pick list of the miners.

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The Search for The Primary Dealer Holy Grail

Lee Adler

The Fed publishes a huge pile of data on the dealers’ holdings, transactions, and financing each week. It’s organized in a way that’s completely useless for our purposes. It’s granular to the nth degree, not aggregated as we need it to be.

Over the past couple of weeks I’ve thought about how to aggregate the data in a way that would make sense, and perhaps tell us something.

I managed to make some sense of it. It’s not the holy grail that I was hoping for, but it’s interesting. And again, it shows just how insanely leveraged the system is. The Fed simply can’t allow a selloff in the bond market. It would be catastrophic.

Here’s the chart that shows why. There’s a lot we can learn from it about just how much danger we face.

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Try Try Again, Extended Market Hits Long Term Resistance Trend

Lee Adler

The futures are attacking resistance here in the wee hours Monday morning. This is the second attempt since the opening in Asia on Sunday night. This is a critical level and what happens here will set the tone for the swing trade outlook, and the longer term. This report tells you what to look for today and this week.

Technical Trader subscribers click here to download the report.

9 of the 14 swing trade chart picks hit their trailing stops during the week. That was intentional as I tightened stops to harvest profits. There were 7 profits and two losses. The profits ranged from 3% to 30.8% and averaged +17.3%. The two losses averaged -3.5%.

Including those and the remaining open picks, the theoretical average gain (100% cash, no margin, no options) was 11.3% with an average holding period of 3 weeks, i.e. 21 calendar days. The average gain the week before was 10.3% with an average holding period of 18 calendar days. Two weeks before it was +4.8% and 11 days.

This week I’m again using trend analysis to adjust trailing stops and fixed stops to proactively take out selections where I think the move is probably done, or not going the way I expected.

Looking at the output of our stock screens of 600 large cap stocks, I’ve come up with six picks for this week (table below). I will track these assuming that the buys open above their stop prices, and the shorts open below. If the stops are violated at the open, it would suggest that the trend probably isn’t going where I think. I’ll wait for the next streetcar.

There are six new picks, half long, half short. That’s a big change from the past few months when shorts were few and far between.

I will assume starting prices for tracking purposes based on the notes in the table below (table for subscribers only). I’m hoping for better entry prices than simply arbitrarily picking the opening price. This is based on the pattern I see in the first couple hours of European trading. A lot can change between now and the New York open. We’ll see if it’s worth the extra effort. Probably not. 😄

If all six are opened, that would leave us with 11 open picks. 3 would be shorts and 8 longs. That’s still a heavily bullish bias, but less so than for the past few months.

I noted last week that the lopsided bullishness was a likely sign of end stage exuberance. This slight tilt supports that, but we must not get locked into any conception of what the market “should” do. I will follow the indicators, wherever they point.

Technical Trader subscribers click here to download the report.

Not a subscriber? Follow Lee’s weekly swing trade chart picks with Lee Adler’s Technical Trader, risk free for 90 days!  

These reports are for informational purposes, aimed at a broad 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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