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Bulls and Bears Both Suffering Severe Whiplash 5/17/21

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Well I just filed my tax return. Phew!

Meanwhile, the market is taking a breather. 5 day cycle indicators are headed down but the index is only going sideways. That's typically bullish. There's still an unmet 5 day cycle projection of 4200 and in the last hour the ES fucutures just bounced off trend support at 4157.

$78 billion in Treasury coupons settled today, but the Treasury already funded all of it with massive T-bill paydowns last week, and this is Fed MBS settlement week, with another slice of $122 billion settling today and the rest Thursday. The bulk of it is done. The market is absolutely awash in cash.  

https://liquiditytrader.com/index.php/2021/05/06/heres-why-we-should-sell-in-june-before-the-swoon/

tvc_95985f9fae1cc2ad427cc0c731267162.png

 

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I have always been reluctant to post midweek updates. Last week’s market action was a perfect example why. We had the beginning of a crash. I responded, and immediately reversed. We know why it reversed. All that cash that the Fed and Treasury poured into the market last week worked its magic. I assuredly do not know what caused it to start on a crash path however. That history is yet to be written.

Meanwhile, I will try to cut through noise and focus on the message of the technical indicators. We had a confusing little detour last week. I need to stay focused on the direction, even if a solar flare knocks out the GPS from time to time.

Cycles now appear to be opposed, with no coherent structure to support a breakout. The 10-12 month and 6 month cycles appear to be topping out. The 13 week cycle is still in a flat down phase. The short term cycles have probably bottomed.

Cycle projections for the 10-12 month cycle now point to xxxx (subscribers only), suggesting xxxx. There are no projections for shorter cycles.

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Cycle time projections point to a final top to occur in xxxx (subscribers only).

The third rail chart did not break its intermediate uptrend in the selloff. Resistance is at xxxx (subscribers only) subscribers on Monday, rising to xxxx (subscribers only) on Friday. If broken, the initial target zone would be xxxx (subscribers only).

On the weekly chart, the market recovered to close above a long term trendline now at xxxx. The uptrend remains intact.

On the monthly chart, May began with trend support at xxxx, and resistance at roughly xxxx (subscribers). The long term cycle momentum indicator is xxxx (subscribers).

Cycle screening measures weakened. The short term pattern suggests more upside. The intermediate term outlook is xxxx (subscribers).

The chart pick list had an average gain of 2.1% with an average holding period of 8 calendar days last week.

For the week as a whole, there were 224 buy signals and 125 sells, a spread of +99. That compares with 168 buys and 96 sells, a spread of +72, the week before. It was as if the vicious mid-week selloff never happened. But it happened to the chart pick list. 10 picks were stopped out, including both directions  I added 8 buys to the list this week, bringing it to 14 longs, no shorts.  That report is published here. (subscribers)

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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. 

 

2/16/21 Every week I run technical stock screens covering all NYSE and NASD stocks trading above $6 and averaging more than 1 million shares a day. This typically results in between 15 and 50 charts to review visually. I’m looking for low risk, high reward price structures, which I’m not smart enough to program into the screening process. But it’s ok. I like to look at charts. 

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I was worried that the list was going to have a very bad week, but in the end, it wasn’t even a flesh wound. In fact, it was just a scratch. We definitely took some hits as the extreme volatility caused stops to get triggered in both directions. List performance slipped to an average gain of +2.1%, down from +2.6% the week before, on an average holding period of 8 days, down from 9 days the week before. This assumes cash trades, no margin, no options.

10 picks hit stop triggers, leaving 4 on the list. All are longs, and all look well positioned for additional gains. I have adjusted stops on all of them.

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I do. I see the QQQ on a dead opossum bounce to the 50 day average failing and confounding bulls everywhere that have decided a correction is close but not yet, clinging to the last gasp of a worn out market.

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32 minutes ago, DrStool said:

Uh oh. Do you see what I see? 30 Minute bars

tvc_4d7c778032ebfd12c142bb5cdabc7d5d.png

Is it a pterodactyl? 

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2 minutes ago, Jimi said:

Is it a pterodactyl? 

or spaghettified barfing brontosaurus. 

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Pterodactyl is a possibility. I hadn't recognized it, but now that you mention it, I can see it. 

Pterodactyls flew, right? 

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We have a mid month Treasury coupon settlement today. The dealers will be preoccupied with putting that to bed. That happens at 2 PM ET. After that, they'll turn their attention to all the excess cash that is sloshing around.

I'm working on a QE update right now. Coming soon! 

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6 minutes ago, Jimi said:

Is it a pterodactyl? 

After so many years of this, I have been conditioned to think it is more like a pump jack. Might dip for a bit, but the damn thing continues to pop back up. 

pumpjack.jpg

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Now that I think about it some more, that video might be particularly apt. That big old hand is the Fed, and the red stuff in the tube is all the liquidity sloshing around. 

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The balance between QE and Treasury supply has gotten even more bullish and will remain so until xxxx (subscribers only). This should provide a boost for stocks. It should keep the Treasury selloff at bay until xxxx (subscribers only).

I have previously made the case for the Treasury to run out of money in xxxx (subscribers). If that estimate is correct, the outlook will turn negative in xxxx (subscribers). But for now, bullish liquidity forces remain in place, outside of the usual month end supply pressure.

As delayed tax receipts come in, in May, the Treasury will have even more cash for paydowns. The rest of May into mid June could be very bullish as a result. A selling opportunity for both stocks and bonds will arise as the Treasury approaches the point where its cash hoard is used up.

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The work of putting $78 billion in new Treasury coupons to bed is all but done. The focus will soon turn to the rest of the market, and there's a surfeit of extra cash to do it with more on the way. A lot more.  

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