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Turnabout is Foul Play – Professional Edition

In a stunning turn of events the market took a trend breakout and turned it into a fakeout. Most shorts probably covered when stops were violated late last week and Monday, leaving a dearth of demand in a range made bare of bids by repeated crossings over the past 3 months. We’ve seen this pattern of enormous moves within a trading range time and again, simply because the lack of cash means that the market has no depth of bids. Meanwhile there are plenty of sellers at successive declining peaks within the range.

It remains to be seen whether there are still buyers at the bottom of the range. Given the deluge of Treasury supply in the pipeline that will suck vast amounts of cash out of dealer trading accounts, I highly doubt that we will see meaningful support at the lows. This comes at a time when the 6 month cycle top is due with preliminary indications suggesting that the down phase of that cycle may have begun today. We should know for sure within a couple of days.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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