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Meat Grinder 10/22/20

This is a syndicated repost courtesy of Stool Pigeons Wire at To view original, click here. Reposted with permission.

5:00 AM ET

This speaks for itself.


Slight breakdown overnight, and then immediately back to the low side of the range. Yesterday’s rhythm was like atrial fibrillation. Next comes a stroke.

My takeaway is that there’s dark matter or dark energy rendering the dealers unable to maintain orderly markets.

My guess is that if they can’t recover more than half this last down move, the next target would be the 3390s, and if that doesn’t hold, 3360s.

If they clear 3430, then they probably go back to 3450-55.

Very difficult to trade.

8:30 AM ET

Here approaching 8:30 AM in New York, the ES fucutures have recovered to the critical, broken uptrend line.   But having hit that, they’ve fallen back. A rollover here would give the bears some prospects of a smash, but a continuation of the rebound would put the bulls back on top.


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What Selloff? Here We Go Again

Short term cycles have entered down phases. But this looks like a consolidation, not a top.Here’s why and what to do about it.

The chart pick screens are spitting out a ton of interesting patterns. I’m adding 9 picks this week, 7 long and 2 short. 4 picks were stopped out last week and one which was a symbol error was also closed. That will leave 18 open picks, including 14 longs, and 4 shorts.

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Past performance doesn’t indicate future results. There’s always risk of loss. Chart picks are for informational purposes only. These reports are geared toward professional investors and experienced individual traders. Do your own due diligence before trading.

Intervention Attention

The market has the benefit of $115 billion in Fed mid-month QE MBS purchase settlements this week. That would normally be very bullish.

It’s notable that the market has not done more with it. And why not? Still massive Treasury supply along with surging corporate debt and equity issuance is absorbing most QE. There’s not enough left to power an endless bull trend in stocks.

That has been our thesis for the past month or few, and the market seems to be bearing that out. Stocks are stuck in a broad trading range and bonds are weakening.

$83 billion of the MBS settled last Thursday. That helped put $82 billion in Treasury coupon issuance to bed the next day. Whodathunk that the Fed would pump into dealer accounts almost the exact amount that the market needed to absorb the Treasury issuance!

Amazing how that works.

This week’s setup is reserved for subscribers. Risk free trial link below.

Normally this much QE every month would be wildly bullish. But the supply of financial assets has risen to meet the demand driven by QE. We’ve reached stasis – equilibrium, so to speak.

But it is fragile. Bonds are teetering on the brink of an abyss. If they go over, and bond prices fall (yields rise), the system would collapse without another round of massive Fed intervention.

So we need to pay attention. Do bonds go over the cliff? How long would it take the Fed to react if they do? And will it be enough, yet again?

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Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, 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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