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Lee Adler’s

Lee Adler’s

August Daily Treasury Statement Data – Danger Signs Persist

Lee Adler

The rest of the investment universe has caught up with us and is now deeply concerned about the bond market. Well known pundits have expounded on the problem, attributing it to all sorts of tangential and meaningless issues. Meanwhile the problem is exactly as we foresaw over the past couple of years, supply. Simply by watching the trends of the data that matters, I forecasted that the inflection point would come in July. That was a few weeks early, but close enough.

We are now in the belly of the beast. Get used to it. Continue to avoid the bond market in any form. And be wary of the potential for contagion.

This report updates the current actual real time government revenues and outlays through the end of August. A marginal improvement in the data changes nothing. The danger remains extreme.

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S&P 500 at a Critical Crossroads as Intermediate Signals Flash Warnings

Lee Adler

The market is holding just under resistance, with the S&P 500 stalling at a multiple trend convergence zone and support suggested just below. Longer-cycle indicators show signs of a top, while the 6-month cycle remains uncertain. Short-term cycles are in a down phase, though a 4-week bounce is expected to begin from a low due xxxx xxxx xxxx. The Dow, VIX, and cycle screening data all have cautionary setups, although the market’s long-term uptrend channel remains intact.

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Primary Dealers’ Plight Poses Big Problem for Bessent Buyback Ploy

Lee Adler

The Treasury will at least double its debt buyback program, but the details that matter most, including how large the increase will actually be and how it will be financed are yet to come. The bigger question is whether it can meaningfully offset near-record coupon issuance. Will it have the intended effect, or adverse unintended consequences. Dealer positioning in this regard is of Primary importance. This week’s Primary Dealer Positions and Financing update looks at where dealer balance sheets, repo financing, and futures hedging stand as the pressure from the tsunami of issuance continues to build unabated.

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Market Faces Make or Break Inflection Points

Lee Adler

The market is holding just under resistance, with the S&P 500 stalling at a multiple trend convergence zone and support suggested just below. Longer-cycle indicators show signs of a top, while the 6-month cycle remains uncertain. Short-term cycles are in a down phase, though a 4-week bounce is expected to begin from a low due xxxx xxxx xxxx. The Dow, VIX, and cycle screening data all have cautionary setups, although the market’s long-term uptrend channel remains intact.

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Macroliquidity™ – Buybacks- A Really Futile and Stupid Gesture

Lee Adler

Treasury supply has surged to $400 billion in new debt in a single month, and the Treasury has announced it will AT LEAST DOUBLE its coupon buyback operations as Treasury yields threaten to break out while bond prices would concurrently crash. The buyback scheme is a panic signal that fails to account for the fact that it xxxxxxxxx xxxxxxxxxx xxxxxxxx xxxxxxxxx xxxxxxxxxx beyond the insane xxxxxx xxxxxxxx xxxxxxxxxx must already bear.  

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Gold Takes Constructive Breather, Intermediate Outlook Stays Bullis

Lee Adler

Cycle and momentum indicators are in bullish configurations. The problem is that in bear markets such patterns typically fail. That requires patience and proof before action. Price patterns need to resolve upwards from bases, which in this case would be a daily close above xxxx. Conversely, a breakdown would target support around xxxx. Weeks of sideways churning are more likely to be a consolidation leading to a xxxxxxxxx.  

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Rally Weakens, But Signs of Higher Highs Hold

Lee Adler

The rally slowed last week after the market punched through major resistance to make new highs. The structure of the rally is intact, despite the slowing, but under the surface there are signs from the cycle screens that the advance is deteriorating. Meanwhile cycle projections still point higher across the board. They are consummations devoutly to be wished by some, and dreaded by others. For us, they are maximum potential indications. Indicator signals, and breaks of the key support or resistance will be the signs to tell us whether to stay in, bail out, or go short.

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Their Expense is Your Income

Lee Adler

Ten days ago, I was stunned when the stock market did exactly the opposite of what I had forecast for July and August. Based on monstrous Treasury supply pressure that we knew was coming, I had expected a gathering crunch, not just for Treasuries, but also for contagion into other assets.

Not only did that not happen, stocks broke out, and even gold and precious metals started to recover. The Macroliquidity™ model, which I have tweaked and adjusted through the 26 years I have been publishing these reports, failed to foreshadow the stock market breakout. It correctly identified that the bond market would increasingly tighten. That part has played out, although so far somewhat more mildly than I thought. But the stock market breakout to new highs was a shock to the model.

I agonized over it. What did I miss! And then I had a flash of recognition.

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The Buy Signals Weren’t Fake

Lee Adler

Cycle and momentum indicators are in bullish configurations. The problem is that in bear markets such patterns typically fail. That requires patience and proof before action. Price patterns need to resolve upwards from bases, which in this case would be a daily close above xxxx. Conversely, a breakdown would target support around xxxx. Weeks of sideways churning are more likely to be a consolidation leading to a xxxxxxxxx.  

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