Professor’s Comments March 31, 2022
Posted by OMS at March 31st, 2022
Stocks fell moderately yesterday on light volume. The Dow lost 66 points, closing at 35,228. The NASDAQ and S&P were down 177 and 29 points, respectively. Volume on the NYSE was only 89 percent of its 10-day average. There were 120 new highs and 24 new lows.
Yesterday’s decline appeared to be micro-wave 4 down of sub-wave 5 up within Wave 2 up. If this is the case, one more rally should completer the corrective rally that has been ongoing since the 24 February low. In Tuesday’s comments, I discussed how the Dow would likely need a sequence of up-down-up days to complete the bearish rising wedge for sub-wave 5 up. Yesterday’s decline appeared to be the down wave of that sequence. In this micro-wave 4 scenario, the Dow could rally to the 35,550 level before Wave 2 completes.
It’s also possible that Wave 2 up is complete. The reason I say this is because yesterday’s high of 35,361 was just a few points shy of Tuesday’s high of 35,372. In this scenario, Tuesday’s high was micro-wave 3 of the pattern and yesterday’s high was a truncated micro-wave 5.
In either scenario, the key level to watch is the 25 February high of 34,096. This level is the wave ‘a’ high of the large a-b-c pattern that has been developing since the 24 February low, which I’m labeling as Wave 1 down. If this level is broken, it would void the bullish micro-wave 4 scenario, and suggest that Wave 3 down is underway.
The pattern on the Russell 2K also appears complete. The decline since Tuesday’s high of 212.25 into yesterday’s low on IWM appeared to be impulsive. If yesterday’s decline was the start of Wave 3 down, Tuesday’s high should not be exceeded and prices should continue to work lower. I am labeling the 24 February low of 187.92 as Wave 1 down in the pattern. So, once Wave 3 down is underway, prices should easily drop below that low and come to rest near the 183 level. Once Wave 3 down is confirmed, it should lead to even lower prices in the months ahead with 150 possible.
Please take all necessary precautions to protect yourself.
After Wednesday’s action, the Dean’s List and The Tide remain positive.
The Market Timing Indicators for the Dow, S&P, and NASDAQ remain positive.
The Scalp Trading Indicators for the Dow, S&P, and NASDAQ are also positive.
The Sector Ratio stayed at 19-5 positive after Wednesday’s session. The top five strong sectors were Energy (5), Material (5), Retail (4), Insurance (4) and Food Drugs (2). The top five weak sectors were Household Products (-1), Consumer Products (-1), Autos (-0), Banks (0) and Telecoms (0).
I’m still on the side lines with my Doctor’s Trade in TZA. Yesterday’s last 4-hour bar turned Green, but it was not accompanied by a Green Arrow. So, all I’m doing now is waiting for a confirmed Green Arrow to appear and I’ll re-enter the trade. I should note that I am still concerned about two things with this trade. The first is the negative bias indicator. As a minimum, I would like to see the indicator to start heading up. The second is the lack of positive divergence from the same indicator….at least on the 4-hour bars. If you look closely at the more sensitive 1 and 2 hour bars, both charts are showing significant positive divergence. This is why I’m willing to take the trade on the 4-hour chart IF the bias starts to head up after a confirmed Green Arrow.
Cryptos: GBTC generated a Red Arrow after a red bar appeared in yesterday’s early trading. The Red Arrow has still not been confirmed. However, the first red bar was my signal to take some money off the table. So, after 7 points of profit since the Green Arrow Buy Signal appeared on 15 March, I’m on the side-lines.
BTW, students should note something on the GBTC trade to see why I’m still interested in trading TZA. The thing to note is that GBTC also had a negative bias indicator when the confirmed Green Arrow first appeared on 15 March. In this case there was also NO divergence showing on the 4-hour chart. However, the 2-hour chart helped clarify the picture as it clearly showed that downward momentum was losing steam and the ETF was getting ready to rise.
Gold: I’m still watching GLD as it continues to develop what appears to be the ‘blade” of its Hockey Stick pattern. It’s likely this ‘blade’ development will continue until retracement Wave 2 up in equities is complete.
That’s what I’m doing,
h
Market Signals for
03-31-2022
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 17 Mar 2022 |
NASDAQ | POS | 24 Mar 2022 |
GOLD | NEU | 28 Mar 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEG | 21 Mar 2022 |
CRUDE OIL | NEU | 22 Mar 2022 |
CRYPTO | POS | 22 Mar 2022 |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
Category: Professor's Comments