Professor’s Comments May 17, 2022
Posted by OMS at May 17th, 2022
The markets opened lower yesterday, then did a stair step rally into the 1 pm period before falling off into the close. The Dow finished with a gain of 27 points, closing at 32,223. It reached an intraday high of 32,514, which was my lower target for the retracement wave, before falling off. The NASDAQ finished with a loss of 142 points; the RUT was down 9 points, the S&P lost 16 points. The loss in the NASDAQ and Russell 2k was not a surprise as they are a lot weaker than the Dow at this point. I’ll talk more about this later.
Yesterday’s early action on the Dow was a continuation of the sideways triangle that started last Friday afternoon. Once the triangle was complete, about 1pm yesterday, prices rallied out of the triangle. From a wave count perspective, the triangle was either wave 4 of the rally from the 12 May low or was part of wave ‘c’ up within retracement wave 2 up. Doesn’t really matter. Either way, the Dow should make one more pop, either back to the 32,500 level or maybe even to 32,600-32,700 before wave 2 up is complete. After that wave 3 of Wave 3 down should take the Dow down to the 30,500 level or below. My target for Wave 3 down is still anywhere between 28,500 and 30,500.
There were no changes to the Market Timing Indicators or the Deans List and MWL after yesterday’s action. They are still negative.
Because of this, I will continue to look for opportunities to short the market on rallies from higher levels. That’s what I started doing yesterday…. when the Dow reached its high of the day. I started shorting the markets with TZA. It was another cigar day …well almost ($1,989), for me.
I had a Consulting Session with Cheryl M. after the market closed yesterday during which she asked an interesting question. She wondered why I wasn’t trading energy stocks now, in addition to the inverse index ETFs. It was a no brainer answer, but I thought about her question last night and I thought I would share it with you this morning, mostly because many of you could be wondering the same thing.
Do I have anything against energy at this point? No. Just like Cheryl, I can see that UCO, DIG, CVX, MRO, XOM and other energy stocks are on the Dean’s List. But as I pointed out to Cheryl yesterday, most of the energy stocks only have a RS ranking of 1. On the other hand, inverse index like QID has an RS ranking of 7. TWM, an inverse ETF for the Russell 2 K has a RS ranking of 6. That’s why I’m trading the inverse ETFs for the NASDAQ and Russell now. Taking it a step further, I’m actually trading SQQQ and TZA, the 3X leveraged ETFs for these indexes. I feel that my Arrows/Bias Indicators have harnessed the atom within these highly leveraged ETFs, to the point where I now feel comfortable trading them. I no longer feel afraid of the explosive power of these ETFs. I now use them every day in my trading. That’s what the Arrows/Bias Indicators do for me…..they harness the power.
If you want to see what I mean, just take a look at IWM, the tracking ETF I use to tell me what the RUT is doing. Yesterday, IWM opened at 177.45. It closed at 177.23. In other words, it didn’t do anything. NADA! But yet I was able to take $1,989 from the market just by trading the Russell. Hmmm? Unbelievable you say? No. That’s why I trade the 3X leveraged ETFs. So yesterday, when the IWM opened down, I waited. Why? Well because I went into yesterday’s session thinking the market was going to rally. Remember, I had a target for the Dow near 32,500. I didn’t have to wait too long.
A confirmed Green Arrow appeared at the 10.05 mark. The Bias was turning positive. Bam! I at once bought a full position on TNA, the positive 3X ETF for the Russell. The Red Arrow took me out of the trade at 11:15 for a 1-point profit. Nice! A $1,000 profit in just over 35 minutes. After that I had two more Green Arrow trades on TNA and one on TZA for small er profits to round out the day. Easy! And remember, this was a day when the Russell didn’t do anything!
So, what did I do? I simply used my 1-2-3 step process to perform the trades. There was no mystery about it. It was not complicated. I just followed the steps below:
1. Decide the Bias: Up or Down.
2. Take all confirmed Green Arrow trades in the direction of the Bias.
3. Exit on a Red Arrow.
That’s it. No complicated thinking. No analysis. No nothing! I just followed the simple three step process. Still don’t have the indicators? Get them. My Consulting Special has expired. Now the Scalp Trading Class is available for $399 on the web site. You need the ST Class and the Bias Class for $79. If you buy both, I’ll give you a free Consulting Session, so you feel comfortable using the new indicators. You will also be invited to attend all future Update Classes. Remember what I always say….
There are those who make things happen. There are those who watch things happen. And then there are those who wonder what happen. Things are happening NOW. We’re in a Bear Market! Don’t watch or wonder. Make things happen…now! Use the Bear Market to make money. Don’t just sit there and watch your hard earned money, you retirement savings, or the money for your child’s education evaporate. Protect it. It I really as simple as 1-2-3.
BTW, my new 1-2-3 step process also has another huge advantage. It actually tells you how many shares to trade when you get a Green Arrow. This allows you to reduce risk when you enter the trade and then tells you when you can add shares to your initial position. Go ahead…tell me what other trading system does this for you? Mine does. That’s why I want all my students to have the Arrows/Bias Indicators.
Today, if the market pops early, I’ll be looking for shorts (inverse ETFs) anywhere above the 32,500 level on the Dow. Best Bets are still SQQQ, TZA and SDOW in that order. If I’m correct and wave 3 of Wave 3 down is about to start, I want to have something short on from levels anywhere near or above the 32,500 level.
The Sector Ratio stayed at 6-18 negative after Monday’s session. The top five strong sectors are Telecoms (10), Energy (2), Foods (2) Utilities (1) and Transportation (0). The top five weak sectors are Banks (-4), Retail (-4), Media (-4), Real Estate (-3) and Financial (-3).
I still don’t see any reason to be buying gold, Bonds or crypto.
That’s what I’m doing,
h
BTW, if you have a friend or co-worker who might be interested in trading or protecting themselves during this Bear Market, please tell them about our website and the new Arrows/Bias Indicators. If they send an email to Dave, he will give them a free trial subscription and I’ll make sure they know how to use the new indicators. Thank you for your support on this.
Market Signals for
05-17-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 09 May 2022 |
NASDAQ | NEG | 03 May 2022 |
GOLD | NEG | 29 Apr 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEG | 11 Apr 2022 |
CRUDE OIL | POS | 12 May 2022 |
CRYPTO | NEG | 21 Apr 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