A few Comments before the open Fri, Jun 26th, 2020
Posted by professor at June 26th, 2020
Yesterday’s late 300 point rally appeared to be an attempt to retrace some of Wednesday’s 700 point loss. The rally reached an intraday high of 25,769, so it was about 200+ points shy of Tuesday’s ‘Island Reversal’ gap at the 25,993 level. During a major decline, gaps are natural targets for a retracement. The Japanese call this ‘closing the window’. But because this ‘window’ was part of an ‘Island Reversal’, I don’t believe it will be closed. It’s still possible that the Dow could stage a small rally from yesterday’s close, but the odds are high that the rally will not exceed 26,000.
Yesterday’s rally only changed the Sector Ratio slightly. As we go into today’s session, the Ratio is 14-10 positive with Energy, Cap Goods, Material, Household Products, and Autos at the top of the Strong List. The Weak List was led by Utilities, Healthcare, PharmaBio, Telecoms, and Leisure. Looking at the Weak List, with Healthcare and PharmaBio being highlighted, I think you should pay attention to stocks and ETFs in this area, especially if you currently own them. Two days ago, Medtronic was highlighted by my trend algorithm as a short after dropping 4.46 points. The thing I found disturbing was that during yesterday’s rally, the stock did not participate. This tells me that healthcare stocks, like MDT, could be in for some real trouble once Wave 3 down gets rolling. Like I said, be careful if you own them.
After yesterday’s rally, the market is overbought and set up for some type of decline. The thing I’ll be watching is to see if the decline begins to look impulsive. An impulsive move to the downside now would increase the odds that Wave 3 down is underway.
h
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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