Professor’s Comments April 20, 2021
Posted by OMS at April 21st, 2021
In the WSR I discussed how the indexes appeared to be in the final stage of completing five wave patterns that started on 29 January. I also mentioned that while the pattern on the Dow had completed the required number of sub-waves, the pattern on the S&P and NASDAQ appeared to need a small pullback followed by one more final rally to a top. So, yesterday’s decline of 123 points on the Dow, 138 points on the NASDAQ and 22 points on the S&P was right on track for the pattern projections of the sub waves. Now let’s see if the indexes, especially the S&P and NASDAQ, make their final rally.
Last Friday, the Dow made a high of 34,256 which was slightly above the 33,978 level I was using as my projected target. Yesterday’s decline from that high was accomplished in five minor sub-waves, so it’s possible that the top for the Dow is already in. The sub-wave pattern on the S&P and NASDAQ is less clear. So far both indexes have only developed three declining waves. However, we must remember that the final waves of an Ending Diagonal do not always develop picture perfect patterns. They can and do often truncate. So, we need to be on full alert.
The level to watch on the NASDAQ-100 (QQQ) is yesterday’s low of 337.21. Beyond this is last Wednesday’s low of 335.67. If these lows hold, it’s likely that yesterday’s pullback was part of a sub-wave 4 retracement. It would suggest the next rally will take the NDX Composite to the 14,400+ level during final wave 5 up later this week. Yesterday, the COMP closed at 13,914.
In late March, I mentioned that that there was a major Fibonacci Cluster window occurring where major trend changes can occur. That window passed and we won’t get another major window until late August. However, there is a much smaller window scheduled for later this week, with the center scheduled for 25 April. The +/- on this window is about 2-3 days on either side of the window.
The Market Timing Indicators on the Dow and NASDAQ remain Positive. The Scalp Trading Indicators on the DIA and NASDAQ-100 (QQQ) remain Positive. So, even though the patterns appear complete or nearly so, the indicators remain Positive. Students should pay close attention to the ST indicators now, especially as the market enters the Fibonacci Window scheduled for later this week.
Yesterday’s trading action caused two of the breadth indicators on The Tide to turn negative. The indicator I’m most concerned about is the A-D Oscillator, which has been positive since 1 April. A negative A-D Oscillator means that more stocks on the NYSE are now moving lower than moving higher. The Hi-Lo indicator also turned negative yesterday. So now 2 of the 4 indicators that make up The Tide are negative.
The Dean’s List has turned Neutral. While the positive ETFs for the Dow, S&P, and NASDAQ remain on the List, the appearance of RWM, the inverse ETF for the small cap Russel 2K, is causing the Dean to be cautious (neutral).
The Sector Ratio remained at 24-0 Positive after Monday’s session. The top 5 strong sectors were Service, Autos, Banks, Semiconductors and Material. There were no weak sectors. Continue to look for changes to the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks: Yesterday’s pullback impacted several of the Top Stocks on Friday’s MWL. Top Stock, NVDA, dropped 22 points to 614.47. #2 HD dropped 1.23 points. #3, ORCL fell 0.20. All three stocks have seen strong rallies recently, so it’s not surprising to see them pullback. Other stocks high on the List, like WSM have already moved out of the trend mode, so with RS numbers on the decline, even for the top stocks, students should understand that even the top stocks are no longer as strong as the were a few weeks back. TSLA and AAPL remain on the MWL, but only have RS rankings of 4 and 3. The pattern on both stocks suggests the recent wave 2 rally is close to being over. A few weeks ago, I mentioned that TSLA could rally back to the 740+ level during its wave 2 retracement. Last Thursday it hit a high of 781. The ST Indicators on TSLA and AAPL remain positive. However, the ST volume indicator is moving lower, and another day or two of decline could turn it negative. If the ST indicators on these two key stocks turns negative (as I expect), students should exercise EXTREME caution while trading NASDAQ stocks.
Gold: GLD fell 0.46 cents to 165.89 yesterday. As I mentioned in the WSR, the recent rally in gold has retraced 0.382 percent of the decline since 7 August 2020 high of 2,089. So, prices should continue to decline this week. The thing to watch with gold is the depth of the pullback. If gold (the metal) moves lower than 1,693, it means that gold will likely fall to the 1,560 level. Yesterday gold closed at 1,770.
Bonds: While the ST indicators on Bonds are currently Positive, the recent rally appears to be associated with wave 4 action. Once wave 4 completes, wave 5 down should drop Bonds below their 18 March low. I’m still avoiding Bonds for now.
That’s what I’m doing.
h
Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
Market Signals for
04-21-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 07 Apr 2021 |
NASDAQ | POS | 01 Apr 2021 |
GOLD | POS | 14 Apr 2021 |
U.S. DOLLAR | NEG | 12 Apr 2021 |
BONDS | POS | 20 Apr 2021 |
CRUDE OIL | POS | 14 Apr 2021 |
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