Professor’s Comments April 21, 2022
Posted by OMS at April 21st, 2022
Stocks were mixed yesterday. The Dow rose 249 points, while the NASDAQ-100 fell 211 points. The S&P was little changed, down only 2.76 points. The wide difference between the two major indexes was in two stocks. IBM, which was up 9.17 points, accounted for 24 percent of the Dow’s 0.71 percent rally. On the other hand, a whopping 35 percent decline in Netflix, caused the NASDAQ-100 to decline by 1.49 percent. Netflix finished at 226.19, down 122.42 points. Since last November’s high of 701, the stock is now down over 70 percent!
In Tuesday’s Comments, I discussed how the divergence I was seeing between the Dow and NASDAQ caused me to believe that the Wave 2 retracement rally in the Dow was not over. But I have to admit that while I thought the Dow would push higher, I did not think it would rally for almost 750 points in two days. That part was unexpected. But when I step back and look at a chart and see how the 2-day rally unfolded, I still see an a-b-c retracement rally off the 12 April low of 34,103, which I still believe is Wave 2 up. The last two days being sub-wave ‘c’ up of that rally.
If yesterday’s intraday rally to 35,315 did not complete Wave 2 up, I would expect it to carry to the 35,500 level. One other possibility is the gap that occurred on 14 January near the 35,850 level. So, with the Dow closing at 35,160 yesterday, it looks like the markets, which I expect to be led by the Dow, will have another few days of upside before the next decline I see coming begins.
BTW, I still believe the weakest index is the Russell 2K. The past two days of rally in the RUT also appeared to be sub-wave ‘c’ up of a classic a-b-c retracement pattern for Wave 2 up. For wave count purposes, I’m assuming that Wave 1 down completed on 11 April at the 1977 level. So once the current rally completes, the next decline should be Wave 3 down. A break below 1981 on the RUT (195.88 on IWM) will confirm that Wave 3 down is underway. Yesterday, IWM closed at 202.33.
The Market Timing Indicators for the Dow are positive. The same timing indicators for the NASDAQ are negative. The timing indicators for the S&P and Russell 2K are neutral.
The Scalp Trading Indicators for the Dow and RUT are positive. The indicators for the S&P are neutral, and negative on the NASDAQ.
The Sector Ratio strengthened to 10-147 negative after Wednesday’s session. The top five strong sectors were Energy (8), Food Drugs (4), Foods (4), Material (3), and Healthcare (3). The top five weak sectors were Semiconductors (-4), Banks (-3), Media (-3), Autos (-3), and Transportation (-2).
Doctor’s Trade: Tuesday’s first red bar took me out of TZA at the same price I entered the trade on the previous day’s Green Arrow. I’m on the side-lines for now awaiting the next Green Arrow.
BTW, students should note the that the bias on IWM, the tracking ETF I use to trade TZA or TNA, has been mostly positive for the past two days. So even though I’m using TZA in my Doctor’s trade, I’m also scalp trading either TZA or TNA on the 5s. I just wanted to point out how by using the bias on the 5s, as student could have taken several nice trades in TNA, the positive ETF for the RUT, while they were waiting for the index to complete Wave 2 up.
Once again, when you’re scalp trading, the first thing you want to do every day is check the bias on the 5-min bars. This will determine the direction of trades you make to start the day. So, if you were planning to trade the RUT on Tuesday, as soon as you saw the bias on IWM rising at the open, you put up TNA on your screen and saw a Green Arrow. Three bars later, the bias on TNA turned positive, so you could have entered the trade at 56.63. The bars stayed green until 10:55 when the first red bar appeared, so you exited the trade at 58.81 for a profit of over 2 points. Then with the bias staying mostly positive for the next two days, you could have taken several other Green Arrow trades on TNA while you waited for the next Green Arrow to appear on TZA.
That’s what I’m doing,
h
Again: Always check the bias before you start your trading day. ALWAYS!!! If you plan to scalp trade during the next few days, make sure you trade in the direction of the bias. If you’re trading the long side, even with an inverse ETF, make sure the bias is positive AND rising. A positive, rising bias is the key to successful Green Arrow trades.
Market Signals for
04-21-2022
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 18 Apr 2022 |
NASDAQ | NEG | 19 Apr 2022 |
GOLD | POS | 11 Apr 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEG | 11 Apr 2022 |
CRUDE OIL | POS | 14 Apr 2022 |
CRYPTO | POS | 19 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