Professor’s Comments April 22, 2021
Posted by OMS at April 22nd, 2021
In Tuesday’s Comments, I talked about how the Dow needed a small pullback for wave 4 before making a final rally to put in the top. So, the pullback that started on Monday continued into Tuesday, dropping the Dow down to 33,687. The late rally that started on Tuesday afternoon appeared to be sub-wave 1 of a five-wave sequence that should carry the Dow to a new all-time high, possibly as high as the 34,700 level. Today’s 316-point rally was either a continuation of sub-wave 1 up or the start of sub-wave 3 up of the five-wave sequence. We should know early today. If the Dow starts a choppy 3 wave pullback, then it is likely yesterday’s rally was a continuation of sub-wave 1. If a pullback doesn’t occur, it’s likely part of sub-wave 3 up. The reason I am paying particular attention to these sub-waves now is because I believe the market is very close to forming a top, and this final set of sub-waves could be particularly important in helping students identify places where initial short or inverse positions can be established with a high probability of success.
BTW, my wave 5 targets for the S&P and NASDAQ Composite are near 4,200 and 14,400. Yesterday the S&P closed at 4,173 with the Comp closing at 13,950.
Remember, there are several important factors at work now. Investor and advisor sentiment remain at record highs. According to the Intelligent Investment Advisors Survey, the number of Bullish Advisors is now at 70.6 percent. Levels like this were only seen two times in the history of the market and both times were followed by significant declines.
Secondly, there is a minor Fibonacci window occurring this week. The market has a high probability of topping and changing direction within these windows.
And thirdly, there are still two valid Hindenburg Omens on the Board. Like I have discussed before, the presence of an Omen does not guarantee a crash. But history shows that a crash has NEVER occurred without the presence of an Omen.
Bottom Line: This is a time when we need to pay close attention to what the market is telling us. Right now, the Market Timing Indicators are still Positive. The Scalp Trading Indicators are still Positive. If they start to turn Neutral or Negative…pay attention.
The Dean’s List remains Neutral as RWM, the inverse ETF for the small cap Russel 2K, remains on the List. The Tide also remains Neutral as 3 of the 4 breadth indicators that make up The Tide remain positive. The Hi-Lo Indicator is the lone negative breadth indicator.
The Sector Ratio weakened slightly to 23-1 Positive after Wednesday’s session. The top 5 strong sectors were Service, Autos, Banks, Real Estate, and Material. The weak sector was Energy. 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. I just do not like what I am seeing now in the trading action of the Top Stocks. Too many of them are completing major topping patterns and look like they are starting to roll over. The time to invest in the Top Stock Rotation Strategy is when the market is coming out of a significant decline and the ST Volume indicator begins to turn positive. This is NOT the case now. Most of the Top Stocks have already had major run ups. If you want to get in now, you MUST realize that it is EXTREMELY late in the game. If you still want to trade after reading this, please consider day trades only using the ST indicators on the short-term bars.
Gold: GLD rose 1.65 to 168.13 yesterday. The pattern on the metal appears to be a corrective 3-3-5 flat or zig-zag. IF this is the case, gold (the metal) should rally above the 1,800 level, possibly as high as 1,815 before wave 5 of 5 completes. A close below 1,760 now would signal that retracement wave 5 is complete and the next wave down is underway. If I am correct about the current rally being a correction, once 1,800+ is hit, the metal should trade down to the 1,660 level on the next leg down. If it breaks below 1,660, it could go as low as 1,560. Gold closed at 1,794 yesterday.
Bonds: While the ST indicators on Bonds are currently Positive, the recent rally still appears to be associated with wave 4 action. Once wave 4 completes, wave 5 down should drop Bonds below their 18 March low. I am 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
04-22-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEU |
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