Professor’s Comments April 28, 2022
Posted by OMS at April 28th, 2022
Yesterday had a completely different feel to it as the market was correcting. I mention this because sometimes, you know right from the get-go that something is different about the way the market is behaving. You need to pay attention to the early signs. Instead of feeling like you’re in a falling elevator, as was the case on Thursday, Friday and Monday, yesterday was all about having patience and understand that something was different. During the previous three days, I woke up to see my trading account up several hundred or thousand dollars, even before the market opened. But yesterday was different. After the first 10 minutes, I was only up 14 dollars. After 20 minutes, I was ahead 25 dollars. Hmmm? It just wasn’t the same. What happened to the fun? Does this sound familiar?
I want you to take a moment this morning and think about what was happening yesterday. Think about how you felt. The reason I want you to do this is so you can capture that feeling and hold on to it. It’s important and trust me, you’re going to have many of these same feelings in the weeks/months ahead. That’s because the markets are currently in a Wave 3 decline. But yesterday was a pause in that decline. There will be a lot more days like last Thursday, Friday, and Monday in the weeks ahead, than days like yesterday. So, take a moment or two this morning and think about how you felt during the day…don’t worry too much about the charts. Think about how you felt during the day from a trading perspective. Did you feel confused? You were not alone.
From a technical perspective, the markets were mixed. The Dow rose early, then pulled back after about an hour of trading. Two hours later, the Dow was up over 450 points. About 2pm, the selling resumed and lasted for the rest of the day. The Dow finished with a gain of 61 points, closing at 33,301. Again, take some time to think about the choppy trading that occurred. When you see or feel choppy trading…think correction. Think wave 2 or wave 4. Think smaller positions. Think about taking profits early and often. DO NOT bet the farm!
The NASDAQ was down about 2 points, while the S&P was down almost nine. The RUT was down 6 points. My VTI indicator is currently showing that both the NDA and RUT have entered the downtrend mode. The Dow has not. So, yesterday’s trading was more about what a handful of stocks on the Dow were doing than anything else. After a decline of 2,160 points, that’s what you would expect. Just as no stock goes straight up to haven, no stock, no matter how bad or overpriced goes straight down to hell. It takes time.
Nothing changes after yesterday’s failed rally. The markets are still in a major Wave 3 decline. Yesterday was likely corrective wave 2 of Wave 3 down. The wave probably has more upside to go before it completes. Yesterday the Dow got as high as 33,697. The choppy rally to get it that high was likely wave ‘a’ up. Yesterday afternoon’s decline was likely corrective wave ‘b’ down. If I’m correct about this labeling, the Dow should rally again today, and re-test yesterday’s high. A 0.38 percent retracement of Wave 1 down could take it back above 34,000. During this time… as the market rallies, note how you feel. Also, because yesterday’s trading was choppy, the Principle of Alternation says that the next wave up (wave ‘c’ up) should be more linear. It should also last twice as long. So, the next rally will likely be a little different than what we saw yesterday. Again, get the feel of it. That’s because once this rally completes, it will be back to the elevator ride feeling again. My target for Wave 3 down is still near or below the 31,000 level.
Because of this, I’ll start looking to put on my short positions near or above the 34,000 level. Be patient and pay attention to the bias on the 1-hour bars. Note how the upper Bollinger Band on the Dow is currently near the 34,000 level. That’s the key for the Dow. So, if the Dow begins to approach this upper Band, AND the bias remains negative, I’ll start shorting it using SDOW. Option traders might also want to pay attention to the 34,000 level.
For scalp traders: the key to today’s trading is bias indicator on the 5 min bars. If the bias on IWM and DIA turns positive. I’ll look to buy TNA and UDOW on a confirmed Green Arrow. Scalp trades only.
The Dean’s List and The Tide remain negative, so any long trades MUST be considered as scalps. Once again, students should note how short the Dean’s List has become. The List is the shortest I’ve seen in several years. Is the Dean trying to tell you something? I think YES!
The Market Timing Indicator for Dow is neutral. The timing indicators for the NASDAQ, SPY, and Russell 2K remain negative.
The Scalp Trading Indicators for the Dow, S&P, NASDAQ, and Russell 2K remain negative.
The Sector Ratio weakened to 6-18 negative after Wednesday’s session. The top five strong sectors are Telecoms (5), Energy (3), Foods (2), Utilities (2) and Food Drug (1). The top five weak sectors are the Semiconductors (-5), Media (-5), Banks (-4), Financial (-4), and Technology (-4).
Gold and crude oil appear to be approaching a significant bottom. I’m still on the side lines with GLD and UCO waiting for a signal. Crypto is dead…for now. My best bets are still in the inverse index ETFs…after the market completes its Wave 2 rally.
BTW, if you get a chance, take a quick look at the sideways triangle that is forming on UCO. Remember, with triangles, the price usually leaves the triangle in the direction it enters. In this case, the direction is up. Same for the triangle in gold.
That’s what I’m doing,
h
Also, please tell your friends about the new Arrows and bias indicators. If they send an email to Dave, via support at the market101, he will give them a free trial subscription. They’re gonna thank you in the months ahead.
Market Signals for
04-28-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 27 Apr 2022 |
NASDAQ | NEG | 21 Apr 2022 |
GOLD | NEG | 22 Apr 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEG | 11 Apr 2022 |
CRUDE OIL | NEU | 25 Apr 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