Professor’s Comments April 29, 2021

Posted by OMS  at April 29th, 2021

The markets pulled back yesterday, continuing to form what appears to be a wave 4 consolidation triangle.  The Dow finished with a loss of 164 points at 33,820.  The S&P and NASDAQ were 39 and 4 points lower, respectively.  The pullback appeared to be a classic wave ‘e’ down of the triangle and if so, the markets should begin to rally toward their final top today.  Once again, there was nothing about yesterday’s trading that would make me change my short-term outlook for the indexes.  The Dow should continue to push higher as final Wave 5 up completes, probably close to the 34,700 level.  The S&P and NASDAQ should do the same as they trace out the final sub-waves of their five wave patterns.  I’m still using 4,200+ on the S&P and 14,200 on the NASDAQ as my final targets.

The S&P reached a high of 4,201 yesterday, so it could have topped.  IF not, the top should be close.  Right now, I’m using the pullback to 4,118 that occurred on 20 April as sub-wave 4 of the five-wave up sequence.  If sub-wave 4 is not complete and needs one more pullback, then the final rally to a top could be delayed a week or so.  Otherwise, the rally should begin soon, possibly today.  In either case, I do not expect the final rally will exceed 4,200 by much.

On the other hand, the wave 4 triangle pattern on the Dow continues to suggest higher prices.  Like I said above, I’m still sticking with the 34,700 level as my target.  However, after measuring the waves using my Hockey Stick approach (measuring the stick and adding it to the bottom of the Blade) I get a target of only 34,500.  So, the final target on the Dow is likely somewhere between 34,500 and 34,700.

Yesterday’s decline of 39 points on the NASDAQ didn’t do anything to change my analysis of that index.  It still appears that the Composite is in the final wave (wave 5 up) of a pattern that will take it to the 14,200 level, possibly slightly higher.  A move below 13,600 now would suggest the pattern has either ended or is truncating.  Yesterday the Comp closed at 14,051.

Bottom Line:  Students should continue to pay close attention to the Market Timing Indicators.  Yesterday, the Market Timing Indicators on the Dow and NASDAQ turned Neutral.  This is not unusual as the indicators sometimes turn Neutral or even Negative during the final stage of a wave 4 consolidation triangle.  So, when you see Neutral indicators, you MUST always note where you are in the pattern, and if the pattern is a triangle, you still must assume the consolidation will lead to higher prices ahead.  Prices in triangles almost always leave the triangle in the direction they entered the pattern.  In this case, it’s up.

BTW, the triangle’s upper boundary line on my chart of the DIA is near the 341.20 level.  The lower level is near 338.20.  So, IF the DIA moves above 341.20 I the days ahead, the odds for a move toward the target levels mentioned above will increase significantly. On the other hand, a break of last week’s low (20 April) of 336.75 will void the pattern.

The Dean’s List remains Positive. The Tide is also Positive.

The Sector Ratio weakened slightly to 22-2 Positive after Wednesday’s session. The top 5 strong sectors were Service, Autos, Retail, Banks, and Material.  The two weak sectors were Media and Semiconductors.  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 was another interesting day for our Top Stocks.  Remember, all three of the major indexes were down yesterday, with the Dow losing 164 points. But you never would have known it if you looked at the performance of the Top Stocks, where 4 out of 5 of the stocks were up.  TDC, the leader on the Board was down slightly after a big run-up, but the other 4 stocks were up.  Some were up BIG!  #2 CROX was up 59 cents.  #3 NCR, was up a whopping 3.68 points. It opened at 44 and closed at 45.96 which made for a nice scalp trade. #4 STX continued its recent sky-rocket pattern, closing 0.97 cents higher. #5 MRO, another oil stock, gained 0.71 cents as it broke out from its two month long triangle.  Students should note the triangle patterns on both MRO and NCR.  BTW, students should also look at what happened after Top Stock TDC completed its three month triangle pattern.  Hmmm?  What was I saying about triangles when I was discussing the indexes above? 

Here’s the thing:  If the major indexes begin to break out of their triangle patterns in the days ahead, students might want to pay attention to the Top Stocks on the MWL.  These are the stocks that will likely lead the way higher.  Hey, if 4 out of 5 move higher on a down day in the market, the odds suggest they will likely continue to move higher with the force of the market behind them.   After all, these Top Stocks are among the strongest stocks on the planet!  Wouldn’t you expect them to move higher?  I do!

Gold:  No change to the Comments I recently posted in the WSR.  The 3-3-5 flat corrective pattern I have been discussing for gold appears to have ended. If gold breaks below 1,770 now, the 3 wave pattern will likely extend to 5 waves which will confirm that the next major leg down is underway. 

Bonds:   Same for Bonds.  The ST indicators on Bonds remain Positive, but I’m still avoiding Bonds for now.   I still believe that the recent rally is associated with a retracement wave 4 up.  Once this wave completes, Bonds should fall below their 18 March low.

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

04-29-2021

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.