Professor’s Comments April 8, 2021
Posted by OMS at April 8th, 2021
After Monday’s strong rally, the markets spent the next two days backing and filling. Yesterday would have been a down day for the Dow except for a late rally into the close that pushed the index into positive territory. The 16 point rally day was accomplished on weak volume and negative breadth. Volume on the NYSE was only 9.5 Billion shares, making it the slowest trading day of the year. Volume has now contracted in 8 out of the last 9 trading days. This decrease in volume is occurring at a time when measures of investor sentiment are at EXTREME levels of optimism which usually suggests a top of major significance is near. BTW, according to the Investors Intelligence Advisors’ Survey, the ratio of Bulls to Bears is now higher than it was just before the February 2010 crash.
From a pattern perspective, the past two days of pullback from Monday’s high can be interpreted as a small wave 4. If the is the case, the Dow might need one smaller rally to complete the pattern. A re-test of Monday’s high of 33,617 should do the trick. This does not have to happen because if Monday’s high was the top, the pattern could be considered an upward ‘flat’. As I mentioned in Tuesday’s Comments, a close below 32,980 would suggest that the top is in. After that, a close below 32,072 would confirm the change in trend and suggest the Dow is headed for a retest of the 29 January low of 29,856.
BTW, the S&P also has a short-term pattern that suggests the past two days of trading are a corrective wave 4. The number I’m using on the S&P as a bearish line in the sand is a close below 3,943. Students can get a better picture of the developing wave 4 on the Dow and S&P by looking at the chart that includes the extended hours sessions.
The Market Timing Indicators on the Dow and NASDAQ remain Positive. The Scalp Trading Indicators on the DIA and NASDAQ-100 (QQQ) remain Positive.
The Dean’s List remains Positive while The Tide remains Neutral. A negative Up-Down oscillator is keeping The Tide from being positive.
The Sector Ratio remained at 24-0 Positive after Wednesday’s session. The top 5 strong sectors were Semiconductors, Autos, Banks, Service, and Leisure. 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: With the overall market looking like it is approaching a major top, many of the Top Stocks on the MWL are starting to roll over. The past few days of trading action have seen the ST volume indicator on the Dow begin to weaken. This is also happening at a time when there is EXTREME negative divergence in the ST momentum indicator. Because of the weakening and divergence in these indicators, students should pay attention the ST volume ‘trigger’ on the Dow in the days ahead. It will likely be the first indicator to tell you that the party is over. A Sell Signal will be generated if the ST volume indicator is negative when the momentum comes out of the Trend Zone. Once this happens, I’ll start posting a few stocks from the Weak List. Right now, UBNT, WPRT, and TCBI are the top three weakest stocks on the List.
Gold: NO changes here. GLD pulled back slightly yesterday in a pattern that continues to suggest a corrective wave 4. My short-term target for gold (the metal) remains near the 1,750 level, but beyond that any projections are still problematic. Because of this I’m still holding off on my gold purchase until I see additional signs that the bottom is in. I’m still not seeing those signs yet, even though the ST indicators on GLD have turned positive. Be patient. If the current short-term rally in gold is just a fake out correction in a down trend, gold could still fall 100 points or more before a final bottom is in.
Bonds: The ST indicators on Bonds remain negative. Because of this, 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
04-08-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 07 Apr 2021 |
NASDAQ | POS | 01 Apr 2021 |
GOLD | NEU | 07 Apr 2021 |
U.S. DOLLAR | NEG | 06 Apr 2021 |
BONDS | NEG | 27 Jan 2021 |
CRUDE OIL | NEG | 30 Mar 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