Professor’s Comments August 17, 2021
Posted by OMS at August 17th, 2021
The Dow gapped lower at yesterday’s open falling over 280 points before reversing and rallying to a new high. The S&P also made a new all-time high. The NASDAQ rallied but did not confirm the high in its sister indexes. At the end of the day, the Dow finished with a gain of 110 points at 35,625. The NADAQ closed 24 points lower. Once again, for the third consecutive day, the Dow and S&P closed at all time highs with negative breadth. The three days of new highs with negative breadth reminds me of the trading action that occurred back in July 2007 just before the market started its decline (crash) into March 2009. For those keeping tabs, today was also the third consecutive day where down volume swamped up volume, almost 80 percent of the volume on the NYSE was down volume, yet the Dow finished 110 points higher. Crazy huh?
A similar thing happened on the NASDAQ-100 (QQQ) where twice as many stocks closed lower but the large cap technology index closed fractionally higher. Whenever this happened in the past, (higher close with 2:1 stocks finishing lower) the NDX tended to close lower during the next two trading days.
It still appears that the major indexes are forming Ending Diagonal topping patterns which will complete somewhere between 26 August and 10 September plus or minus a week. It’s possible that the indexes topped yesterday. A close below yesterday’s low of 35,231 on the Dow would increase the odds the top is in. The number I’m using on the S&P (SPY) is 442.66.
As of Friday’s close, the Market Timing Indicators for the Dow, S&P, and NASDAQ remain Positive.
The Scalp Trading Indicators for the Dow (DIA), S&P (SPY), and NASDAQ (QQQ) also remain Positive.
The Dean’s List has turned back to Neutral. The Tide has turned Negative. So the indexes are making new highs with a negative Tide. Be careful!
The Sector Ratio weakened to 13-11 Negative after yesterday’s session. The top five strong sectors were PharmaBio (3), FoodDrug (2), Financial (1), Insurance (1) and CapGoods (1). The top five weak sectors were Energy (-6), Leisure (-2), Autos (-2), Food (-1), and Real Estate (-1)
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
Top Stocks: I traded two stocks, RCL and RIOT, yesterday on the short- term bars. I also held my Position Trade in RCL, based on the 30 min bars. Both stocks were winners. My entry in RIOT occurred close to 13.40 at 35.80. Exit was accomplished with a trailing stop about an hour later. I did not want to hold Riot overnight, so I placed the stop once I had a profit.
As I mentioned in the WSR, I still believe that RCL will trade down to the 70 level in the weeks ahead. Today’s initial decline to 78 and subsequent rally appears to be waves 1 and 2 of Wave 3 down. By the time all five waves of the pattern are complete, RCL could be trading closer to 60.
Gold and Bonds: The ST indicators on GLD and TMF remain neutral, so I’m still on the side lines with both issues. This week could be a significant week for equities, gold, and Bonds. Be patient and wait for a change in the Timing Signals.
BTW, students should note the positive divergence in the momentum indicators that is developing in GLD and GDX on the Daily charts. If the indicators turn positive, I’m a buyer.
That’s what I’m doing,
h
The 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
08-17-2021
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
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