Professor’s Comments August 31, 2021
Posted by OMS at August 31st, 2021
The market was mixed yesterday. The Dow lost 56 points, closing at 35,399. The NASDAQ and S&P rallied to new highs, gaining 136 and 19 points, respectively. Volume on the NYSE was low, coming in at 87 percent of its 10-day moving average. There were 194 new highs and 31 new lows.
The Dow transports were also down yesterday and are now down about 2,000 points, about 12 percent since last April. This non-conformation with the Industrials is a Major Dow Theory non-confirmation often seen in the months ahead of a major market top. The transports are a warning that the amount of goods being shopped throughout the country is slowing. This usually leads to a major pullback in stock prices.
Yesterday’s new high in the NASDAQ, driven mostly by Apple, saw more shares trade lower than higher (1656 down vs. 1225 up). The story was much the same on the NYSE where down volume swamped up volume by 61 to 39 percent. So even though the indexes are either making or approaching new highs, the breadth of the market is telling us a top is near.
The patterns suggest the indexes are in the final stage of a five-wave Ending Diagonal Pattern. The major characteristic of a final fifth wave that separates it from a third wave is the decrease in breadth, volume, and momentum. The current rally wave is showing major divergences in all three. I still believe the market will top sometime between now and 10 September +/- if it hasn’t already done so. BTW, yesterday’s pullback in the Dow looked like a small sub-wave 4 in a five-wave sequence. If this is the case, the Dow should start its sub-wave 5 rally in the next day or so and top somewhere between current levels and 35,700-35,800.
Today is the last day of the month, so the positive end-of month bias from Mutual Fund re-balancing should be present. The positive bias should last into the Labor Day Holiday Weekend.
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) remain Positive.
The Dean’s List and Tide remain Positive.
The Sector Ratio strengthened to 20-4 Positive after yesterday’s session. The top five strong sectors were Semiconductors (3), Food Drug (3), PharmaBio (2), Telecoms (2) and Household Products (2). The four weak sectors were Energy (-3), Autos (-1), Foods (-1) and Service (0).
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
Top Stocks: I traded the two Bitcoin miners for nice gains again yesterday. MARA pulled back at the open, so I had to exercise patience and wait until almost noon before the indicators allowed me to enter the trade. From there, the 10-min bars produced a profit of about 1.45 points into the close. RIOT did not follow MARA’s path and remained negative for most of the day. A small trade just before the close produced a small half point profit. PM, one of the stocks highlighted by my trend algorithm, opened slightly higher and continued to trend higher for the rest of the day. It produced a one-point profit on a down day for the Dow. I thought that was impressive. WAB, the other stock highlighted by my algorithm, opened down and stayed down all day. The ST indicators kept me out of the trade.
With the markets looking like a final top is fast approaching, all I’m doing now is scalp trading the Bitcoin miners and a few trending stocks. Lat night, my algorithm highlighted AAPL, AWR, LULU and REMX as possible trend candidates.
Gold: Gold (GLD) pulled back yesterday, closing 0.84 points lower at 169.35. The decline appeared to be a small wave 4 within a five-wave sequence that should see gold (the metal) trade to the 1,830 level. Once this sequence is complete, gold should decline to the 1,770 level to complete the Wave C retracement pattern. If this retracement back down to 1,770 happens, the pattern suggests gold could be setting up for a major rally that could take the metal to new highs. How gold and mining stocks trade during the next week or so will be very telling for the metal. Pay attention. There could be a lot of opportunity here…. especially after a pullback.
Bonds: I’m still waiting on Bonds. The pattern suggests the wave 4 up retracement is either complete or nearing completion. Be patient and wait for a signal change. Then look for TBT, the inverse ETF for Bonds to appear on the Dean’s List. A downturn in Bonds would project a rise in interest rates, which will likely start to impact equity prices.
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
08-31-2021
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 23 Aug 2021 |
NASDAQ | POS | 23 Aug 2021 |
GOLD | POS | 27 Aug 2021 |
U.S. DOLLAR | NEG | 23 Aug 2021 |
BONDS | POS | 30 Aug 2021 |
CRUDE OIL | POS | 30 Aug 2021 |
CRYPTO | POS | 20 Aug 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