Professor’s Comments – Before the Open 1/28/2022

Posted by OMS  at January 28th, 2022

Stocks fell modestly yesterday, but from the emails I received, several of my students were having a really nice day with intraday scalp trades.  And that’s the thing…. scalp trades.  We’re in some type of consolidation zone where I’m not holding anything overnight. 

The reason I wanted to post a few brief comments this morning is because the action I’ve seen since Wednesday’s Fed announcement has been anything but impulsive.  This is important because the lack of impulsive action to the downside is increasing the odds that Wednesday’s low of 33,876 was the end of Wave ‘D’ down and yesterday’s early rally and afternoon decline were Waves ‘a’ up and ‘b’ down within Wave ‘E’ up of the Expending Diagonal Pattern.

If this is the case, the Dow could start a Wave ‘c’ rally to complete Wave ‘E’ up within the next few days.  As long as the Dow remains above last Wednesday’s low, this scenario is not only possible, the odds for this occurring are starting to increase.

BTW, if the rally does start, it will change the current pattern to something called a Broadening Wedge. In this pattern, prices make a series of lower lows and higher highs…at least until the final wave, or Wave ‘E’ up.  The final wave of a Broadening Wedge usually truncates, so I would NOT expect it to exceed the 36,300-36,400 level.  But still, this level is a long way from yesterday’s close of 34,160.

Here’s what to watch for:  If the Dow starts to break above yesterday morning’s Wave ’a’ high of 34,773, there’s a good possibility that Wave ‘c’ up of final Wave ‘E’ up is underway.  The rally could be swift, fueled by a ton of short-covering, so pay attention to the Arrows.

That’s what John B. did yesterday when he wrote:

“I had my best day today in the market. I felt like the smartest man in the world! Thanks for your help and guidance.”

Just follow the arrows :>)

That’s what I’m doing.

h

P.S. Remember, we’re in that Phi Mate turn date window now.  It could go either way, so watch Wednesday’s low. A break of that low will sent the indexes lower.  If the Dow holds that low, we could be headed a lot higher.

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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