Professor’s Comments – Before the Open 12/31/2021

Posted by OMS  at December 31st, 2021

Yesterday, I talked about the Russell 2K and how I was looking to buy TZA, a 3X inverse leveraged ETF to short it.  I said that IF a Green Arrow appeared on the 30 min chart of TZA, I would buy a few shares.

So, after watching TZA’s Red Arrow for most of the day, a Green Arrow finally appeared just after 15:00 pm. I bought my trial position at 26.17.  I then added to those shares when a Green Arrow appeared on the hourly chart, just as I said I would do in yesterday’s comments.  So now I have a half position in TZA with an average cost of about 26.30. 

BTW, the 2-hour chart of TZA also turned positive, but I did not add any shares based on it as now I’m waiting for a Green Arrow on the 4-hour chart. If this happens today, I’ll add to my ‘trial’ position.   These shares will be enough to hold me until I see IWM start to break below neckline support at the 212 level.  If this happens, I’ll start to become very aggressive because a break of 212 will almost certainly mean the Wave 3 down in the Russell is underway.

There was a small change in the A-D oscillator yesterday, so we could see a big move within the next 1-2 days. Also, after spending most of the day trading sideways, the Dow final started to break down and formed a ‘Shooting Star’ candlestick at the close.  Shooting Stars are often seen at significant tops and given that I was looking for a top near or slightly above the 8 November high of 36,566, yesterday’s high of 36,679 could have done the trick.  So, if the Dow did top yesterday, just remember the odds are high that this is only the top for Wave C up within the Ending Diagonal. The next wave down, which should be Wave D down, will likely drop the Dow back down to the 35,000 to 35,300 level before final Wave E up takes the Dow to new all-time highs, probably somewhere above 37,000.

Bottom Line:  What I’m telling you is that given the Ending Diagonal Patterns I’m seeing in the Dow, NASDAQ, and SPY, I believe January will likely be a cold month for the markets.  That’s why I’m looking to establish short positions in the indexes using inverse ETFs on confirmed Arrows.

That’s what I’m doing,

h

Remember, the markets will be closing early today. 

Happy New Year!

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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