Professor’s Comments – Before the Open 3/11/2022

Posted by OMS  at March 11th, 2022

Even though yesterday’s early decline in the Dow was large, it was not impulsive.  There was no downside follow through, and the late afternoon rally caused the Dow to make up most of the loss, closing 112 points lower. If Wave 3 down was underway, this would not happen. So, after watching yesterday’s action, I must conclude that retracement Wave 2 up is not finished.  The retracement wave is likely forming a complied zig-zag or flat pattern.

This pattern consists of two a-b-c moves tied together by an ‘X’ wave. This is what I believe yesterday’s early decline (wave X) was all about.  The rally that ensued after the early decline was sub-wave wave ‘a’ up of the second a-b-c pattern.  Once complete, this should be followed by a small decline for sub-wave wave ‘b’ down and then sub-wave ‘c’ up.  From the looks of things, sub-wave ‘c’ up could carry to the 33,450 – 33,500 level before it is complete.  The process will likely take another or another 2-3 days before Wave 3 down begins.

Another way to look at the developing zig-zag pattern is to think of it as the ‘Blade’ of a small Hockey Stick. The Stick or wave 1 down, is the decline since the 3 March high into the 8 March low.  This decline was about 1,600 Dow points.  So, depending on where wave 2 up ends, let’s say its near 33,450.  If you subtract 1,600 from 33,450, you get 31,850.  This number is my initial target for Wave 3 down.  This target is well below the 24 February Wave 1 low of 32,273, so if the Dow falls to that level, it will also confirm that Wave 3 down is underway with still lower prices to come.  My target for Wave 3 down remains near or slightly below the 30,000 level.

Continue to watch the 32,588 level during the next few days.  It will be your initial indication that something bad is about to happen. I have drawn a Red Line on on my chart at that level.

Please take all necessary precautions to protect yourself.

h

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.