Professor’s Comments – Before the Open 5/27/2022

Posted by OMS  at May 27th, 2022

I started buying a few inverse index ETFs yesterday afternoon when the Dow approached the 32,750 level. Later in the day, I took profit on the shares in my regular trading accounts, but held a few shares in our IRAs.

When I trade in my regular accounts, the money from the sale of the ETFs is always immediately available to me. So, I can get in and get out whenever I want.  But the funds in my IRA are not available to me until 3 days after the sale.  This changes the way I trade my IRAs.  It’s why I will be holding the inverse index ETFs in the IRAs over the long weekend but going flat in my regular trading account by today’s close.

If Wave 2 up is developing a complex 3-3-5 flat pattern, it could push higher for several days into next week, possibly to above the 33,000 level.  If it does, I want to have some money available in both accounts to take advantage of the higher prices for my shorts.  So, holding a few shares in my IRA, even though they might go against me, and going flat in the trading accounts will allow me to do this.

If the Dow declines to the 32,400+ level today, it will lend support to the 3-3-5 pattern scenario. That’s because so far, the ‘C’ wave of the pattern for Wave 2 up only has 3 waves.  It needs 5 waves before it completes.  A decline today would be wave ‘d’, which will likely be followed by wave ‘e’ up next week.

Then once Wave 2 up completes, probably sometime later next week, Wave 3 down should drop prices significantly lower.

I’m still thinking Wave 3 down will complete somewhere between the 28,500 to 26,500 level. At this point, I’m not too concerned about a potential 250-300 point move higher in the Dow. What I want to do in the days ahead is position myself for the major decline I see coming.

That’s what I’m doing,

h

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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