Professor’s Comments December 1, 2020

Posted by OMS  at December 1st, 2020

The market pulled back yesterday in what appeared to be a wave 4 of the final five wave sequence to a major top.  The move down finally gave some degree of clarity to the wave structure.

The Dow finished with a loss of 272 points, closing at 29,638.  The large cap index fell to an intraday low of 29,434.  The NASDAQ and SPX also pulled back yesterday, dropping 7 and 17 points, respectively. Volume on the NYSE was moderate, coming in at 109 percent of its 10-day average.  There were 170 new highs and 4 new lows. 

In last week’s Comments (11/24) I said that the current Wave 3 rally should complete somewhere between 30,000 to 30,300.  Then after pullback for Wave 4, Wave 5 up could see the Dow trading above the 30,300 level.  So, IF the Dow begins to rally today, it will tend to confirm the scenario I described last week.  

There is also a possibility that yesterday’s pullback was a small wave 4 within Wave 3 up.  If this is the case, the Dow should rally back to the 30,000+ level and then have another, larger pullback, before resuming its climb higher, only this time likely exceeding the 30,300 level.  If this is the case, the current rally should extend well into January.  My current target for the Dow in the first scenario is 30,110.  In the second, a more Bullish scenario, my target is 30,350+.  

If on the other hand, the Dow fails to rally during the next day or so, it is likely forming a ‘flat pattern’ that calls for a re-test of the 11/24 low of 29,228 before rallying to new highs.  So, in all cases, even the short-term bearish case, it appears the Dow still has more rally left.  It’s only a matter of how it gets there. 

BTW, history suggests that when the market had a positive November, the rally tends to carry over into the first week of December. The odds for this to occur are slightly better than 80 percent that the up trend to continue.

The Market Timing Indicators for the Major Indexes remain strong.  However, the indicator for the Dow has turned Neutral.  It’s not unusual for the Timing Indicators to turn Neutral in a wave 4.  The same timing indicator for the NASDAQ remains Positive. 

The Dean’s List and the Tide are Positive.

The Sector Ratio stayed at 24-0 Positive after Monday’s session.  The top 5 strong sectors were Media, Semiconductors, Autos, Energy, and Leisure. There were no weak sectors.

Energy stocks pulled back yesterday along with the market.  However, the ST indicators remain positive on the top energy stocks so I would expect them to continue to lead the market higher.  If you look closely at a top stock like HP, …after a big run-up, it has been pulling back during the past three days.  Pullbacks like this reflect normal healthy breathing in a trending stock.  The pattern is called ‘three crows’, a very Bullish Candlestick Pattern, especially when support is the 200-day moving average.  The pullback is also the ‘Blade’ of a small Hockey Stick Pattern.  Same is true for other top energy stocks like NBR and DVN.  The VTI for the top energy stocks remains in the trend mode.

Gold (GLD) continued its slide on Monday, dropping another 1.12 points to 166.67.  My target for GLD remains at the 155-160 level.   However, because GLD is so oversold now, it could rally slightly in the days ahead before dropping to my final target.

Model Update:   There were no changes to the Model after Monday’s session.  The Model continues to hold 180 shares of QQQ with a cash balance of 52,169.

I had a few last minute requests for tomorrow’s training session.  Don’t worry, you’re all in.  I’ll be sending out the details for the training session later today.  Originally, I tried to send out a large email with the details for the meeting, but it was rejected by my system.  So, I started sending out individual emails asking for confirmation.  The only person I haven’t heard back from is Brent A.  So, Brent, if you received the email with the info, please let me know.  I don’t want you to miss this session.

BTW, if you haven’t taken my Scalp Trading Class, you might want to purchase the video today.  Then you can attend tomorrow’s free training session as well as others I plan to have in the future.  It’s not too late.

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

12-01-2020

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

The Hockey Stick Pattern
The Creation of Waves and Trends
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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.