Professor’s Comments December 20, 2022
Posted by OMS at December 20th, 2022
Stocks fell yesterday for the fourth consecutive trading day. The Dow finished with a loss of 162 points, closing at 32,754. The NASDAQ and S&P were down 159 and 35 points, respectively. Volume on the NYSE was heavy, coming in at 145 percent of its 10-day average. There were 31 new highs and 178 new lows.
The wave count suggests that yesterday’s early decline and late rally were part of sub-waves 3 down and 4 up of wave 1 down. If this is the case, we should see more decline today to complete wave 1 of Wave 3 down. Once wave 1 down completes, possibly near the 32,300 level, there should be a small wave 2 rally back to the 33,000+ level, before wave 3 of Wave 3 down gets underway. Wave 3 of Wave 3 down should drop the Dow down to the target levels I mentioned in the WSR.
The alternate is that yesterday’s lows, 32,581 on the Dow and 3,800 on the S&P, completed wave 1 down. If this is the case, wave 2 up could retrace to the 32,800 to 33,000 level before the next strong sell off begins. I will use any retracement now to add to my existing short (inverse) positions.
BTW, the Blade portion of the inverse Hockey Stick pattern on the NASDAQ-100 continues to develop. Yesterday the NDX closed right at the lower trendline of the ‘Blade’ near 11,084. So, the thing to watch today is the 11,084 level. If broken, it projects a move over 2,000 points lower, possibly down to or below the 9,000 level. My first target for this move remains near the 10,440 level, then 9,000, eventually 6,772.
The Market Timing Indicators are currently negative for the Dow and NASDAQ.
The Dean’s List and The Tide are negative. Students should note how short the Dean’s List has become.
The Sector Ratio weakened to 14-10 positive after Monday’s session. The top five strong sectors were Cap Goods (4), Household Products (3), Semiconductors (3), PharmaBio (2) and Real Estate (2). The top five weak sectors were Banks (-3), Retail (-2), Telecoms (-1), Utilities (-1) and Food Drug (-1).
My Trades: I continue to trade and hold positions in TZA, SQQQ and SDOW. Yesterday, to eliminate some of the noise during my intraday trades (to stay in positions longer now that Wave 3 down is underway) I switched to the 7-min bars. This resulted in two nice trades in SDOW (at the 10:47 and 13:21 marks). Similar trades were made in TZA and SQQQ near the same time slots. The trade in SQQQ and TZA were easier (safer) because the Bias indicator on both issues had already ruined positive. The Bias on SQQQ went positive just after the open (9:37) and stayed positive all day. The Bias on TZA turned positive at 10:33. The six trades on these three inverse index ETFs produced another cigar day for me. Nice!
Students should note just how easy it was to make money yesterday once the Bias turned positive and was rising. The positive rising Bias is the key. Once you see this, just look for Green Arrows and exit on the Reds.
BTW, thanks for the cigars, Tom Z. They came yesterday. A really nice selection!
For today: We need to be a bit more careful as wave 1 of Wave 3 down could be nearing completion. If the market opens higher today, I’ll start looking for opportunities to add to my inverse positions. Just watch the Bias. If it stays positive on inverse ETFs like SQQQ, TZA and SDOW, I’ll continue to take Green Arrow trades. But if the Bias turns negative, I’ll move to the side lines and wait for opportunities to present themselves. With Wave 3 down underway, the easier path to make money now is by trading the downside. Wait for your opportunity, then pounce.
That’s what I’m doing,
h
Market Signals for
12-20-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 15 Dec 2022 |
NASDAQ | NEG | 15 Dec 2022 |
GOLD | NEU | 19 Dec 2022 |
U.S. DOLLAR | NEG | 14 Nov 2022 |
BONDS | POS | 16 Nov 2022 |
CRUDE OIL | NEG | 16 Dec 2022 |
CRYPTO | NEG | 10 Nov 2022 |
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.
Category: Professor's Comments