Professor’s Comments December 23, 2021
Posted by OMS at December 23rd, 2021
Stocks rose modestly on Wednesday on light pre-Holiday volume. The Dow finished with a gain of 261 points, closing at 35,753. The NASDAQ and S&P were up 180 and 47 points, respectively. Volume on the NYSE came in at 73 percent of its 10-day moving average. There were 59 new highs and 56 new lows.
So far, the rally since the 20 December low of 34,665 has retraced 1,088 points or 72 percent of the 1,524 Dow points lost in wave 1 of Wave 3 down. If wave 2 is not finished after yesterday’s rally, a rise to the 35,850 level +/- should do it. This area is just above the gap from 16 December.
The Dow and all the other major indexes remain below their November highs, so my primary scenario remains intact. This scenario suggests the Dow is inside wave 3 down of Wave 3 down. Like I said above, wave 2 up of Wave 3 down may have completed with yesterday’s rally or could have a few more points to go. Then once the rally completes, the Dow should start to decline to the 34,000 level or below.
If this does not happen, and the Dow begins to rise above the 8 November high of 36,565, it means that Wave 5 up of the Ending Diagonal is not complete and my alternate scenario is taking place. In this scenario, the recent rally to 36,000 was sub-wave ‘a’ of an a-b-c move for Wave ‘C’ up in the pattern. This wave would then be followed by a Wave ‘D’ decline to about 35.500 before a final Wave ‘E’ rally to a top near the 37,000 level. In this scenario, the Dow would likely top sometime in mid to late February 2022. Because the Ending Diagonal for Wave 5 up started from the 20 September low of 33,613 where Wave 4 ended, that level would become the next likely target. In other words, the 8 November high of 36,565 is key. If the Dow stays below 36,565 I’m Bearish. If the Dow rises above 36,565, we will likely have choppy, volatile trading for the next two months, before the Dow finally tops near or above 37,000. Again, this is my low probability, alternate scenario.
The Dean’s List and The Tide have turned neutral. The Market Timing Indicators for the Dow have turned neutral. The same indicators for the NASDAQ, and S&P remain negative.
The Scalp Trading Indicators for the Dow have turned positive. The same indicators for the NASDAQ and S&P are neutral.
The Sector Ratio increased to 15-9 positive after Wednesday’s session. The top five strong sectors were Semiconductors (5), Healthcare (4), Technology (3), Household Products (3), and PharmaBio (3). The top five weak sectors were Energy (-2), Media (-2), Transportation (-1), Banks (-1), and Insurance (-1).
I still don’t see much happening with gold, Bonds, or the cryptos. Bonds appear to need one smaller rally wave before the triangle for Wave 4 competes. After that, TBT, the inverse bond ETF, could be a nice place to be when interest rates start to rise as bond prices decline. Be patient with any bond trades now.
Same thing for gold. The choppy pattern on spot gold suggests a decline to the 9 August low of 1,692 could be in the cards. It’s even possible that gold could fall back down to re-test the 8 March low of 1,679. I am avoiding gold for now. If the pattern clarifies, I might even look for a short in gold, but not now. Silver is in the same boat…at least for now. The pattern is not clear. If anything, it’s bearish.
My Market Timing Indicator for the Cryptos turned negative on 18 November with GBTC at 47. The indicator has remained negative, except for a day or two at neutral before turning negative again. Now GBTC is at 37 with its VTI in the downtrend mode. As a minimum, I MUST see the VTI start moving out of the downtrend mode before I become interested in the cryptos again. For now, they’re dead money.
My strategy for the next few days: Take a few days off and get ready for Christmas. After watching the market action for the past few days, I believe the odds are heavily stacked in favor of the downside. That’s because yesterday’s low-volume rally was mostly driven by short-covering. It appeared to be a classic sub-wave 2 rally. Because of the short-covering and the positive pre-Holiday bullish bias, it might take another day or so before wave 3 of Wave 3 down begins, so I plan to keep a watchful eye on the markets while I’m wrapping presents. I’m still looking for opportunities to add to my existing positions in inverse ETFs.
That’s what I’m doing,
h
The markets will be closed tomorrow in observance of the Christmas holiday. Next Friday is New Year’s Eve. The markets will be open but will close early. I have family coming into town during the next week and will be taking some time off to spend with them. So, this will be my last update until next Tuesday morning. If something happens to change my primary scenario between now and then, I will post a few brief comments with the reason(s) for the change. Otherwise, I expect the Dow to decline once sub-wave 2 up completes.
I wish you a Merry Christmas, and a happy, safe, and prosperous new year.
Market Signals for
12-23-2021
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 22 Dec 2021 |
NASDAQ | NEG | 14 Dec 2021 |
GOLD | NEG | 20 Dec 2021 |
U.S. DOLLAR | POS | 19 Nov 2021 |
BONDS | NEU | 20 Dec 2021 |
CRUDE OIL | NEG | 17 Dec 2021 |
CRYPTO | NEG | 15 Dec 2021 |
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