Professor’s Comments December 23, 2022

Posted by OMS  at December 23rd, 2022

Stocks fell hard out of the gate yesterday with the Dow dropping 803 points before bouncing into the close. The late bounce saw the Dow recover a little less than half its loss, closing 348 points lower at 33,027. The NASDAQ and S&P were down 349 and 56 points, respectively. Volume on the NYSE was low, coming in at 85 percent of its 10-day average.  There were 47 new highs and 201 new lows.

The reason I’m posting Comments today is because while yesterday’s decline dropped below 1,752 intraday on the Russell 2K, it finished at 1,754.  This has me concerned!

It means that yesterday’s low could have been an ‘X’ wave of a w-up, x -down, y-up Double zig-zag pattern for Wave 2 up.  If this is the case, the market could continue to rally for the next day or so before Wave 3 of Major Wave 3 down begins.

It’s possible that the Dow could rally back to the 33,500 to 33,600 level+ before wave ‘Y’ of Wave 2 up is complete.  From what I saw yesterday, I would put the odds of this rally happening at over 60-70 percent. In other words, it’s a strong possibility. 

If the Dow does rally, I will look to re-establish the short positions I sold near yesterday’s lows.  I will also look to re-establish the Put options in DIA and SPY I closed out yesterday for a nice profit. If the Dow does rally to near or above the 33,400 level, I will look to buy the 17 March Puts in DIA and SPY with 300 and 350 strikes.  I will also buy a few of the DIA 295 strikes as a speculation.

I strongly believe this market is going a lot lower once Wave 2 up completes and begins to break below the support levels I previously mentioned.  The line in the sand I’m using is still 1,752 on the RUT.  If that level is broken on a closing basis, small cap issues will lead the overall market lower.

The market will be closed on Monday for Christmas, so I will not be posting a WSR unless something crazy happens. My next update will be on Wednesday morning.

I wish you a Merry Christmas. Stay healthy.

That’s what I’m doing (or trying to do).  I’m finally getting over my cold.

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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