Professor’s Comments December 24, 2020

Posted by OMS  at December 24th, 2020

The markets were mixed again yesterday on light volume.  Once again, the Dow started the day with a nice gain, but weakened into the close.  It finished up 114 points to close at 30,130.  The tech heavy NASDAQ was down 27 points while the SPX finished up 3 points.  Volume on the NYSE was light, coming in at 84 percent of its 10-day average.  there were 280 new highs and only 4 new lows.  

Yesterday’s early trading closed the gap from last Friday on several markets, so it could have been the completion of retracement wave 2 up. If this is the case, the Dow, S&P, and NASDAQ should continue the decline that started about 15 minutes before yesterday’s close.  There was a large intra-market divergence yesterday between the Dow and S&P (the Dow did not confirm the S&P’s rally), which is a sign of weakness.  This could mean that the a-b-c retracement scenario I talked about in Tuesday’s comments is occurring.  If this is indeed what’s happening, the markets should start their decline within the next few days.  If not, the alternate scenario I mentioned in my previous Comments is occurring. This alternate scenario would see the market push higher into January as the final waves of Wave 5 up unfold. 

In either case, the key number numbers I’m watching are 29,900 on the Dow and 3,676 on the S&P.  A decline below these lows will likely start a significant decline in both markets.  My target for wave 3 down on the Dow remains near the 12 November low of 28,902.  This remains my primary scenario if Monday’s high of 30,304 is not exceeded.   

Yesterday’s trading did produce any changes to the Market Timing Indicators.  The Dow remains Neutral while the NASDAQ stayed on its Positive signal.  The Bollinger Bands on the Daily chart of the Dow continue to tighten.  Tight Bands usually mean that a Big Move is coming.  Be careful if the market begins to move down.

The Dean’s List remains Positive; The Tide remains Neutral.

I remain on Red Alert.  

The Sector Ratio weakened slightly to 22-2 Positive after yesterday’s session.   The top 5 strong sectors are Insurance, Energy, Media, Banks, and Leisure.  The two one weak sectors were Real Estate and Telecoms.

Top Stock Rotation Strategy:   I spent some time with a student yesterday answering several questions that he had on the new Top Stock Rotation Strategy that I presented in the training session I had a few weeks back.  Because a few changes had to be made with the stocks in the new strategy, I thought it would be a good time to review some of these changes, so you can see how it’s been working. I think you’ll be impressed.

Anyhow, using the new strategy, we saw that the volume indicator on the Dow (DIA) turned positive on 20 November, triggering a Buy Signal for the top stocks on the MWL.  At the time, 6 out of the top 7 stocks on the List were energy related.  So, let’s say we picked Nabors Industries, (NBR) which was the top stock on the MWL.  The stock took off immediately and rose from about 45 to a high of 76.76, a gain of over 30 points in 15 trading days.  Wow!!!  If you go back and check, all the other energy stocks on the List had nice gains too, but the gains in NBR led the pack. Hey, it was the top stock!

Anyhow, NBR’s nice run came to an end on 16 December when our exit criteria indicator turned negative, telling us the up-trend was over and it was time to move on.  Seeing this, and the fact that the Timing Indicators on the Dow were still positive, we went back to the List looking for a new stock(s) to buy.  Remember, with the new strategy, we only want to own stocks that are trending.  Stocks that are not trending do not make us any money!  So, with positive indicators on the Dow, we went back to the List. 

The top three stocks at the time were GEOS, CLF and DDD.  NBR was still the top stock, but we knew it was no longer trending, so we dumped it.  So, the following morning let’s say we replaced NBR with one of the other top three stocks.  I don’t care which one…. you choose. 

Let’s say you picked DDD.  It went from 10.69 to 12.22 as of yesterday.  You’re still in the stock as it continues to trend.  Suppose you bought GEOS, at 9.  It’s now up about 10 percent and still trending.  How ‘bout CLF?  It’s also up about 10 percent.  It’s still trending and you’re still in.  In other words, you’re still in trending stocks which are making you money!  Hmmm?  What about NBR?  What would have happened if I stayed in energy?  Well, you gave a lot of your profit back. NBR closed at 59.74 yesterday.  So, the new ST Indicators told us when to enter and when to exit the top stocks, AND the MWL told us which stocks to buy.  How good is that?

In terms of profit, NBR would have netted you about 50+ percent gain.  Tack on another 10 percent for its replacement and you’re up over 60 percent in about a month.  And you’re still in the top stocks!  Now can see why I’m excited by the new indicators and new strategy?

If you still haven’t purchased my Scalp Trading Class, you might want to ask yourself why?  Do yourself a favor and send Dave an email and give yourself a special present for Christmas.  Take yourself to a completely new level of trading.  The Class, which consists of 3-videos, will tell you how to set up your trading screen and use the new indicators to enter and exit trades.  The indicators can be used for Scalp Trades, Position Trades, or end of day trading.  Then, if you purchase the Class, I will send you a link to the Trading Session I held where I discussed the new Top Stock Rotation Strategy.  I will also schedule a personalized one on one training session for you, to answer any questions you might have.  You will also be invited to all future free training sessions.  Like I said….do it!  For the first time in your life, you will know when to enter and …more importantly, when to EXIT a trade AND you will know which stocks (or ETFs) to trade.  No guessing.  NO more relying on tips.  No more…gut feeling.  Now you’ll have a system that will tell you when to enter strong stocks and then when to get out.

Next year will likely be an extremely volatile year.  The charts and patterns suggest it could be a very depressing year for the markets.  Why not take advantage of this and make some money while you’re cooped up trying to protect yourself from the Coronavirus?  If things start to head south, one of the things I plan to do is publish the top stocks from the Weak List.  This way, you’ll have access to some of the weakest stocks on the planet.  And you’ll know when to short them and when to cover your position.  Again, don’t think about it…do it.  Send Dave an email and we’ll get you fixed up.

Model Update:   The Model remains 100 percent in cash.

The Model Portfolio and the new Top Stock Rotation Strategy are being shown for educational purposed only.  The Buy/Sell actions in the Model Portfolio and in the Top Stock Rotation Strategy 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 or the Top Stock Rotation Strategy should not be used to predict future performance.

The Markets will be closed Friday for Christmas.  They will also be closed the following Friday for the New Year holiday.  I will continue to post my Comments during the Holiday period, but they will likely be a bit briefer than usual.  On the other hand, if something unusual happens or something changes, I will post my take on the change immediately.

Have a wonderful Holiday Season.  Stay safe!

That’s what I’m doing,

h 

Market Signals for

12-24-2020

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.