Professor’s Comments December 3, 2020

Posted by OMS  at December 3rd, 2020

The market was mixed yesterday on relatively light trading. The Dow finished with a gain of 59 points, closing at 29,883.  The NASDAQ dropped 6 points while the SPX gained 6 points.  Volume on the NYSE was moderate, coming in at 102 percent of its 10-day average.  There were 105 new highs and 5 new lows. 

There was a small change in the A-D Oscillator last night, so we need to be on the lookout for a Big Move within the next 1-2 days.  With momentum slowing and volume decreasing, the small change signal could mean some type of top is approaching.  We should know within the next few days.  

As I mentioned in previous Comments, the patterns, while still Bullish, are not clear.  There are two major possibilities:  The first suggests that Wave 3 up is either complete or nearing completion.  If this is the case, the next wave down should be Wave 4.  It would be followed by one more rally, probably to the 30,300 level or slightly higher.  On the other hand, if recent rally to 30,000 is the completion of a five wave sequence for Wave C up of Major Wave B up, then the next few days could mark the completion of the Bull Market that started in march 2009.

There is also a lesser scenario that suggests the Dow could be forming a ‘flat pattern’.  While the odds for this scenario are low, if the Dow begins to fall from current levels, it could re-test of the 11/24 low of 29,228 before rallying to new highs.  This is an extremely dangerous scenario because the Dow MUST hold the 11/24 low.  That’s a decline of 655 points from current levels, so it could be a significant impact to portfolios.   And with one of the two major scenarios on the Board being the end of the Bull Market, I really don’t like the odds of holding stocks during the any decline now as it could be the start of the next Bear market. 

That’s why it will be extremely important to pay attention to the indicators in the days ahead, especially the volume and momentum indicators, now that the A-D oscillator is telling us a Big Move is coming. 

There were NO CHANGES to the Market Timing Indicators after yesterday’s session.  They remain Positive. 

The Dean’s List and the Tide are Positive.

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

Energy stocks were strong yesterday after resting for the past few days. The major trend indicators remain in the trend mode, and if that is the case, I’m keeping my finger off the sell button.  As I mentioned in last night’s training session, one of the things I’m doing with my energy stocks is adding to them when they are oversold and selling these additional shares when they become overbought.  This my typical ‘Buy the Cake, Eat the Cake Strategy’ which I discussed many times when I had a Classroom. It’s a way to generate trading profits from a strong stock while maintaining your Basic Position until the indicators turn negative.

BTW, three out of the top five stocks on the MWL are energy related.  Also, the top 8 ETFs on the Dean’s List are energy related.  Hmmm?  Also, have you been paying attention to Cleveland Cliffs since it broke into the top three on the MWL. You know the stock MUST be strong for it to bump the energy guys from the top spots.  Pay attention whenever you see changes like this.

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

Gold (GLD) rose 1.28 points yesterday from extreme oversold conditions.  Like I said in Tuesday’s Comments, gold could rally slightly in the days ahead before dropping to my final target near the 155-160 level.  I’m still avoiding gold for now.

Thanks to everyone attending last night’s training session. I had a great time doing it for you and now I’m enjoying your wonderful feedback emails. Again, thank you!

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

12-03-2020

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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.