Professor’s Comments December 5, 2019
Posted by OMS at December 5th, 2019
The markets rallied yesterday in what appeared to be either retracement wave ‘a’ of 2 up or wave 2 up. After a decline of over 800 points in three days, the retracement rally in the Dow was expected. The issue now is whether the retacement is complete (probably not), or if it will develop into a more complex a-b-c structure. This is always the issue with retracement waves and students should remain cautious as the corrective wave develops as the Dow could retrace back to the 27,850-28,000 level before wave 2 up is complete. This is one of the reasons the Model is only holding ‘trial’ inverse positions as the risk of higher prices will not go away until the Dow moves below yesterday’s low of 27,325.
One thing students should understand is that this market will NOT go straight down. The decline to the 21,700 level will develop in stages. At this point, the market is in the very early stages of the decline, a place where most institutional traders are still buying the dips. The institutions haven’t begun to though in the towel yet. This will come in a few weeks when the first wave 3 down begins. Students should understand that the 800+ point decline we saw earlier in the week was likely only wave 1 down of Wave 1. We haven’t even seen the first wave 3 down yet….
There were NO CHNAGES to the market timing indicators for equities. The Dow, NASDAQ, SPX, and Russell 2K remain on Sell Signals.As long as the timing signals remain negative, the markets should continue to decline. However the current wave structure appears to be developing a retracement wave 2, so rallies within the downward developing trend should be expected.
The Dean’s List remains Positive while The Tide is neutral.
The DMIs for the Dow and NASDAQ are Negative.
The Sector Ratio stayed at 18-6 Positive after yesterday’s session. As long as the Ratio stays positive, there is a chance the market could push higher. The Strong Sector List was led by Healthcare, PharmaBio, Retail, Food and Computers. The Weak Sector List was led by Energy, Media, Utilities, Transportation, and Insurance.
Model Portfolio: Early yesterday, the Model bought 700 shares of DXD and 300 shares of SQQQ. Later in the day, the Model bought another 700 shares of DXD. Average price for the shares of DXD was near 24.00. The price paid for the shares of SQQQ was 26.12. The Model continues to hold 1,500 shares of UCO, the ETF for Crude Oil.
The Model also bought a ‘trial’ position of 500 shares of GDX at a price of 27.40. With gold moving to a Buy Signal after Tuesday’s session, the Model wanted to own some gold. However, during yesterday’s session the timing signal for gold changed to neutral, so the Model will be quick to exit this trade IF the signal turns negative.
Students should understand that gold (the metal) could go either way at this point. The odds for a rally or a move down to the 1445 level are just about even. IF gold begins to head lower, it could fall well below the the 12 November low of 1445. On the other hand, a rally above 1500 would eliminate the negative scenario and project a move to the 1,600+ level. With even odds, gold is NOT the best trade on the Board at this time.
The better bet is shorting equity indexes at prices near or above the 27,800 level on the Dow.
Bonds fell slightly yesterday with TMF dropping 0,82 cents to 28.52. Bonds are another interesting trade at this point as any decline now would suggest a continuation of the trend toward lower prices. With Bonds on a neutral signal, I’m just waiting for signal change.
While traveling in France, I don’t have access to my desktop computer, so I can’t tell you how much the Model has gained or lost during the past few days. However, the past two days of gain in UCO have probably caused the Model to be up close to 29-30 percent. All I’m doing now is looking for opportunities to establish short positions in equities and possibly Bonds using TBT, assuming the next move in Bonds will be down.
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.
That’s what I’m doing,
h
Market Signals for
12-05-2019
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 03 Dec 2019 |
NASDAQ | NEG | 03 Dec 2019 |
GOLD | NEU | 04 Dec 2019 |
U.S. DOLLAR | NEG | 02 Dec 2019 |
BONDS | NEU | 02 Dec 2019 |
CRUDE OIL | POS | 04 Dec 2019 |
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