Professor’s Comments December 7, 2022
Posted by OMS at December 7th, 2022
Late last week, I talked about how the market appeared in the final stages of completing retracement Wave 2 up. I said the pattern could complete within the next few days, possibly into early next week. After that, the market should start heading down as Wave 3 down begins to unfold. So here it is on Wednesday morning, and so far, the Dow has dropped 500 points on Monday and 350 points, yesterday. The NASDAQ and S&P were down 257 and 57 points, respectively yesterday. The Russel 2K was down 27 points. The NASDAQ and RUT have been hit especially hard during the past few days. They were the weakest indexes during the Wave 2 retracement rally. Now they are leading the way down.
While I still can’t confirm that Wave 3 down is underway, the odds are rising that the Wave 2 rally from 30 September / 13 October lows has topped. One of the reasons I can say this is because some of the indexes have fallen below the previous minor wave 4 low and Mr. Elliott say this is a no-no for Wave 2 up to still be viable. The index with the clearest previous wave 4 low is the NASDAQ. A decline below 11,450 would confirm that Wave 3 down is starting. Yesterday, the NAS closed at 11,651.
A close below 3,937 on the S&P, the previous wave 4 low will also confirm that Wave 3 down is starting on that index. The wave 4 low on the RUT is not as clear, but I’m using a break under 1,821 as my line in the sand. This equates to the 30 November low of 181.96 on IWM. If this level is broken there is little to no support on the small caps until the neckline of the massive H&S pattern is tested near the 163 level. Then if this level is broken, IWM could easily trade down to the 120 to 130 level.
The Market Timing Indicators have still not turned negative, so continue to be careful.
The Tide is neutral, as the Summation Index and the A-D Oscillator have turned negative. The Dean’s List is still neutral.
AIQ’ s Artificial Intelligence algorithm generated a 0-100 Signal on the NASDAQ yesterday, however the signal is still not confirmed.
The Sector Ratio was 2-22 positive after yesterday’s session. The top five strong sectors were Cap Goods (7), Material (4), Semiconductors (4), Real Estate (4) and Media (4). The top two weak sectors were Telecoms (-1) and Banks (-1). BTW, seeing the Banks at the top of the Weak List in a recessionary environment with a Major Wave 3 down about to start is never reassuring.
My Trades: I have been trading and holding a few shares of SQQQ, TZA, SDOW, and SARK. I am also holding several longer-term PUT positions in DIA and SPY. These positions go through March 2023. If the market starts breaking below target levels I mentioned above, I will start adding to those positions.
My doctor friends (and other professionals) should note that TZA moved back on a Green arrow on 30 November at the 29.45 level. Yesterday, TZA closed at 32.76. Its next challenge should be the 36.75 -37 level. Check out the positive divergence that is occurring on the 4-hr Bias. Once the Bias turns positive, I will add to my current position in TZA. I’m currently holding the Doctor’s Trade using TZA in both our IRA and regular Trading accounts.
Marcia and I got home late last night. And while it was nice to see the world-famous Christmas markets of Germany, it feels great to be back home in Jacksonville. I picked up a cold just before we got to Frankfurt so I’ll be nursing it for most of the day today. I’m such a baby when I get sick. I’m headed back to bed now to catch up on some of the sleep I missed.
BTW, I received several emails while I was away, and I’ll try to answer them later this afternoon. But for now, I need to get some rest.
Be patient. The major downturn I see coming is just starting. None of the lower targets I have given you in the past have changed. If anything, they could be even lower.
That’s what I’m doing,
h
Market Signals for
12-07-2022
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | SM CHG |
DEANs LIST | NEU |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 04 Nov 2022 |
NASDAQ | NEU | 30 Nov 2022 |
GOLD | POS | 22 Nov 2022 |
U.S. DOLLAR | NEG | 14 Nov 2022 |
BONDS | POS | 16 Nov 2022 |
CRUDE OIL | NEU | 01 Dec 2022 |
CRYPTO | NEG | 10 Nov 2022 |
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