Professor’s Comments December 8, 2022
Posted by OMS at December 8th, 2022
Stocks were mostly flat yesterday after two strong days of selling. Fear of recession in 2023 continues to worry the market. While nothing has changed fundamentally, the number of CEOs calling or preparing for a recession continues to grow. The patterns suggest that Wave 3 down has either started or is close to starting. So, any negative news now could start things rolling quickly downhill. On Friday, the BLS will announce the latest PPI index report and next week is the December Fed Meeting. The PPI is not expected to show much change versus the previous month which is bad news. The reason for this is because high and steadily rising producer prices can only mean higher consumer prices (inflation) down the road. As for the Fed, the committee is expected to raise rates by 50 basis points, but the tone of the statement will be the real thing to watch. Any change that would lead investors to believe interest rates could move higher than currently expected could cause trouble.
There was a small change in the A-D oscillator of less than one point yesterday, so we need to on the lookout for a Big Move within the next 1-2 days. Pay attention!!!! Small change signals have produced Big Winners for us in the past few months.
As for the patterns, it appears that yesterday’s sideways move was a small degree sub-wave 4 inside the first of a series of wave 3s down. If I’m right about this, stocks should continue to trade lower during the next several weeks. Finally, once it becomes obvious to everyone that the rally from 30 September lows into last week’s highs was just a retracement rally in a Major Bear market, the Bullish confidence that drove the Wave 2 rally will abate and the massive selling I see coming will begin.
BTW, when I travel, I get a chance to talk with a lot of people. Our cruise director was from the Netherlands, and he told me about the problems he was having with getting a loan for his new house. He said that inflation was running over 20 percent in Holland and that the new house that he and his girl friend were planning to buy might have to be put off for a while. I heard a similar story from our Austrian concierge director. She said rising interest rates, which are now over 20 percent in Austria, are causing her and her partner to re-think their plans. The reason I mention this is because rising interest rates are not only a major problem her in the U.S. but are hurting people all over the world.
I also heard a story about the Bank for International Settlements being in trouble. To be honest, I never heard of this bank before. But it seems that they are the guys in charge of keeping tabs on the rising risks of Foreign Exchange Currency and Debt swaps markets. While I was peacefully cruising down the Rhine-Maine- Danube canal, the bank issued a warning that the accounting for the swaps is out of control and much of the transactions for these derivatives is now off-balance sheet. The bank said the risk could be as high as $80 trillion dollars.
Now I must tell you up from that I don’t know a lot about financial derivatives or credit swaps. That’s not my thing. But doesn’t this sound a lot like what we were hearing back in 2007-2008? Things that caused the market to crash. I remember hearing words like ‘out of control’, ‘extremely high risk’, and ‘off balance sheet’ back then, so even though the words are coming out of Europe, I know they can’t be good for the U.S.
I took another day off yesterday, and probably will do the same today as I try to rid myself of this cold. The shares of SQQQ, TZA, SDOQ, and SARK that I’m now holding gave me a nice payday as I rested. The only problem I had was that because of my continued coughing, I didn’t think it wise to smoke a cigar. So, the cigars will have to wait.
Anyhow, I’m mostly holding the inverse positions I bought last week. I’m about 60 percent invested now in inverse index ETFs in my Regular Trading Account and about 75 percent invested in out IRAs. I added a few more shares of TZA to my accounts yesterday when TZA broke below 181.96.
Right now, the Daily Bias, while falling, is still positive on DIA, SPY, IWM, and QQQ. So, I fell that I have enough inverse index ETFs ‘on’ just in case the market starts to fall. If/When the Bias turns negative on the indexes mentioned, I’ll add a few more shares to my positions bringing the total invested closer to 90 percent.
That’s what I’m doing. Be patient. It’s still early.
h
Market Signals for
12-08-2022
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
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Category: Professor's Comments