Professor’s Comments February 23, 2022
Posted by OMS at February 23rd, 2022
The indexes continued their impulsive Wave 3 decline yesterday on lopsided breadth and volume. At one point, the Dow was down 715 points before a late rally helped the index to only close down 482 points at 33,596. The NASDAQ and S&P were down 167 and 44 points, respectively. IWM, the ETF I use to check the Russell 2K was off 2.81 points at 196.6. I’m still using the 183 level as my target.
Volume on the NYSE was heavy coming in at 109 percent of its 10-day average. There were 30 new highs and 337 new lows. Advancing issues outnumbered decliners by over a 4:1 ratio. Amazingly, the closing Trin came in at neutral 1.21 which tells me traders are still not too concerned about the decline, which means that it still has a lot more to go.
Yesterday’s low at the 14.10 mark was likely the completion of sub-wave 1 down within wave 3 down of Wave 3. Once a large impulse wave begins, it usually sub-divides into several minor sub-waves, which result in minor rallies. I believe that one of these minor retracement rallies started late yesterday afternoon. It shouldn’t matter much as any rally should be brief, maybe a few hundred points to the 33,700 -33,800 level, before the selling resumes. The bounce should give traders another entry point to establish short or inverse positions.
Since Wave 3 down started on 9 February, the Dow has been moving lower in a stair step decline producing lower lows and lower highs. This type of stair-step pattern is typical of a Major Wave 3 decline and is one of the classic signs that more decline is coming.
Our Doctor’s Trade in TZA gained another 1.49 points yesterday, which tacks on another 4 percent. I think that puts the trade up over 158 percent since it started back in mid-November, but who’s counting. My intermediate term target for TZA is still above the 43.38 level which is the 28 January high. Yesterday, TZA closed at 36.92.
Our short of Kathy Wood’s technology also had a nice day yesterday, as SARK gained another 1.39 points to 52.24. SARK is now approaching its near-term target high of 53.05, so we will need to watch that one. Remember, this fund holds a ton of shorts of new technology issues that are of interest to a lot of people, so we need to be careful with it during any potential retracement rallies. It appears that the ETF is nearing completion of sub-wave 1 of Wave 5 up. If so, I might step aside as the ETF approaches its target and wait to buy again on a wave 2 pullback. My intermediate term target for SARK stays near 60. The Arrows/colored bars on the 4-hour chart have been giving us terrific entry and exit points on the ETF. I expect that this will continue, so I’m holding until I see a change. Right now, the bias is still positive and accelerating. Not a good sign for Kathy’s stocks.
For the past week or so, I have been mostly trading the inverse Russell, NASDAQ and SARK. The reason is because these indexes/ETFs were the ones that had already topped and were starting their Wave 3 declines. But now there is something else to watch, something that is even more meaningful than the patterns on the smaller indexes. The thing to watch is the 4,250 level on the S&P-500. The reason this level is EXTREMELY important is because this level is where the neckline of a large Head & Shoulders Pattern is located. The left shoulder of this pattern is the 4 October low. The right shoulder is the 24 January low. So for all practical purposed, the neckline of this MAJOR H&S pattern is located near the 4,250 level. Yesterday, the SPX got as low as 4,267 before bouncing. This was to be expected as the first test of the ‘neckline’ usually fails. It’s what happens on the second (or third) test that’s important. If the next test of 4,250 fails, the ‘head’ of the pattern suggests the S&P will drop to the 3,700 level. H&S patterns are reliable patterns. So, students should pay careful attention to the 4,250 level and take appropriate action. BTW, IF the 4,250 level is broken to the downside, I will be looking to add SPXU to the mix. On a break down, SPXU, the inverse ETF for the S&P, will become my #3 Best Bet, based on the pattern, behind TZA and SQQQ.
A move above the 24 January high of 17.52 in SPXU will signal that the S&P is breaking below its H&S neckline. Yesterday, SPXU closed at 16.11.
Please take all necessary precautions to protect yourself now that we have Red Arrows on the intermediate-term bars of the indexes.
After Tuesday’s action, the Dean’s List is negative. The Tide is negative. Nothing changed.
The Market Timing Indicators for the Dow, S&P are NASDAQ remain negative.0The Scalp Trading Indicators for the Dow, S&P, and NASDAQ are also negative.
The Sector Ratio stayed at 10-14 negative on Tuesday. The top five strong sectors were Energy (4), Banks (3), Media (2), Material (2) and Leisure (2). The top five weak sectors were Autos (-4), Retail (-3), Semiconductors (-3), Computers (-3), and Household Products (-3).
Yesterday was another cigar day for me. I’ve lost count of how many days in a row it has been for big paydays. All I continue to do is check the bias at the start of the day, which was negative yesterday, and trade inverse index ETFs. Pretty easy!
I will be having an Update Class tonight where I will discuss this winning strategy in detail. During the Class, I will show you how the current Bear Market is unfolding, what to expect, and how to trade it using the Enhanced Arrows AND my new bias indicator. It’s an absolute bargain at $25. Don’t miss it.
Gold: The overall pattern on gold is still not clear. I thought the action in Ukraine over the weekend would have helped clarify the pattern, but it didn’t. Because of this, I’m still on the side-lines. BTW, with inflation starting to go wild, I’d normally be paying a lot of attention to gold and the metals, as they have historically been a great place to be in a bear market. This might yet be the case, but for now, I’m placing my bets elsewhere…by buying and trading inverse index ETFs.
That’s what I’m doing,
h
I hope to see most of you later at my Update Class after the market closes. Please don’t forget to tell your friends and co-workers about our web site. Thanks again for your help on this.
Market Signals for
02-23-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 11 Feb 2022 |
NASDAQ | NEG | 09 Feb 2022 |
GOLD | POS | 07 Feb 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEU | 17 Feb 2022 |
CRUDE OIL | POS | 23 Dec 2021 |
CRYPTO | NEG | 16 Feb 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