Professor’s Comments February 25, 2021

Posted by OMS  at February 25th, 2021

In last weekend’s WSR and then again in Tuesday’s Comments, I talked about the three major indexes and the different patterns they were forming as they moved toward completion of their final tops.  At the time, the NASDAQ was already on a Sell Signal, and the S&P was close to generating a Sell, so it was easy for me to assume the Dow was also getting ready to roll over.  In Tuesday’s Comments I talked about how the Dow appeared to be forming a Rounding Top, mostly because of all the up-down up waves which are typical of this type of pattern.  But as we saw yesterday, this was not the proper analysis.  Once the Dow broke above the 31,653 level, it was evident that the apparent ‘Rounding Top’ was a complex consolidation triangle. It means that the 23 February low was the completion of a Wave 4 within a still Bullish pattern.  This suggests the Dow will likely rally to a new high to complete Wave 5 up.

Putting yesterday’s rally under a microscope, once 31,653 was broken to the upside, the rally became impulsive.  This means that it was likely all or part of wave 3 of Wave 5 up.  Once wave 3 completes, I would expect a small pullback, maybe to the 31,775 to 31,800 level, before wave 5 of Wave 5 up completes near the 31,200 level.  The reason I expect the Dow to top near 32,200 is because that would make wave 1 and wave 5 equal in length.  If this happens or even if the pattern truncates, then 31,653 becomes a key number as any decline below the previous highs would likely mean the final top on the Dow is in.

As for the NASDAQ, yesterday’s rally was consistent with a typical wave 4 retracement.  With the NASDAQ still on a Sell Signal, it means that the 23 February low of 12,758 was wave 3 of Wave 5 down.  So once the current retracement wave completes, I would expect wave 5 down of Wave 5 down to drop the NASDAQ toward the 12,600 level.  A close above 13,543 would make the above analysis invalid.

To sum it up, the Dow is still in a Bullish pattern while the weaker NASDAQ has turned Bearish.  The pattern on the S&P is closer to that of the Dow.  Yesterday’s rally on the S&P was also impulsive, so I must go with it being a wave 3 of a 5 wave sequence.  However, after examining the decline into the 23 February low, it still looks more like more of a five wave decline than a corrective sequence or a triangle, so it’s still possible that the 23 February low is not a wave 4.  But for now, with the Dow clearly showing signs that it wants to move higher, the odds suggest the S&P will also push higher making a new high slightly above the 16 February high of 3,950. A decline below the gap at 3,867 would negate any further Bullish potential.

Yesterday’s action was not enough to turn The Tide positive.  It remains Neutral.  The Dean’s List also remains Neutral as QID, the inverse ETF for the NASDAQ-100 is on the List.  

The DMI on the Dow has turned Positive after being negative for a day.  The Market Timing Indicator on the Dow (DIA) remains Positive. The same timing indicator for the NASDAQ remains Negative. The Scalp Trading Indicators on the DIA remains Positive. The ST Indicator on the NASDAQ-100 (QQQ) remains Negative.    Because of the mixed signals, students should remain cautious and pay close attention to the support levels mentioned above and look for a change in signals if these numbers are violated.  

The Sector Ratio strengthened to 23-1 Positive after yesterday’s session.  The top 5 strong sectors are Banks, Retail, Service, Media, and Energy. The only weak sector was the Telecoms.  Continue to pay attention to the Sector Ratio as the week progresses.

The 0-98 Sell Signal kicked out by AIQ’s artificial intelligence algorithm on 12 February remains unconfirmed.  As I mentioned in the WSR, I continue to pay close attention to the ST momentum indicator, especially if the DIA begins to break below Thursday’s low of 316.48.

Model Update:   There were NO Changes to the Model.  It remains 100 percent in cash.

Top Stocks:  Several top energy stocks from the MWL caught fire yesterday.  NBR was up over 17 points after resting and moving sideways for 11 trading days. MRO was another as it gained 0.68 cents to 11.84.  Both stocks remain in Up Trends, so pay attention to their momentum indicators as they move higher.

Apple (AAPL) one of the stocks on the weak list, dropped another 0.51 cents yesterday. It remains in a Down Trend.  I’ll start positing more stocks from the weak list once the indexes begin to break below the key support levels mentioned above.

Bottom Line:  The patterns and the fact that the ST Indicators on the Dow remain positive suggest higher prices for short term, maybe the next 2-3 days.  Continue to pay attention to the support numbers I mentioned above for the Dow and S&P.  If these indexes break below these numbers, it will eliminate any further Bullish potential.  

Let’s see if I got this right…

Last Friday, I mentioned that three of the top 5 stocks on the MWL were energy related. The stocks were #2 CVI, #4 HFC, and #5 NBR. The trigger that we use on the Dow was still positive, so it was OK to Buy..

So this week, we saw CVI move from 22.9 to a high of 25.33 (so far), HFC went from 36.59 to a high of 39.44 (so far) and superstar NBR move from 87.47 to a high of 105.96 (so far). The reason I say ‘so far’ because all the stocks mentioned are still in Trend Modes.

Notice that once again…there were no losers.

Pay attention to the top stocks. That’s where the action is.

Just saying….

That’s what I’m doing,

h

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

02-25-2021

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.