Professor’s Comments January 19, 2022
Posted by OMS at January 19th, 2022
For the past few weeks, I have been talking about how the Dow would be lower in January as Wave “D” down within a large Ending diagonal pattern started to unfold. I said the wave would likely end somewhere between the 34,950 and 35,300 level. So yesterday, when the Dow dropped to a low of 35,262. I started managing my short (inverse) positions in several index ETFs. Remember, no good stock goes to heaven; no bad stock goes to hell. Stocks and ETFs go to targets and all of the minimum downside targets I had for my two scenarios in the DOW, S&P, and NASDAQ were hit yesterday. There could be more downside as one of the scenarios has the indexes continuing to fall from current levels. However, for me, this means the odds are only 50 percent, and if I wanted to play those odds, I’d go to Vegas. Fifty percent odds are never good odds for trading the market. So, I took some profit off the table.
Besides, while yesterday’s early decline and late rally seemed bad on the surface, it really wasn’t. History shows that when the market trades down, like it did early Friday, and then bounce into the close, what happens the following day (Tuesday) is worth watching. If the market trades lower and wipes out the gain from the late rally, it’s often a sign of a short-term bottom. Friday’s decline being sub-wave 3 down, the late rally being sub-wave 4 up, and then yesterday’s decline being sub-wave 5 down. So, we need to be prepared for a possible bounce.
That bounce could be Wave ‘E’ up, which if it occurs, could take the Dow back to the 36, 600+ level. OR, if the bounce is a bit smaller, say to the 35,600-36,000 level, it could be retracement Wave 2 within Major Wave 3 down. At this point, there is no way to tell.
So, here’s what I will be doing for the next day or so as I wait for the market to tell me what it wants to do. Watching. I’ll be on the side-lines. That’s the safest bet for the next day or so. Remember, you DO NOT have to trade every day. I only trade when the odds are heavily stacked in my favor. And right now, from current levels, they are only 50-50 at best.
Same for the ‘Doctors Trade’ with TZA. Yesterday was a Big Day for our trade designed to help Doctors and other folks in the medical profession get paid so they can focus on keeping us healthy and safe. By gaining 2.71 points to 32.54 yesterday, most of my doctor friends had nice, big, smiles on their faces by day’s end. I like that :>) But even TZA has limits. At this point, because its 3-period RSI is EXTREMELY oversold while my custom VTI indicator is still not in the trend mode, it too could be ready to pull back. Students involved in the Doctor Trade should not be too concerned by this, as the exit criteria for the trade on the 4-hour bars still is a Red Arrow or a dip in the Safety Valve.
As for me, well, you know what I’m doing. I’m still holding the shares of TZA I bought based on the 4-hour bars, but I’m trading my ‘eating cake’ shares based on the 4-min bars. I sold most of these shares as TZA moved higher into yesterday’s close. I didn’t like the negative divergence I was seeing on the momentum indicator.
Anyhow, yesterday was another Big Day for me with my Enhanced Arrows. I can’t wait to show these new ‘tweaks’ to most of you tonight. BTW, one of the ‘tweaks’ enabled me to stay in the trade of TZA right into the close. It put me into the trade at the 31.60 level at 15:02 and an hour later I was up over a buck. Nice. Hmmm? Still don’t have the Arrows and want to be in tonight’s Update Class? Send Dave or me an email immediately. We’ll get you in. I want all of my students to be trading with the new Enhanced Arrows. Again, DO NOT be penny-wise and pound-foolish on this. Get the Arrows! I have asked Dave to give you a special offer…do it!
Speaking of special offers, the ‘Special’ I ran on my Consulting Sessions was so popular, I have decided to offer another one for Valentines’ Day. If you’re interested, just let us know. As Yvette said, she paid for the Session in one day! Think about it another way…yesterday’s one hour trade in TZA (300 shares) would have paid for the Consulting Session and made you another $150.
The Dean’s List and The Tide are now negative.
The Market Timing Indicators for the Dow, S&P and NASDAQ are negative. 3-12The Scalp Trading Indicators for the Dow, NASDAQ, and S&P remain negative.
The Sector Ratio weakened to 13-12 negative after Tuesday’s session. The top five strong sectors were Banks (6), Energy (5), Foods (3), Materials (2), and Food Drugs (2). The top four weak sectors were Retail (-5), Semiconductors (-2), Service (-2), CapGoods (-2), and Computers (-2).
I still don’t have anything good to say about gold, bonds or cryptos. I still view them as dead money. If I were going to watch any of the three, I’d keep an eye on the cryptos. My VTI indicator on the GBTC is still buried in the downtrend mode, but I am starting to see a lot of positive divergence from the momentum indicators. This is usually a sign that some type of bottom could be forming.
The trades I’m most focused on now are with the major indexes. Today, I want to see if the 35,000-35,300 level on the Dow holds. This is IMPORTANT! If the level holds, Wave ‘E’ up could start in the next day or so. If not, and the Dow begins to break below 34,950 level, it means the top is in and we need to start looking for new targets, targets that are significantly lower.
BTW, don’t worry too much about missing trades during the next few days. It’s infinitely more important to try to figure out if we’re still in an Ending Diagonal or if the top is in. Remember, the current ED started at the 33.600 level back in September. So, IF the Dow is no longer in the ED, we have at least another 1,750 points of downside before that first target is met.
Looking forward to seeing y’all tonight.
That’s what I’m doing,
h
Note from Dave concerning tonight’s class: Hank, Please tell the Arrow member’s who did not receive the email announcing tonight’s Class to drop me an email at support@themarket101.com and tell me what they need (registration or class login information). I will email them directly. They should always check their spam, junk, and delete folders. If found move the email to the inbox.
Market Signals for
01-19-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 18 Jan 2022 |
NASDAQ | NEG | 13 Jan 2022 |
GOLD | NEU | 11 Jan 2022 |
U.S. DOLLAR | NEU | 18 Jan 2022 |
BONDS | NEG | 18 Jan 2022 |
CRUDE OIL | POS | 23 Dec 2021 |
CRYPTO | NEG | 06 Jan 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