Professor’s Comments January 20, 2022

Posted by OMS  at January 20th, 2022

I want to thank those who attended last night’s Update Class. I had a great time doing it and I hope you learned a few things that will help your trading.  I told you the new Arrow ‘tweaks’ were fantastic. And now you have them:>)

Because we had a chance to cover a lot of ground last night, I’m going to make today’s Comments brief and instead, focus on what happens in the market today.  As you know, I believe the Dow, S&P, and NASDAQ are sitting at EXTREMELY important trend line support levels within their Ending Diagonal Patterns.  If the Dow holds this support and starts to rally from here, it means that Wave ‘D’ down in the pattern is complete and the next major move should be Wave ‘E’ up.  This wave, IF it occurs, could see the Dow retrace back to the 36,600 level or higher.  A move above 37,000 or even higher is possible, so it’s not a bad idea to take a day or two off and watch to see how things begin to unfold from here.

On the other hand, IF the 35,000 level does NOT hold, and the market starts to fall rapidly, it presents us with an entirely different scenario.  It means that the Dow topped on 5 January in an Expanding Wedge Pattern and the Bear Market is underway.  It also means that the highs made in the S&P and NASDAQ in late December and early January were important tops.  And IF this is the case, it means that it will be a long time before we see those prices again.  It could be years!  So, as I said, there is no harm in taking a day or so off to watch and get this right. 

In last night’s webinar, I promised to give you the time periods I use to trade.  Here they are:

For the 4 and 5 min bars, I use 1-day chart.

7s and 10s, I use a 2-day chart.

12s and 15s, I use a 3-day chart.

30 min, 10 days.

60 min, 20 days

2 and 4-hour, 30 days

Daily’s, I year

Weekly’s, 3 years. 

I use the 15s as ‘high cover’ for the 4 and 5-min bars.. The 4-hour bars are my ‘high cover’ for the 15s.

I mostly use two time periods:  For most of my longer-term trades, I use the 4-hour bars.  For example, right now one of these trades is the ‘Doctors Trade’ with TZA. The inverse ETF for the Russell 2K.  I believe the RUT (IWM) is going a lot lower, especially since the only support level I see, now that 212 has been broken, is at the 180 level near the 200-day moving average.  If that level doesn’t hold, the March 2020 low of 99.69 could be tested.  That’s why I like TZA as a longer-term trade.  BTW, I believe it’s also important to tell you that I will not hold TZA blindly over this period.  I will only hold it as long as the Arrows give say so.  If the Arrows turn Red on TZA I’ll simply step aside and wait for the next opportunity to re-enter the trade. 

OK, so while I’m holding TZA on the 4-hour bars, I’m also scalping it on the shorter-term bars, like the 4’s, 5’s or 7s.  These are my day trades.  I NEVER hold these positions overnight. I also trade smaller positions when I’m scalping and almost always step into the trades. When I see the stock or ETF is entering the ‘Trend Zone’, I add to the position.

The one thing you should notice about what I’m saying here is that I’m NOT trading a lot of stocks or ETFs.  I’m only focusing on one or two. I don’t have the time to be flipping between many stocks during the day. Especially now. The reason I say this is because the market has NOT shown its hand yet. While it’s likely the small caps have started Wave 3 down, I’m not so sure about their big sisters.  They could still be ready to start Wave ‘E’ up, which has the potential to rally to new highs. 

So, what I’m telling you this morning is to relax.  Take a break.  Let’s see what happens during the next few days.  If the Dow begins to move higher, and the arrows turn Green, we’ll know what to do.  February could be a good month to the upside.  But right now, we don’t know anything other than we’re at a critical support level. Be patient.

That’s what I’m doing,

h

Market Signals for

01-20-2022

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.