Professor’s Comments January 26, 2023
Posted by OMS at January 26th, 2023
Stocks finished mixed yesterday, after dropping sharply at the open. The Dow finished with a gain of 10 points, closing at 33,743. The NASDAQ and S&P were down 32 and 1 point, respectively. Volume on the NYSE was moderate, coming in at 95 percent of its 10-day moving average. There were 70 new highs and 13 new lows.
Yesterday’s early decline consisted of three waves, which is corrective, so it’s likely that retracement Wave 2 up is still not complete. If yesterday’s early decline was sub-wave ‘b’ down of an a-b-c flat pattern, sub-wave ‘c’ up should carry the Dow slightly above Tuesday’s high of 33,783 before the next set of down waves begins. A close below yesterday’s low of 33,273 would increase the odds that Wave 3 down is underway.
The S&P appears to be in the same boat with the Dow. I’m using a potential target of 405 for the SPY. Anything above the 23 January high of 402.64 will do the job. Yesterday. the SPY closed at 400.35.
The NASDAQ has two scenarios working for it, with dependent on what happens in relation to the 13 December high of 12,166.41. Here too, yesterday’s decline and late retracement rally were corrective, so the next rally leg could either end either slightly above or slightly below the 13 December high, the only difference being a slight change in the minor wave count. A decline below the 19 January low of 11,252, which is the Wave ‘b’ low, would increase the odds that the next set of down waves has started.
The Market Timing Indicators remain positive on the Dow and NASDAQ.
The Dean’s List is positive. The Tide is also positive.
The Sector Ratio strengthened 21-3 positive after Tuesday’s session. The top five strong sectors were Media (4), Consumer Products (3), Retail (3), Material (3), and Cap Goods (2). The top three weak sectors were Food Drug (-1), PharmaBio (-1) and Utilities (0).
My Trades: I didn’t do a lot yesterday, mostly watching from the side lines. After seeing the early decline, I used the Green Arrow that appeared on UDOW at the 11:14 mark to exit the handful of inverse ETFs I had on. After that I just watched for the ensuing rally to end, which never happened. The Bias stayed positive, and I wasn’t about to buck the positive momentum by buying a bunch of shorts.
I’m still looking for an opportunity to add to my Puts and/or start buying SDOW, SQQQ and TZA., but I want to see evidence that sub-wave ‘c’ up is complete before I do. Right now, I don’t see that evidence. As a minimum, I want to see the Bias on the 8 min bars of the DIA and Q’s turn negative with confirmed Red Arrows.
Gold (GLD): I’m still watching to see if the rally in gold will end. For the past year, there has been an almost perfect inverse relationship between gold and the Dollar /Euro. As gold rises, the Dollar, and Euro fall. A similar relationship has existed between the Euro and the S&P, only in this case, the relationship is positive. In other words, as the S&P has been rising, the Euro has been rising along with it. Both are at peak levels now, while the Dollar is making new lows. So, one of the things students should watch now is for all four of these indexes to start reversing. If the Dollar starts to rise, we should see the S&P, and the Euro, begin to fall. But I’m still not sure if gold is going to do that. Gold could pull back in a minor wave 2, but after a few months, the chart suggests it could start a wave 3 of Wave 3 up. If this happens, gold could move significantly higher.
BTW, all this is happening while my charts for Bonds are just completing a major five-wave move to the downside. This is telling me that Bond prices are about to rise, producing lower interest rates! Hmmm? With the yield curve being inverted, the two taken together are starting to spell….RECESSION.
Pay attention and watch for a Green Arrow on UUP, the ETF for the Dollar, on its daily chart. A Green Arrow here will put pressure on equities and increase the odds of a rally in Bonds.
That’s what I’m doing,
h
Market Signals for
01-26-2023
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 23 Jan 2023 |
NASDAQ | POS | 11 Jan 2023 |
GOLD | POS | 27 Dec 2022 |
U.S. DOLLAR | NEG | 04 Jan 2023 |
BONDS | POS | 24 Jan 2023 |
CRUDE OIL | POS | 11 Jan 2023 |
CRYPTO | POS | 05 Jan 2023 |
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