Professor’s Comments January 31, 2020
Posted by OMS at January 31st, 2020
he Model exited all its inverse positions yesterday mostly because of mixed market timing signals and unclear patterns.
The Dow made several attempts to break below the 28 500 level yesterday and failed. The failure to trade below 28,500 and NOT being able to count five waves down increases the odds that a short-term bottom is in. But even if it’s not, and the Dow turns around and begins to fall again, it’s likely the decline will only be to the 28,300+ level before a corrective wave 2 up rallies the Dow back to the 29,000 level. In other words, I don’t believe we’ll be missing much during the next few days by being on the sidelines.
The other thing that has me concerned is the lack of conviction from the Sector Ratio. After yesterday’s session, the Ratio was still at 15-9 Positive. So even though the Tide remains negative, almost twice as many sectors are still moving higher than lower. Again, I don’t see any point in holding positions when these key indicators are at odds.
Because of this, I’m going to wait a few days and watch the market from the sidelines. I want to see if the market tips its hand as to which way it wants to go. A move back below the 28,500 level would be very telling as it would break the lower support channel of the Bull Market. Then if the Dow traded below the recent low of 28,440, we’d have our five waves down which would confirm Wave 1 down of a new Bear market. On the other hand, if the Dow continues to rally, and breaks above 29,000, the odds swing heavily in favor of a move to the 30,000 level in the March-April time period. But right now, with the Dow at 28,859, the market is in limbo. Catholics define Limbo as a state between heaven and hell where the soul awaits judgment. It’s pretty much how I feel about the current state of the market.
Be patient and let the market tell us what it wants to do before putting money at risk.
That’s what I’m doing,
h
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
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