Professor’s Comments July 1, 2021
Posted by OMS at July 1st, 2021
Stocks were mostly flat to higher yesterday as the end-of-month positive bias kept prices well bid. The only non-participant was the NASDAQ which lost 24 points in the lightest trading of the year for tech stocks. The Dow and S&P finished with gains of 21 and 6 points, respectively. Volume on the NYSE was light, coming in at 89 percent of its 10-day average. There were 205 new highs and 12 new lows.
The non-confirmation between the Dow and the S&P and NASDAQ continues as the indexes work to complete their patterns. Even with yesterday’s rally, the Dow still appears to be tracing out the final waves of retracement wave 2 up. If the current rally stays below the 1 June high of 34,849, the pattern MUST be labeled a wave 2 retracement. If the Dow moves above 34,849, the pattern will morph into a more bullish pattern, with new highs likely. So, 34,849 is the key.
As I mentioned in Tuesday’s Comments, the S&P and NASDAQ look like they still have a bit more upside work to do before they complete. The S&P appears to be nearing completion of a sub-wave 3 up within a five wave Ending Diagonal Pattern (ED). If that’s the case, it should start a small decline soon, maybe back to the 4230 level, before making a final sub-wave 5 rally to about 4300. Yesterday, the S&P closed at 4297. A close below the 18 June low of 4164 would suggest the trend has changed from up to down. BTW, the initial target for the Ending Diagonal of the S&P is the 12 May low of 4063, which is where the pattern began. If the Scalp Trading Indicators on the S&P remain positive, the S&P should continue to trace out the final waves of the ED. It’s when the indicators turn negative…. that’s when it will be time to seek cover.
The pattern on the NASDAQ also appears consistent with a five wave Ending Diagonal that is in its final wave. Wave 4 of the pattern ended on 14 May at the 13,002 level. Wave five up has now exceeded the Wave 3 high, so it’s possible that Wave 5 could continue to push slightly higher. I’m currently estimating the final high will come in somewhere between the 14,650 and 14,800 levels, but to do this, it will need a small wave 4 pullback. Yesterday, the NASDAQ closed at 14,504. Once the final top is in, students should watch for a five wave impulsive decline and a change in indicators. Both would strongly suggest that Wave 5 up is complete, and a new set of down waves is starting.
The Market Timing Indicators on the Dow, S&P, and NASDAQ remain Positive.
The Scalp Trading Indicators for the Dow (DIA) turned Positive after Tuesday’s session and remain Positive. The ST indicators on the S&P (SPY)and NASDAQ-100 (QQQ) remain Positive.
The Dean’s List remains Positive. The Tide remains Negative. The fact that the Tide has remained Negative is one of the reasons I still consider the current rally on the Dow to be a wave 2 retracement.
The Sector Ratio weakened to 13-11 Positive after yesterday’s session. So, the Sectors are telling us that while the S&P and NASDAQ are still pushing toward new highs, the overall market is not that strong. Only slightly more than half of the sectors are participating. Students should recall that for the past year, the sectors were EXTREMELT bullish, with positive sectors consistently the 20s. Now the ratio of bullish to bearish sectors is just about even. When it changes to bearish, be careful.
The top 5 strong sectors were Energy with an RS rating of 2, Retail (2), Semiconductors (2), PharmaBio (2), and Financial (2). The top five weak sectors were Telecoms (-2), Transportation (-2), Banks (-1), Foods (-1), and Media (-1). Continue to watch for increasing weakness in the Sector Ratio as the indexes complete the final waves of their Bullish patterns.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks: Not much happened with the Top Stocks after the trade in WKHS. With the NASDAQ pressuring the market for most of the day, many of the top stocks were basically flat. The ST indicators on the 10s never gave say so.
Gold: Gold remains in the doldrums and with yesterday’s new low, appeared to complete a five wave down sequence that started on 1 June. The problem with this is while gold should see a bounce, the five waves down suggest that any rally now MUST be considered a retracement wave part of a larger Bearish sequence. If I’m correct about this, gold could decline to about the 1730 level or lower. Yesterday, gold closed at 1770. I’m avoiding gold for now.
Bonds: The Timing Indicators on Bonds remain Positive. However, after looking at yesterday’s action, it now appears that Bond yields will likely start to rise which means Bond prices will likely fall. I had another nice short-term trade in TMF yesterday, but after watching the action, I will no longer be trading Bonds to the upside. The thing that bothers me the most about Bonds now is the fact that the ST volume indicator on TMF has turned negative on the hourly chart. If the momentum indicator turns negative now, I’ll probably look to short bonds by buying TBT, the inverse Bond ETF. Longer term traders should wait for a change in signals on the Daily chart. Position traders should wait for the hourly charts to turn. It’s still early.
That’s what I’m doing,
h
The 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
07-01-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 30 Jun 2021 |
NASDAQ | POS | 07 Jun 2021 |
GOLD | NEG | 08 Jun 2021 |
U.S. DOLLAR | POS | 16 Jun 2021 |
BONDS | POS | 28 Jun 2021 |
CRUDE OIL | POS | 21 Jun 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.
Category: Professor's Comments