Professor’s Comments July 2, 2020

Posted by OMS  at July 2nd, 2020

The markets were mixed yesterday. The Dow finished with loss of 78 points, closing at 25,735.  The NASDAQ and SPX were up 96 and 16 points, respectively.  Volume on the NYSE was light, coming in at only 85 percent of its 10-day average.  There were 50 new highs and 2 new lows.

The BLS will be releasing the results of the June Jobs Report at 8:30 this morning.  In the past, whenever there’s been divergence in market highs between the NASDAQ and the Dow/SPX going into the Jobs Report, there’s been a strong tendency for the markets to sell off 1-2 days after the announcement.  Given that the markets will be closed tomorrow for the July 4^th Holiday, and the fact that they usually have a strong Bullish bias going into the Holiday, we could see the markets rally today and then fall off when trading resumes next week.

From a pattern perspective, the markets appear to be working on Wave 2 up within Major Wave 3 down.  Yesterday’s early rally to 26,019 was an attempt to fill the ‘Island Reversal Gap’ from 23 June that begins at the 26,055 level and extends to 26,128.  This gap should provide strong resistance to any move beyond 26,128. However, students should understand that IF these levels are exceeded to the upside, it’s possible the Dow could rally to the 26,500+ level before Wave 2 up completes.  Wave 2s are always tricky to trade and this one is no exception.  It’s the reason why the Model is still only establishing and holding ‘trial’ positions in DXD.

The Head & Shoulders Pattern I talked about last weekend is still alive and well.  All the current Wave 2 rally is doing now is completing the right shoulder of the pattern.  A close below the neckline near the 25,000 level should send stocks reeling.  My target for the next leg down, Wave 3 of Major 3 down, is below the 23,000 level with 22,800 or below likely.  

Right now, the indicators are giving no clue as to what could happen in today’s trading.  The VTI is a neutral at 52.9 with a 2-period RSI at 58.9.  So, with numbers like this, the Dow is not in a trend nor is it overbought or oversold. The Bullish holiday bias is being countered by a negative DMI, and negative divergence in breadth.  Three of the four breadth indicators are negative.  In other words, almost anything can happen today.  

The Market Timing Indicators for the Major Indexes are mixed after yesterday’s session. The Dow is Negative, but the NASDAQ remains Positive.

The Dean’s List is Neutral while the Tide remains Neutral.

The Sector Ratio strengthened to 24-0 Positive after yesterday’s session. The top 5 Strongest Sectors were Retail, Material, Consumer Products, Cap Goods, and Autos.

The Model purchased another 800 shares of DXD yesterday at 18.70.  So now the Model holds 1,600 shares of DXD, 400 shares of DUST, and a lot of cash.  It continues to look for opportunities to buy shares of inverse index ETFs IF the market moves higher. 

Gold and the miners fell yesterday with GLD dropping 0.75 cents to 166.62.  Gold remains in a Bullish pattern and appears on track for a rally to the 1,900 level as Wave 3 up unfolds.  On the other hand, it still appears that mining stocks are close to completing wave ‘b’ of a complex Wave 2 pattern that still needs one more down leg to go.  It’s still not clear if the miners are going to follow gold higher or make one more run lower, toward the 220-240 level.  We should know by the middle of next week.

Waiting for the Jobs Report.

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

07-02-2020

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.