Professor’s Comments July 30, 2020
Posted by OMS at July 30th, 2020
The markets continued their up-down-up sideways action yesterday closing higher yesterday. For the past 10 trading days, the Dow has had 5 higher and 5 lower closes, essentially going nowhere. This sideways action is typical of the final stages of a retracement wave that is getting tired and nearing completion.
The Dow finished with a gain of 160 points, closing at 26,540. The NASDAQ and SPX were up 140 and 40 points, respectively. Volume on the NYSE was moderate, coming in at 110 percent of its 10-day average. There were 123 new highs and 13 new lows.
Yesterday’s rally did not help clarify which scenario is occurring on the Dow. That will happen once the Dow begins to fall below the 26,300 level telling us that Wave 3 of Major Wave 3 down is underway. Otherwise, the alternate scenario which has the Dow rallying above the 15 July high of 27,071 before falling is still possible. A decline below the 26,300 level would eliminate this alternate scenario.
Once Wave 3 down starts, it should pull the Dow below the 15 June low of 24,843. My current target for Wave 3 down remains slightly below the 23,000 level. Once all five waves of Major Wave C down are complete, the Dow should be trading below its 23 March low of 18,213 with 17,000 or lower possible.
I will go to Full Red Alert if the Dow falls below the 26,300 level.
The Market Timing Indicators for the Major Indexes remain mixed. The Dow turned back to Positive after yesterday’s rally, but the NASDAQ stayed Neutral.
The Dean’s List remains Positive. The Tide is Neutral.
The Sector Ratio was 24-0 Positive after yesterday’s session. Continue to watch this indicator closely in the days ahead. Again, IF it starts to weaken, pay attention. Even though the markets rallied yesterday, both of my short-term momentum indicators fell yesterday and continues to head down. remain slightly above the zero line. My custom VTI indicator also fell yesterday and now has a reading of 66. If the VTI moves below the 50 level, it will generate a Sell Signal.
The top five strong sectors were Autos, Healthcare, Insurance, Material, and Consumer Products. There were no weak sectors.
There were NO CHANGES to the Model on Monday. The Model continues to hold trial positions of 1,200 shares of TWM, 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.
Gold rose and the miners fell yesterday. Gold, the metal continues its wave 5 rally but now appears overbought. The miners appear to be nearing completion of their wave 1 rally. Once this wave completes, wave 2 down should take prices significantly lower.
The Dollar fell hard yesterday and appears close to a bottom. The decline appears to be retracing the rally that began from the 16 February low to the 20 March high. So far, the Dollar has retraced about 60 percent of that February to March rally. A decline of 61.8 percent would be a perfect Fibonacci retracement for Wave 2. If the Dollar begins its Wave 3 up rally, gold prices should decline.
Bonds also appear to be topping. The pattern suggests an a-b-c corrective Wave 2 up is nearing completion with impulsive Wave 3 down due next. TMF, the Bond ETF, fell 0.20 cents yesterday to 45.29. I’m still using last Wednesday’s low of 43.5 as the level to signal the start of Wave 3 down. If this level is broken, I will look to add a few shares of TBT to the Model Portfolio.
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
07-30-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 29 Jul 2020 |
NASDAQ | NEU | 28 Jul 2020 |
GOLD | POS | 23 Jun 2020 |
U.S. DOLLAR | NEG | 24 Jun 2020 |
BONDS | POS | 22 Jul 2020 |
CRUDE OIL | POS | 06 Jul 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.
Category: Professor's Comments