Professor’s Comments July 9, 2020
Posted by OMS at July 9th, 2020
The markets rallied yesterday retracing about half of Tuesday’s decline. The Dow finished with a gain of 177 points, closing at 26,067. The NASDAQ and SPX were up 149 and 25 points, respectively. Volume on the NYSE was moderate, coming in at 100 percent of its 10 day average. There were 79 new highs and 11 new lows.
Not much changed after yesterday’s session. It still appears the markets are working to complete retracement Wave 2 up within Major Wave 3 down. Once again, the Dow was characterized by back and forth, up-down-up trading typical of a wave 2.
Because of this, there are still two possible scenarios on the board. The Dow could still rally toward the 26,500 level to complete Wave 2 up. Or it could begin to fall within the next day or so. Either scenario is possible over the short term with nearly equal odds. Students should understand that once Wave 2 completes, possibly within days, Wave 3 down of Major Wave 3 down should begin. This set of waves should be a powerful decline that drops prices below the 23,000 level. By the time all five waves of the sequence are complete, the Dow should be trading below the 18,000 level.
The VTI remains neutral at 60.21 with a 2-period RSI at 60.40. So, with no trend and a neutral RSI, the indicators are not providing any clue as to what the market might do today.
I’m still watching and waiting for impulsive action. Once the Dow begins starts to decline with only minor retracements, not like what happened yesterday, there’s a good chance that Wave 3 down of Major Wave 3 down is underway.
The Market Timing Indicators for the Major Indexes are mixed after yesterday’s session. The Dow is Neutral while the NASDAQ remains Positive.
The Dean’s List remains Positive, and The Tide remains Neutral.
One of the BIG changes I saw after yesterday’s choppy session was in the Sector Ratio. It fell to 9-15 Negative. I mentioned this noticeable weakness in Tuesday’s Comments when I said “By falling in a rising market, the Sector Ratio is telling us that while the Dow appears strong on the surface…the overall market is not. It’s starting to weaken.” So once again despite yesterday’s 177 point rally in the Dow, the sectors continue to weaken. Pay attention! The top 5 Strongest Sectors were Material, Computers, Retail, Cap Goods, and Autos. The top five Weak Sectors were Banks, Service, Leisure, Energy and Real Estate.
The Model continues to hold 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. The Model will become aggressively negative if the Dow falls below the 25,000 level.
Small cap stocks on the Russell 2K have been a lot weaker than their large cap brothers on the Dow. One of the things I continue to watch is IWM, one of the positive ETFs for the Russell 2K. All I’m doing now is looking for an entry point in TWM, the inverse ETF for the Russell 2K
Yesterday the miners rallied to their upper trend line. This trend line should provide strong resistance to higher prices causing the HUI to start its next leg down. Because the current rally has carried higher than I expected, I now believe the next move down will be closer to the 240- 250 level. Instead of my previous target of 220-240. BTW, the current rally in the HUI morphed into a five wave rally, which is often seen in mining stocks and gold. Usually Wave 3 is the strongest wave in most stocks, but not for gold. It’s usually Wave 5 for gold. So, what this means is that I MUST change my wave count for gold. Instead of the current wave being a retracement Wave 2, its more likely that Wave 1 up is completing, and Wave 2 down should follow. This means that once Wave 2 down completes, durng the next two months or so, a major Wave 3 rally should be in the cards.
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
07-09-2020
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 08 Jul 2020 |
NASDAQ | POS | 18 May 2020 |
GOLD | POS | 23 Jun 2020 |
U.S. DOLLAR | NEG | 24 Jun 2020 |
BONDS | NEU | 06 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