Professor’s Comments June 22, 2021

Posted by OMS  at June 22nd, 2021

The markets rose sharply on Monday, recovering some of last week’s loses.  The Dow finished with a gain of 586 points.  The NASDAQ and S&P were up 111 and 59 points, respectively.  Volume on the NYSE was moderate, coming in at 87 percent of its 10-day average.  There were 109 new highs and 25 new lows.

Yesterday’s snap back rally on relatively low volume appeared to be the start of an a-b-c rally for retracement wave 2 up. The rally carried to the 33,908 level, filling the gap from 17 June.  In my WSR, I mentioned that the rally could get back to the 34,000 level, so 33,908 came close.  The actual calculated range for the retracement rally is between 33,885 and 34,250, so by trading to 33,908, the Dow exceeded the lower target.  It’s possible that the Dow could test the upper target level on wave ‘c’ of wave 2 up, but yesterday’s low volume day decreases the odds of that happening.

One thing to watch today is Fed Chairman, Powell’s comments before a House sub-committee at 2pm.  If the market pulls back this morning, his comments could spark another rally late this afternoon.  The rally does NOT have to happen, but when the Fed chair speaks, it sometimes causes a lot of volatility in the markets.  

Something else that needs to be watch is last Friday’s low of 33,271 on the Dow and 414.70 on the SPY.  If the markets break below these lows, it could trigger an even sharper decline.   

I still believe that any rallies now should be viewed as shorting opportunities.  My next downside target for the Dow remains near the 32,000 level.  My short-term target for the S&P remains near the 4,110 to 4,117 level. 

The Market Timing Indicators on the Dow and S&P remain Negative.  The Timing Indicators on the NASDAQ remain Positive.

The Scalp Trading Indicators for the Dow (DIA) turned Negative on 15 June and remain Negative.  The same indicators on the S&P (SPY) are Neutral.  The ST indicators on the NASDAQ-100 (QQQ) remain Positive. 

The Dean’s List remains Neutral.  The Tide remains Negative.

The Sector Ratio strengthened to 12-12 Neutral after yesterday’s session. The top 5 strong sectors were Energy with an RS rating of 4, PharmaBio (4), Service (4) Real Estate (2) and Utilities (2).  The top five weak sectors were Banks (-2) Transportation (-2) Consumer Products (-1), Telecoms (-1) and Semiconductors (0). Continue to watch for increasing weakness in the Sector Ratio as the week progresses.

Model Update:   There were NO Changes to the Model. It remains 100 percent in cash.

Top Stocks:  Like I said in the WSR, now that the Market Timing Indicators on the Dow are negative, I don’t really want to fight the signal.  I’d much rather look for stocks to short from the Weak List or trade inverse ETFs, like DXD or SDOW.  That’s what I plan on doing today, especially into the 2pm time slot.  The short-term bars are the key now that the market is in a retracement mode.

Gold: Gold (GLD) rose 2 bucks yesterday, but the indicators stayed negative.  The rally kept GLD above its lower trend line support, so its possible that a rally could start from current levels.  I’m still being cautious with gold now, mainly because IF trend line support does not hold, gold could begin a serious decline.  Because of this, I’m avoiding gold until I see a change in the indicators.  

Bonds:  TMF fell 1.31 points yesterday and looks to have completed its wave 4 counter trend rally from the 18 March low.  If I’m right about this, Bonds should begin to fall in the weeks ahead, as interest rates rise.  The next wave down in Bond prices should re-test the March lows. Friday’s Bond rally drove interest rates down to 2.00 percent.  If I’m right about the pattern, we could see interest rates on Bonds rise to about 2.6 to 2.8 percent in a few months.  

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

06-22-2021

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.