Professor’s Comments June 23, 2020
Posted by OMS at June 23rd, 2020
The market rose moderately yesterday on weak volume. The Dow finished with gain of 154 points, closing at 26,025. The NASDAQ and SPX were up 110 and 20 points, respectively. Volume on the NYSE was extremely light, coming in at only 77 percent of its 10-day average. There were 61 new highs and 6 new lows.
Not much changed from a technical perspective after yesterday’s trading. The Dow still appears to be in the final stage of competing corrective Wave 2 up of Major Wave C down. Once Wave 2 up completes, the Dow should begin an impulsive decline for Wave 3 down, a move that should take it to significantly lower levels.
The two scenarios I talked about in the WSR are still very much alive. The first suggests higher prices, likely retesting the 26,661 to 26,750 level. The second suggests the Dow has already seen its Wave 2 top and is about to start Wave 3 down. After yesterday’s session, the Dow continues to sit on a trend line from the 26 March low. Any break of the 26,00 level in the days ahead would signal that Wave 3 down is under way. Otherwise, the Dow should continue to rally and re-test the 26,661+ level to complete Wave 2 up.
That’s the Bottom Line: Either break below 26,000 and start Wave 3 down or rally to re-test 26,661 and complete Wave 2 up. Either way, the pattern suggests that Wave 2 up should be complete by week’s end.
The Market Timing Indicators for the Major Indexes remain Positive.
The Dean’s List is Positive while the Tide remains Neutral. One of the more significant things I’m seeing now is the lack of breadth. During the past few days, 3 of the 4 breadth indicators turn negative. The only positive breadth indicator now is the Hi-Lo indicator.
Also, there was a Small Change in the A-D oscillator yesterday of less than 4 points, so we need to be on the lookout for a Big Move in the Dow within the next 1-2 days. That Big Move could be up or down.
The Sector Ratio turned back to 24-0 Positive after Monday’s session. The top 5 strongest Sectors were Energy, Retail, Cap Goods, Autos and Consumer Products.
The Model continues to hold 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. These purchases could begin within the next few days, especially if the Dow starts to decline below Monday’s close.
Gold and the miners rose yesterday. It’s possible that gold had broken out of its Bullish flag pattern and is about to rally to the 1,900 level as Wave 3 up unfolds. On the other hand, it still appears that mining stocks are trapped within a complex 3-3-5 Wave 2 pattern that still needs one more down leg to go. We should know if the miners are going to follow gold higher or make another run lower, toward the 220-240 level on the HUI within the next few days.
To give you an idea on how I’m betting, I used yesterday’s rally in the miners to buy a few July 17 Puts on GDX with a strike price of 31.5 paying 0.47 cents. The thing that caused me to buy the Puts was the potential for an island reversal on GDX at the 34.3 level. If prices begin to fall below yesterday’s open at 34.3, they should easily test the 5 June low of 31.2.
BTW, students should continue to watch the 260 level on the HUI. Yesterday the miners index closed at 277.5, so obviously I’ll be watching my Puts carefully today.
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.
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