Professor’s Comments June 23, 2022

Posted by OMS  at June 23rd, 2022

The indexes rose early, then pulled back to close down yesterday. The Dow finished with a loss of 47 points at 30,483.  The NASDAQ and S&P fell 16 and 5 points, respectively. Volume on the NYSE was moderate, coming in at 103 percent of its 10-day average.  There were 5 new highs and 270 new lows.

It still appears that wave 1 of Wave 3 down ended last Friday morning at 29,653 and everything since has been associated with retracement wave 2 up of Wave 3 down.  It’s possible that wave 2 up on the Dow completed at yesterday’s high of 30,777, as this level filled the gap from the 15 June close. The wave structure also appears complete as yesterday’s up-down action also appeared to complete wave ‘c’ up of a double zig-zag. If wave 2 up is not complete, and wave 2 up forms another 3-wave rally sequence, another rally to 31,025 or 31,400 should do it. Just remember what old Yogi once said about a baseball game. “It ain’t over till its over.” This can also be said about wave 2’s as well.

On the other hand, a decline below last Friday’s close of 29,889 would signal that wave 3 down of Wave 3 down is starting.

So, 30,000 is still the key.  A break below this this level is the neckline of the Dow’s Large Rounding Top Pattern.  If the Dow starts to break below 30,000, the odds are high that 26,500 will be reached.  My first target on the way down is still the 6 November gap near the 28,320 level with still lower prices after that. I’m still using 25,500 to 26,500 as my downside target for Wave 3 down.

The pattern is the same on the S&P and Russell 2K.  A close below 1,665 now is my signal that wave 3 of Wave 3 down is starting on the RUT.

The Dean’s List and the Tide are negative.

The Market Timing Indicators on the Dow, NASDAQ, S&P (SPY) and RUT remain negative. The Scalp Trading Indicators on the Dow, S&P (SPY), NASDAQ (QQQ) and RUT are also negative.

The Sector Ratio rose to 1-23 negative after Wednesday’s session. The only strong sector was Telecoms with an RS ranking of zero.The top five weak sectors are Media (-9), Real Estate (-9), Retail (8), Material (-7), and Autos (-6). Continue to avoid these weak sectors as they will likely lead the market lower as Wave 3 down unfolds.

My Doctors Trade with TZA remains on a Red Arrow, so I’m out of the trade and on the side-lines waiting for the next Green Arrow.  Students should note that the recent pullback wave 2 in TZA has formed the ‘Blade’ of a large Hockey Stick pattern.  The ‘Stick’ of the pattern is about 17.45 points.  So, if I add those 17.45 points to Tuesday’s low of 46.48, I get a target of 63.93. Yesterday, TZA closed at 48.54.  That’s why I’m watching for the next Green Arrow.

Still no change in my comments on Bonds, crypto, or gold.  I still don’t see any reason to own them now.  

My Best Bets are still the inverse index ETFs on any rallies.  Just watch the arrows, moving to the side lines if you see red. All I’m doing now is waiting for Green Arrows to appear on the inverse index ETFs.

That’s what I’m doing.

h

BTW, if the Dow does not break below 30,000 in the next day or so, it likely means that wave 2 up of Wave 3 down is forming a more complex, 5-wave rising wedge pattern. If this is the case, the next leg up (wave ‘c’ up), could take the Dow toward the 30,900 level. After that, there would be a small pullback (wave ‘d’ down) to about 30,800 followed by another rally to about 31,100+/-.

This scenario has about a 50-50 chance of being correct.

h

Market Signals for

06-23-2022

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.