Professor’s Comments June 9, 2022

Posted by OMS  at June 9th, 2022

The overall market continued to trade sideways yesterday, even though the major indexes finished lower.  The Dow finished with a loss of 270 points, closing at 32,910. The NASDAQ and S&P were down 89 and 45 points, respectively.  Volume on the NYSE was moderate, coming in at 91 percent of its 10-day average.  There were 91 new highs and 51 new lows.

Yesterday’s decline appeared to be sub-wave ‘e’ down of a sideways triangle pattern for wave 4 of final wave ‘c’ up of Wave 2 up. I know this wave count stuff sounds complicated, but if you look at all choppy action that has occurred since June 1, I must believe that its all associated with the development of a large consolidation triangle.  And because the into the triangle was up, the move out of the triangle will also be to the upside. This move should happen within the next few days.

The rally should develop in one of two ways: The first is a rapid, spike move up that gains 500-600 Dow points and takes 1-2 days to complete.  The second is a more slower rally, typical of a five-wave developing structure.  If this occurs, there should be more power behind the rally which could carry the Dow toward the 34,000 level.

In either case, the triangle pattern suggests higher prices before Wave 2 up is complete.

As long as the Dow stays above the 7 June low of 32,641, the odds favor higher prices.  A close below 32,641 now will suggest that Wave 2 up has truncated, and Wave 3 down is underway.

One of the things I noticed yesterday was the decline in the Dow transportation index.  It got hit hard, with IYT, the iShares Transport ETF dropping 7.36 points or 4 percent to close at 229.52.  Normally one would think that this is a bad sign for the equity indexes, but in this case it’s actually a positive. The data shows that when the Dow does not confirm a large move down in the trannies, (Dow was only down about 1 percent), it usually leads to a higher Dow during the next week or so.  I normally don’t put a lot of faith in historical patterns like this one, but given the bullish triangle pattern that has developed, I thought it was worth mentioning.

The Dean’s List has turned negative. The Tide is still positive.

The Market Timing Indicators on the Dow remain positive. The same indicator on the NASDAQ is still neutral. The Scalp Trading Indicators on the Dow, S&P (SPY), NASDAQ (QQQ) and RUT remain positive.  However, the volume indicator on the Dow and S&P are barely positive.  Continue to pay attention to the volume. If it turns negative, there’s a good chance it will be followed by a Red Arrow.

The Sector Ratio strengthened to 8-18 negative after Monday’s session. The top five strong sectors are Energy (6), Cap Goods (2), Utilities (1), Foods (1), and Household Products (1). The top five weak sectors are Media (-5), Retail (-5), Healthcare (-3), Semiconductors (-3) and Material (-2).  Avoid all weak sectors as they will likely lead the market lower during Wave 3 down.

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

Best Bets:  Given the Bullish triangle patterns I’m seeing on all the major indexes, I will look to trade the upside for the next few days.  I’ll be scalping UDOW, TQQQ, and TNA on the short-term bars on conformed Green Arrows with a positive Bias. Energy stocks and ETFs at the top of the Lists should also do well during this period.  I’m not going to be very aggressive with the longs, remembering that once Wave 2 up completes, the Dow will likely decline 3,500 to 5,500 points during Wave 3 down.

That’s what I’m doing,

h

Market Signals for

06-09-2022

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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