Professor’s Comments March 1, 2022

Posted by OMS  at March 1st, 2022

In my WSR I discussed how the Dow would likely continue its a-b-c corrective rally this week, a rally that started from last Thursday’s oversold low of 32,272.  That rally continued to develop yesterday with the early 589 point decline likely being wave ‘b’ of the pattern.  At this point, it’s not clear if yesterday’s early decline completed wave ‘b’ down or if it has more to go. Middle waves of a retracement wave 2 seem to have a mind of their own.  The only thing that is becoming clear is that once all three waves of retracement wave 2 up are complete, the next major decline, wave 3 of Wave 3 down, should drop the Dow to significantly lower levels. The decline could start at anytime now but after looking at yesterday’s action, I wouldn’t be surprised to see the Dow re-test yesterday’s low before wave ‘c’ up begins.  In other words, it’s likely that wave ‘b’ down and ‘c’ up will subdivide, meaning the corrective process for wave 2 up could take a bit more time to complete before the plunge that I see coming begins. 

One of the reasons I say this has to do with the Principle of Alternation.  In corrective waves, when the ‘a’ wave is short, wave ‘c’ usually takes more time to develop.  In the current case wave ‘a’ up took two days to develop and complete.  So once wave ‘b’ down is finished, wave ‘c’ up should take a minimum of 4 days.  That means that the wave 3 plunge is still probably about a week away.  But I wouldn’t count on any ‘theoretical’ principle at this point, especially with many of the indexes having major Head & Shoulder Patterns in place with well-defined necklines.  If I see the Dow break below 33,750 again (4,250 on the S&P), I’m going to take all measures to protect myself.  The second re-test of a neckline is usually fatal.

Yesterday’s rally on the Dow caried to the 34,096 level which retraced 50 percent of the wave 1 decline that started on 9 February. So even though my primary scenario for retracement wave 2 is an extended a-b-c pattern, I MUST also consider that wave 2 completed after yesterday’s 50 percent retracement.  It’s possible, but not likely.  The odds still favor my primary scenario.  Doesn’t matter…..If the Dow starts to move below the ’neckline’ numbers I mentioned above, I’m getting short.  Otherwise, it’s still possible that wave ‘c’ up could push to the 34,450 level to complete wave 2 up.

Please take all necessary precautions to protect yourself.  Wave 3 down in the indexes should be a devastating decline.

After Monday’s action, the Dean’s List is negative.  The Tide is neutral.

The Market Timing Indicators for the Dow and S&P are remain negative.  The same indicators on the NASDAQ have turned neutral.

The Scalp Trading Indicators for the Dow, S&P, and NASDAQ remain negative.

The Sector Ratio strengthened to 13-11 positive after Monday’s session. The top five strong sectors were Energy (8), Material (4), Banks (3), FoodDrugs (2) and Healthcare (2).  The top five weak sectors were Household Products (-3), PharmaBio (-2), Semiconductors (-2), Autos (-2), and Retail (-2).

Doctor’s Trade:  TZA is still on a Red Arrow/red bar on the 4-hour bars.  Because of this, I’m currently on the side-lines waiting for the next green bar/Arrow. IWM closed at 203.32 yesterday.  My downside target remains near of below the 183 level.

Bonds:   After looking at yesterday’s action in Bonds, it appears that the 16 February low was the completion of a wave 3 down.  So far, the wave 4 retracement has been a series of small a-b-c moves which could be nearing completion.  One more small rally is likely in the cards, but after that, wave 5 down should take bonds to new lows.  A classic Hockey Stick Pattern is forming on the 4-hour bars of TBT, the inverse ETF for Bonds.  Wave 3 up on TBT hit a high of 20.2.  So, my minimum target for Wave 5 up, needs to be above that, probably closer to 22-23. Watch for a Green Arrow.  The 4-hour bias is positive.

Gold:  Nothing new on Gold.  I’m still watching to see how the pattern unfolds.

Cryptos:  The market timing indicators for crypto turned positive last night.  GBTC is now on a Green Arrow on its 4-hour bars. However, while the bias indicator is rising, it’s still negative.  The odds are high that GBTC will continue higher, but given what’s going on in the world with currencies, I still want to see positive bias before jumping in.  Besides, I have a lot going on with inverse index ETFs now, where I’m more comfortable with the downside patterns/targets on the indexes.

As I mentioned in the WSR, this week could be EXTREMELY volatile.  Make sure that you are always on the right side of the new bias indicator.

That’s what I’m doing,

h

Market Signals for

03-01-2022

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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