Professor’s Comments March 10, 2022
Posted by OMS at March 10th, 2022
In Tuesday’s Comments, I discussed an alternate scenario where stocks could stage a strong rally if Wave 2 up was not complete. I gave this scenario low odds after what I saw happen on Monday, when the Dow dropped 797 pints. I said, “it’s possible that the Dow could stage a small rally, if one assumes that yesterday’s low was another sub-wave, wave ‘b’ down, of complex flat pattern.” Well, the ‘small rally’ turned out to be 654 points. Not exactly what I expected in terms of Dow points, but it was still a wave ’c’ up. It should be enough to complete the complex zig-zag pattern for corrective wave 2 up. We’ll see today if the Dow starts lower. A break of the 8 March low of 32, 588 would confirm that Wave 3 down is underway.
Yesterday, the Dow reached a high of 33 487 before pulling back to close at 33,286. The rally was only 20 points shy where sub-wave a down and sub-wave c up are equal in length. So, there is a good possibility that yesterday’s rally is complete. The final sub-waves of a zig-zag or 3-3-5 flat pattern often have equal lengths. But the real test on whether Wave 2 up is over, and Wave 3 down is underway will be to see some impulsive action to the downside. Especially if the downside action starts moving the Dow below 32,588.
I used yesterday’s rally to increase my positions in inverse index ETFs. I bought several shares of TZA, SDOQ and SQQQ. I also bought a few of the 17 June 17 DIA Puts with a strike price of 300. I was paying between 8.30 and 8.70 for the Puts. If the Dow drops several thousand points from current levels, these Puts should pay off handsomely.
I also bought a few shares of UGL, a leveraged gold ETF, yesterday after seeing GLD drop 5.69 points. As I mentioned in Tuesday’s Comments, I was looking for an entry point to buy a few shares of gold on a pullback, so I pulled the trigger on UGL at 70.69. After seeing gold break out last week, I believe it could go significantly higher as Wave 5 up starts to gain momentum. BTW, I will not be trading my shares of UGL. This is a longer-term hold for me.
Please take all necessary precautions to protect yourself.
After Wednesday’s action, the Dean’s List is still negative. The Tide has turned neutral.
The Market Timing Indicators for the Dow, S&P, and NASDAQ are still negative
The Scalp Trading Indicators for the Dow, S&P, and NASDAQ remain negative.
The Sector Ratio strengthened to 8-16 negative after Wednesday’s session. The top five strong sectors were Energy (10), Material (2), Food Drugs (2), Banks (1), and Foods (1). The top five weak sectors were Household Products (-6), Semiconductors (-5), Autos (-5), Technology (-4) and Leisure (-4).
My Doctor’s Trade in TZA generated a Red Arrow on yesterday’s first red bar, but because both the Dow and the Russell opened significantly higher, I decided to wait to see if it will pullback as I expected. The pullback started just before the close, so I decided to stay tin the trade, something I usually don’t do, and held the position overnight. We’ll see if this decision was correct at today’s open.
Also, it was hard for me to justify the sale when I was buying shares of TZA during the day for my trading account. I still believe that IWM, the ETF I use to track the Russell, will trade down to 183 or lower in the weeks ahead.
That’s what I’m doing.
h
Did I mention that I hate Wave 2’s? The only good part about them is that a wonderful Wave 3 follows once they are complete. Watch for impulsive action to the downside.
Market Signals for
03-10-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 11 Feb 2022 |
NASDAQ | NEG | 03 Mar 2022 |
GOLD | POS | 25 Feb 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | POS | 07 Mar 2022 |
CRUDE OIL | POS | 01 Mar 2022 |
CRYPTO | NEU | 09 Mar 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.
Category: Professor's Comments