Professor’s Comments March 23, 2021
Posted by OMS at March 23rd, 2021
The markets rallied (as expected) on Monday on low volume as they complete the final retracement waves of their topping process. The reason I say this is because the Dow, SPX and NASDAQ remain below the highs they put in on 18 March and 16 February. The Dow finished yesterday’s rally with a gain of 104 points, closing at 32,731. The NASDAQ finished with a gain of 162 points. Volume on the NYSW was only 79 percent of its 10-day average. This compares to132 percent on Friday when stocks declined. So, the volume is decreasing on rally days and increasing on days when the market declines, which is Bearish. There were new highs and 30 new lows.
As I mentioned in the WSR, last Friday was a ‘triple witching’ day for options expiration. Most times, when the market is positive for the month prior to a triple witching expiration, it tends to trade down the following week. Yesterday’s rally appeared to be part or all of wave ‘c’ of Wave 2 up. In the WSR I said it could go as high as the 32,900 level. Yesterday the Dow reached a high of 32,810, so wave 2 up could be complete. If this is the case, the markets should begin a five wave impulsive decline during the next day or so to start wave 3 down. By the time wave 3 down completes, the Dow should be trading near or below the 31,700 level. A decline to this level would confirm that the Bear Market is underway and project a re-test of the 5 March low of 30,548 before all five waves of Wave 1 down are complete.
The NASDAQ is in the same boat. My short-term target for the NASDAQ is the 5 March low of 12,397, with the intermediate target being the 21 September low of 10,519.
The thing to watch for now is a five wave impulsive decline which should be clearly visible on the 15 min bars.
Tesla (TSLA) rose 15 points yesterdays and could have completed its retracement wave 2 up. The stock is still below its ‘a’ wave high of 718 made on 10 March and below its 50 day moving average of 708.67. The stock also continues trade between 50 and 200 day moving averages, to form the ‘Blade’ of an inverse Hockey Stick Pattern. Once the stock completes this Blade, it should start moving lower. My short-term target for TSLA remains near 535, which is its 200-day moving average, with lower prices once the 200 is broken. One of the reasons I continue to talk about super star TSLA is because on its way up, it formed a picture-perfect five wave pattern. Now this classic pattern appears to be complete, so I’m watching to see if it will now form a classic Bearish pattern on its way down. So far, by trading between its 50 and 200 -day moving averages, it’s right on track and doing everything it’s supposed to do.
BTW, Apple (AAPL), which rose 3.4 points yesterday, is also mirroring TSLA in the development of its retracement wave 2. So, two of the largest and most popular stocks on the NASDAQ are developing Bearish patterns. Be careful.
An official Hindenburg Omen remains on the Board. This means that the probability for a general market crash remains high.
The Market Timing Indicators on the Dow are Neutral. The same Timing Indicators on the NASDAQ remain Negative. The Scalp Trading Indicators on the DIA and NASDAQ-100 (QQQ) are Neutral.
The Dean’s List remains Neutral. The Tide remains Negative after yesterday’s session. Yesterday’s low volume rally was not enough to change any of The Tides breadth indicators.
The Sector Ratio strengthened to 23-1 Positive after Friday’s session. The top 5 strong sectors were Retail, Media, Service, Autos and Energy. The only weak sector was PharmaBio. Continue to look for changes to the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash. Remember, the Model is based on the NASDAQ-100 (QQQ) and right now the Qs remain on a Sell Signal.
Top Stocks: With the Dow staging a rally yesterday, it was no surprise to see Friday’s Top Stock, WSM lead the way higher as it gained 5.16 points. However, the other top stocks on Friday’s MWL were not as fortunate as they appeared to reach their highs last week and continued to pull back yesterday. This also should come as no surprise as CCL, the #2 stock from Friday’s MWL has moved out of the Trend Zone. I mention this today so students can see what happens to strong stocks once the stop trending. Like I’ve been saying, the market appears to be rolling over, so make sure you pay attention to the ST momentum indicator when trading the Top Stocks. When the momentum moves out of the TZ, the party is over.
BTW, students should note where the ST momentum indicator on TSLA and AAPL is currently located. Is it in the Trend Zone? No. The momentum on TSLA came out of its positive TZ on 29 January with the stock at 864. Now it’s trading at 670 with a negative ST momentum indicator that is awfully close to entering a down trend signal. This is why it is soooooo important to watch what happens with the moving averages on TSLA now. A break of the 200 will put the stock in a down trend and take the NASDAQ with it.
A few stocks to watch on the negative side today are: Omega Healthcare (OHI), Packaging Corp (PKG) and Vale (VAL). Vale appears to be in the process of completing a H&S Pattern. All three stocks saw their ST Momentum indicator enter the negative TZ yesterday.
Gold and Bonds: No changes. I’m still watching. Students should note that shares of gold mining stocks are still missing from the top 10 positions on the MWL.
h
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.
Market Signals for
03-23-2021
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 19 Mar 2021 |
NASDAQ | NEG | 01 Mar 2021 |
GOLD | NEU | 19 Mar 2021 |
U.S. DOLLAR | POS | 09 Mar 2021 |
BONDS | NEG | 27 Jan 2021 |
CRUDE OIL | NEU | 22 Mar 2021 |
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