Professor’s Comments March 24, 2020
Posted by OMS at March 24th, 2020
The markets continued their decline yesterday, waiting for Congress to do something to help the American people. The Dow was up in yesterday’s pre-market when it appeared that a deal between moderate Democrats and Republicans in the Senate on a Covid-19 relief bill was close to being agreed on. However, once Nancy Pelosi flew in from California and tried to introduce several social add-ons into the proposed bill, the Dow fell like a rock dropping 981 points before bouncing into the close. After much choppy trading, the Dow finally closed 582 points lower at 18,591. During the day, the Dow got as low as 18,214 which was only about 200 points from the target I had been using for Wave ‘A’ down.
The major take-away from yesterday’s choppy action is that the Dow managed to hold 18,000 level. Because of this, it’s possible, perhaps even likely, that the Dow completed Wave ‘A’ down yesterday. As I mentioned in yesterday’s pre-market comments when I said, “with the ADX being above 50, as long as the Dow holds above 18,000, there was a good chance the market would rally during the next 2-4 days.” We’ll see. The market is extremely oversold now and IF there is any word of a deal out of Washington today, the indicators suggest a rally of some significance, perhaps even back to the 23,500-24,500+ level. This is where I would expect Wave ‘B’ up to complete. After that, the wave pattern suggests yesterday’s lows will be retested, probably moving back down below the 18,000 level. In other words, the rally that could be starting is NOT the start of another Bull Market. It will just be one of many corrective rallies that will develop during the next several years of Bear Market. You simply can not take more than $12 Trillion out of the market and expect it to bounce back to its old highs. It will take time. This Bear is only beginning. Don’t get too aggressive on the long side.
The market timing indicators remain Negative; however, I am seeing some positive divergence in the momentum indicators. This positive divergence is exactly the opposite of what I was seeing back in late January, just prior to the market’s crash. Students should understand that divergence is NOT a signal to trade on. It is just a warning that something could be about to happen. At this point, the market is beginning to sense that a cure or a treatment for the Covid-19 virus could be at hand. This is causing the downward momentum of the indicators to slow. However, with the indicators still heading down, it’s still too early to become aggressive with stocks. As a minimum, I need to see the momentum portion of my VTI-volume indicator turn positive before I even think about trading the indexes to the long side. That hasn’t happened yet.
The Sector Ratio remains at 1-23 Negative after yesterday’s session. The only positive sector was Computers with an RS rating of zero. Energy remains at the top of the Weak List, followed closely by Autos, Leisure, Service, and Banks. Almost 90 percent of the ratings of the Sectors on the Weak List have RS ratings in the double digits. It’s still a very weak list.
The Model Portfolio remains heavily invested in cash. However yesterday, the Model added 1,000 shares of British Petroleum (BP) at a price of 17.85. The reason the Model bought BP was because it showed the most positive divergence in its momentum indicators. IF the Dow begins to bounce, the Model will look to add a few other stocks to the mix, but only if they show significant positive divergence.
BTW, yesterday I bought several energy stocks for my personal portfolio as trades only. I mentioned several of these stocks in the WSR. They are NOT recommendations. I don’t make recommendations. Remember, it’s March and I like to trade energy in March-April.
That’s what I’m doing,
h
The 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
03-24-2020
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 24 Feb 2020 |
NASDAQ | NEG | 24 Feb 2020 |
GOLD | NEU | 23 Mar 2020 |
U.S. DOLLAR | POS | 18 Mar 2020 |
BONDS | POS | 20 Mar 2020 |
CRUDE OIL | NEG | 24 Feb 2020 |
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