Professor’s Comments March 25, 2021
Posted by OMS at March 25th, 2021
The markets were mixed yesterday on weakening internals. After starting the day with a 320 point rally, the Dow reversed course and finished down 3 points, closing at 32,420. The tech heavy NASDAQ got clobbered, dropping 266 points while the broader S&P lost 22 points. Volume on the NYSE was moderate, coming in at 84 percent of its 10-day moving average. There were 70 new highs and 120 new lows. Students should note that the number of new lows is now exceeding the number of new highs, which is Bearish.
There was another small change in the A-D Oscillator last night, so we need to be on the lookout for a Big Move within the next 1-2 days. Also, yesterday’s trading action came close to generating another Hindenburg Omen, with the new highs falling slightly short of the minimum 2.2 percent of issues traded. So far, there are two ‘Omens’ on the Board. Yesterday’s ‘almost Omen’ would have been the third. The reason I mention this today is because even ‘almost Omens’ are EXTREMELY rare events.
Since putting in its high of 33,228 on 18 March, the Dow has declined in five waves to its wave 1 low on 19 March. Yesterday’s early retracement rally and subsequent decline appeared to be the completion of wave 2 up and the start of wave 3 down. If this analysis is correct, the Dow should continue to decline to the 31,600 level, picking up steam in the days ahead.
The pattern and wave count on the NASDAQ is slightly different from that on the Dow, mostly in how retracement wave 2 developed. The NAS developed a classic a-b-c retracement into the 16 March wave 2 high of 13,620, whereas the Dow formed a complex flat for its retracement where wave ‘b’ was lower than the wave 1 low. Doesn’t matter. Both are classic wave 2 retracements and once complete should result in significantly lower prices. 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. Yesterday the NASDAQ closed at 12,961.
Tesla (TSLA) dropped another 32 points yesterday, closing at 630.27. The stock remains trapped between its 50 and 200 day moving averages as it continues 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. I continue to talk about TSLA because it led the market higher on its way up. Now its picture-perfect five wave pattern appears to be complete, and the stock is leading the market down. Again, watch for the stock to pull back to the 537 level which is where the 200 is currently located. If the 200 is broken, the stock could get cut in half again.
Apple (AAPL) is another stock that appears to be in trouble. The stock dropped 2.45 points yesterday as it continues to trade between the 50 and 200. Students should note how the Bollinger Bands on AAPL continue to narrow as the stock develops the ‘Blade’ of its Hockey Stick Pattern. Once complete, the narrow Bands suggest the stock is setting up for a large move. The wave 1 ‘Stick’ on AAPL is about 28 points. So, if AAPL breaks below its 8 March low of 116.21, it would project a move to the 88 level. Student should note that regardless of what the TV commentators are saying about the market, both TSLA and AAPL, two of the largest and most popular stocks on the NASDAQ, continue to develop Bearish patterns.
Omens: We now have two official Hindenburg Omens on the Board with one near miss. This means that the probability for a general market crash remains high.
The Market Timing Indicators on the Dow and NASDAQ are Negative. The Scalp Trading Indicators on the DIA are Positive. The same indicators on the NASDAQ-100 (QQQ) are Negative.
The Dean’s List remains Neutral. The Tide remains Negative after yesterday’s session.
The Sector Ratio weakened to 20-4 Positive after Wednesday’s session. The top 5 strong sectors were Retail, Media, Service, Cap Goods, and Household Products. The appearance of Household Products on the Strong Sector List is troubling, as its usually a sign that investors are getting cautious in the stock selection process. The four weak sectors were PharmaBio, Food Drug, Energy and Material. 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: Students should note that all Top 5 Weak Stocks mentioned in last Weekend’s WSR are now trading lower. WKHS was #1 on the Weak List at 16.2. Now its at 13.2. #2 DDD dropped from 28.76 to 24.65. #3 TAN fell from 89.58 to 84.5. #4 WPRT lost over 10 percent, dropping from 8.85 to 7.28. And finally, #5 TSLA, which was at 654.87 last Friday, dropped to 630.27. So, what we’re seeing now is just the opposite of what we saw when the ST Indicators were positive. Now it’s the Top Weak Stocks that are leading the way lower. Pay attention.
The top 5 stocks from yesterday’s ‘Weak List’ were WKHS, WPRT, WPRT, REMX and TAN. TSLA is at #8. AAPL is at #22.
Students should also note how short the Dean’s List has become with 5 out of the top 6 ETFs being inverse ETFs. The Dean is telling us that the market is starting to change character.
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.
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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
03-25-2021
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | SM CHG |
DEANs LIST | NEU |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 23 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 | 24 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