Professor’s Comments March 29, 2022
Posted by OMS at March 29th, 2022
Stocks rose yesterday on light volume. The Dow gained 94 points, closing at 34,955. The NASDAQ and S&P were up 186 and 32 points, respectively. Volume on the NYSE was only 87 percent of its 10-day average. There were 75 new highs and 134 new lows. The 10-day TRIN reached an overbought level of 0.89, a level where tops can occur.
Yesterday’s rally to a high of 34,958 carried above Friday’s high, showing that Wave 2 up is still not complete. However, the rally was accompanied by another flat up/down ratio with only 11.4 billion shares traded on the NYSE, the slowest trading day in over a month. These breadth and volume numbers are typical of a counter-trend rally that is nearing completion. From a pattern perspective, sub-wave 5 of the pattern, which is developing as a small bearish rising wedge, appears to need one more sequence of small up-down-up days to complete.
The pattern is similar on the Russell 2K (RUT) where Wave 2 up may have completed on 22 March at the 2098 level. If this is not the case, a small pop to about 2100 should do it. The reason I say this is because the 2100 level is a .382 percent retracement of the Wave 1 decline from the 8 November high into the 24 February low. BTW, the ‘pop’ level on IWM, if it should occur, is probably near 209.
Yesterday, the yield curve on the 30-year Treasury bond inverted for the first time in 16 years. The inversion occurred when the five-year yields rose nine basis points to 2.63 percent, rising above the yield on the 30-year bond. In the past, an inverted yield curve has been a sign that the country was headed for recession. Fed Chairman Powell didn’t appear too concerned about the inversion, continuing to talk about the possibility of raising rates 50 basis points in May to fight inflation which is now running at the fastest pace in four decades. BTW, the spread between the five and 10 year Treasuries is also inverted, having done so earlier this month. Inverted yield curves are not something you want to see if you’re Bullish on equities.
Please take all necessary precautions to protect yourself.
After Monday’s action, the Dean’s List and The Tide remain positive.
The Market Timing Indicators for the Dow, S&P, and NASDAQ remain positive.
The Scalp Trading Indicators for the Dow, S&P, and NASDAQ are also positive.
The Sector Ratio increased to 19-5 positive after Monday’s session. The top five strong sectors were Energy (5), Material (5), Retail (4), Insurance (4) and Food Drugs (2). The top five weak sectors were Autos (-3, Household Products (-2), Consumer Products (-2), Telecoms (0), and Utilities (0).
I’m still on the side lines with my Doctor’s Trade in TZA. Yesterday’s first 4-hour bar turned Green but it was not accompanied by a Green Arrow. The bar was followed by a Red bar with negative indicators, negating any hope that the Wave 2 bottom was in. I continue to watch for the next confirmed Green Arrow that will likely signal that Wave 3 up on TZA is underway. As of yesterday’s close, TZA was on a confirmed Red Arrow.
Same for gold. The big difference between GLD and TZA is that while both ETFs are on confirmed Red Arrows, GLD’s bias indicator while decreasing remains in positive. When I look at the pattern on GLD, it appears to be in the process of completing the blade of a Hockey Stock. So as long as the bias remains positive, I will be looking to buy GLD and a few mining stocks on the next Green Arrow. The overall pattern on gold appears bullish, but until the equity markets complete their Wave 2 rallies, it’s likely that gold will continue to pull back to develop its ‘blade’.
Cryptos: GBTC is still on its confirmed Green Arrow on the 4-hour bars. Since the arrow turned Green last Tuesday, the ETF is now up over 7 points. Students should notice how the parallel ‘railroad tracks’ on the bias indicator signaled the rally. The ETF will likely face strong resistance at its 200-day moving average. Several years ago, I did a webinar for AIQ Systems that described how a stock or ETF develops a bottom and starts to move higher. Once the 200-day moving average is reached, the ETF should pull back and move along the moving average forming the ‘blade’ of the Hockey Stick. That’s what GBTC appears to be doing now.
Bottom Line: The low A/D ratios and low volume I’m seeing in the major indexes are a sign that while retracement Wave 2 up might not be over, it’s getting close. The thing I’m watching for now is an impulsive five-wave decline. Yesterday’s early decline in the Dow, while over 300 points at one point, was NOT impulsive. Yesterday’s low of 34,552 is something students might should mark on their charts, especially if a decline below that level consists of five waves.
Watching.
That’s what I’m doing,
h
Market Signals for
03-29-2022
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 17 Mar 2022 |
NASDAQ | POS | 24 Mar 2022 |
GOLD | NEU | 28 Mar 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEG | 21 Mar 2022 |
CRUDE OIL | NEU | 22 Mar 2022 |
CRYPTO | POS | 22 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