Professor’s Comments May 10, 2022

Posted by OMS  at May 10th, 2022

Stocks continued their decline yesterday, with the Dow dropping another 654 points to 32,245. The NASDAQ and S&P were down 521 and 132 points, respectively.  Key technology stocks like Netflix (NFLX) are now down over 71 percent year to date.  Others like Amazon (AMZN) are down 34 percent, Facebook (FB) down 43 percent, Tesla (TSLA) down 26 percent, and Disney (DIS) down 31 percent.  The fad in Bitcoin is over, with the price now down 50 percent from its November high of 69,000.  The last time I looked, Bitcoin was trading just under 33,000.  The blood bath in equities is spreading to other crypto currencies, like Ethereum, the second largest crypto, which fell over 5 percent this past weekend to 2,240.  The Bear, like a slow moving glacier, is destroying everything in its path.

Yesterday’s advance-decline ratio on the NYSE closed at a negative 7.39 to 1.  Big Board down volume was almost 94 percent of the total shares traded. That’s huge!  Those numbers, which are typical of a wave 3 down within Wave 3 down, tell me that there is likely a lot more downside to come.  However, like I said in the past, no stock, no matter how bad or overpriced, goes straight down. There will be bounces along the away.  And after three straight days of losses totaling 1,816 Dow points, this market is ready for a bounce. The only question I have at this point is how high?

I’m thinking somewhere close to 400-500 Dow points, maybe back to yesterday’s high near the 32,685 level. I don’t see any rally moving much beyond this.  With the S&P now trading below the 4100 level, the institutions won’t be buying at that level anymore. Now, they will be sellers.  So, will I. I will consider any rally back to or above the 32,650 level a gift…another opportunity to put on a few more short bets with SDOW, TZA and SQQQ.  My target for the Dow is still near the 30,500 level. It could drop to 28,500 if wave 3 down is 1.62 times wave 1 down.  BTW, my downside target for the S&P, based on the H&S Pattern, is near the 3,600 level. Actually, there are two H&S Patterns on the S&P with targets close to 3,600.  

Now that Wave 3 of 3 down has started, it is starting to give me few clues on what will likely happen after all five waves of the decline are complete.  So, while its still early, and many things can change, IF wave 3 down does complete near the 3,600 level as I expect, the maximum rally wave after that, wave 4 up, should only carry to about the 3,800-3,900 level.  That’s not really that much of a rally when you think about it.  Then after wave 4 up completes, probably later this summer, wave 5 down should drop the index to somewhere close to the 3,000 level. That’s where the S&P should be in the months approaching the Fall elections.  I wonder how many people are still going to be concerned about current topics, like the right to an abortion, or what’s happening in Europe or China, after they look at their brokerage statements? With each passing day, trillions of dollars are being lost in the economy. If this decline continues, it will certainly drive the American economy into a deep recession, possibly depression. Many jobs will be lost. The savings and investment accounts of many people, especially the millenniums, who have never experienced a deep recession, will be wiped out. This will change the mind set and priorities of many Americans. Protect yourself!

The Dean’s List is the shortest it’s ever been.  The Tide continues to go out. 

The Market Timing Indicator for Dow has turned negative, joining the negative indicators on the NASDAQ, SPY, and Russell 2K. 

The Scalp Trading Indicators for the Dow, S&P, NASDAQ, and Russell 2K are negative.

The Sector Ratio weakened to 4-20 negative after Monday’s session. The four strong sectors were Telecoms (8), Foods (1), Utilities (0), and Real Estate (0).  The top five weak sectors are Media (-8), Autos (-7), Leisure (-7), Semiconductors (-5) and Banks (-5).  Disney (DIS) was down 3.71 points yesterday to a new low closing at 106.98. The stock has caused the Media Sector to be at the top of the Weak Sector List for weeks.  Just wanted to point this out, so you know where to look for weak stocks to short.  I believe that as the market moves lower, stocks in the weakest sectors will lead the way lower.

Crude Oil (UCO) fell 21.45 points yesterday, closing at 158.66.  The decline caused the Market Timing Indicator on the cockpit to turn neutral again.  It appears that the triangle on UCO is still not complete.  There’s a lot going on in the world now with crude oil. Expect a lot of volatility in price as the political situation with Russia, Iran and the Saudi’s and all of Europe (from a demand side) remains clouded.  Be patient.  

Gold (GLD) also took one to the chin yesterday.  It fell 2.54 points to 172.88, still within its developing triangle.  The Timing Indicators for gold remain negative.  Again, be patient and wait for a change in indicators.

I still don’t see any purpose in buying or holding anything related to cypto….at least for now.

Best Bets:  If the market rallies this morning, I will be looking to buy TZA, SQQQ, SDOW on any confirmed Green Arrow. I’m still scalping these ETFs on the short-term bars and holding them on the 4-hour bars.

That’s what I’m doing,

h

Market Signals for

05-10-2022

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