Professor’s Comments May 13, 2021
Posted by OMS at May 13th, 2021
Stocks got hammered again yesterday with the Dow shedding 661 points. The Dow is now down 1,500 points for the week and it’s only Thursday. The S&P and NASDAQ were also hit hard, each dropping 89 and 358 points yesterday and 170 and 721 points for the week. Volume on the NYSE was moderate, coming in at 106 percent of its daily average. There were 75 new highs and 58 new lows.
For the past few weeks, I have been talking about how the major indexes were forming the final waves of major topping patterns. Then in Tuesday’s Comments, I mentioned that the Dow formed a spinning top reversal candlestick pattern, something usually seen at a major top. Because of this, I posted a few key support numbers that if broken would tell students that the decline suggested by the patterns, extreme sentiment and Bearish Omens was underway.
So, yesterday, we saw the S&P break below 4,147 which was the key number I had been using to tell me the top on that index was in. The 4,147 level was last Thursday’s (5/6) low which was the wave ‘e’ low of the triangle for sub-wave 4. Usually, when a sub-wave 4 triangle low is broken, it means something of major significance is happening. In this case, it means the S&P has changed direction. From a technical perspective, the S&P is no longer in a Bull Market. The Dow also broke below my key support number of 33,750 yesterday, closing at 33,587. In doing so, it increased the odds that Wave 5 of Major Wave 5 up on the Dow topped at 35,091 and that everything since is part of Wave 1 down of the new Bear Market.
My initial downside target for Wave 1 down on the S&P is near the 3,920 – 3,960 level. Yesterday’s decline was likely part of sub-wave 3 down which should test the area near 4,010, Then once sub-wave 3 completes, there should be a small retracement rally for sub-wave 4 before sub-wave 5 drops the index to my wave 1 downside target. There’s a small possibility that that a small snap back rally for micro-wave 4 within sub-wave 3 down could take the S&P back up to the 4,100+ level. If this occurs, I will view it as an excellent shorting opportunity. My downside target level for the Dow is near the 33,100 area. This is the level where sub-wave 4 up completed. If 33,100 is broken, the next support level is about 1,000 points lower. But even this lower level doesn’t offer much support. Real support doesn’t come in until the 30 October Wave 4 low of 26,146. That’s the level where final Wave 5 up started, which was also the start of the Ending Diagonal Pattern on the Dow. As I’ve mentioned many times before, the target for an Ending Diagonal Pattern is always where the pattern began.
The Market Timing Indicators for the Dow and NASDAQ are Negative. The ST Indicators for the Dow (DIA), S&P (SPY), and NASDAQ-100 (QQQ) are also on Sell Signals.
Students should pay attention to the key support levels mentioned above AND the indicators as the week progresses.
The Dean’s List and The Tide are Negative.
The Sector Ratio weakened to 20-4 Positive after Wednesday’s session. The top 5 strong sectors were Service, Material, Energy, Real Estate, and Foods. The four weak sectors were Semiconductors, Media, Technology, and Household Products. 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.
Top Stocks: In Tuesday’s Comments, because of the ‘Reversal Day Signal’, I started posting a few stocks from the ‘Weak List’ as potential shorts. The stocks included WKHS, down 0.55 cents yesterday; DDD, down 3.01 yesterday; TDC, down 1.37 yesterday; TAN, down 3.85 yesterday; and BIDU, down 6.43 yesterday. I also mentioned INTC and MU as potential short candidates because Semiconductors were the weakest sector at the time. So yesterday MU lost 3.88 points to 76.80. INTC was down 1.42 points yesterday.
A look at last night’s Weak Lists shows WKHS, TAN, BIDI, MU, and SABR as the weakest stocks. These are followed by INTC, ABMD, CCL, RCL, and SAM to round out the top ten.
Gold: Gold (GLD) pulled back slightly yesterday, dropping 1.71 points to 170.43. However, the pullback appears to be part of a sideways consolidation move. If this is the case, gold should make one more push higher, probably to the 174-175 level before starting its next major leg down. This push higher should take gold (the metal) to the 1860 to 1870 level. If this doesn’t happen, a close below 1,800 would suggest the a-b-c upward correction on gold is complete and that lower prices are in the cards.
Bonds: Bonds took a big hit yesterday with TMF dropping 0.59 cents to 22.08 which is well below my key support level of 22.73. The Market Timing indicators on Bonds turned negative on 11 May, and Bonds have been dropping ever since. I don’t have a good downside target for Bonds at this point, but the 18 March low of 20.91 appears to be a likely candidate. If 20.91 is broken, Wave 5 down could take Bonds back to the February 2020 lows.
That’s what I’m doing.
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
05-13-2021
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 12 May 2021 |
NASDAQ | NEG | 04 May 2021 |
GOLD | POS | 06 May 2021 |
U.S. DOLLAR | NEG | 12 Apr 2021 |
BONDS | NEG | 11 May 2021 |
CRUDE OIL | POS | 28 Apr 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