Professor’s Comments May 24, 2022

Posted by OMS  at May 24th, 2022

In Sunday’s brief Comments, I discussed how the late rally that started on Friday would likely continue toward the 31,500 to 31,750+ level.  It did and then some, getting as high as 31,968, before closing at 31,880, up 619 points. The NASDAQ and S&P were up 180 and 72 points, respectively. Volume on the NYSE was light, coming in at only 80 percent of its 10-day average.  There were 36 new highs and 143 new lows.

Yesterday’s rally was the Big Move predicted by Friday’s small change in the A-D Oscillator. It was another gift for traders to know in advance that a large move would be occurring. All you had to do once you saw the positive Bias at the opening was buy a few positive ETFs on Green Arrows and enjoy the ride(s). 

From a pattern perspective, it’s pretty clear that yesterday was part of a corrective wave 2 within a 3-3-5 pattern for Wave 3 down.  What is not clear is whether wave 2 completed yesterday or if it will continue to make a series of corrective rallies into the weekend before starting the next major decline. Memorial Day/end of the month weekends usually have a bullish bias, so it’s still possible that a decline today could be follower by another rally later in the week.  Be careful. This is still a trader’s market, and like Yogi would say, wave 2s ain’t over ‘till they’re over.

A decline below last Friday’s lows will eliminate the possibility of the upward flat or zig-zag pattern continuing in all indexes.  Otherwise, we need to remain on the lookout for potential rallies, which could re-test the 17 May high at the 32,680 level.  Do I think a rally this high will happen?  No. But it is possible.  BTW, last Friday’s low on the Dow was 30,635.76, so at 31,880, we’re still a long way from confirming that Wave 3 down is underway.  In other words, even if the Dow drops 500-600 points or more today, it’s still possible that it could be a ‘b’ wave within the a-b-c retracement for wave 2 up.

BTW, If the Dow makes wave ‘b’ down today. The same thing will likely happen on the other indexes.  Then once this decline completes, an index like the S&P could carry to the 4,100 level.  So, remember what Yogi said.  Yesterday, the S&P closed at 3,973. 

If you have the Arrows and the new Bias indicator, the above word jumble won’t matter too much.  Just determine the Bias and follow the Arrows.  Simple!

There were no changes to the Market Timing Indicators or the Dean’s List and MWL after yesterday’s action.  They are still negative.

Because of this, I will continue to look for opportunities to short the market today using inverse index ETFs. 

The Sector Ratio strengthened to 6-18 negative after Monday’s session. The top five strong sectors are Telecoms (10), Energy (3), Utilities (3), PharmaBio (1), and Food (0). The top five weak sectors are Retail (-7), Autos (-5), Food Drug (-4), Media (-4), and Consumer Products (-3). Continue to avoid the week sectors as they will lead the market lower.

I still not doing anything with gold, Bonds or crypto. Crypto and Bonds are still dead money, but gold is worth watching as its Market Timing Indicators have turned neutral.  I’m still now a buyer, but I am paying attention. The next few days will be very important to gold’s next major move.  If prices break below 1,808, the metal could trade down to 1, 720 or lower. On the other hand, if gold rallies causing the Market Timing Indicators to turn positive, it would be very bullish for gold. Best bet for now with gold is to remain on the side-lines.

That’s what I’m doing,

h

Market Signals for

05-24-2022

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.