Professor’s Comments May 5, 2020

Posted by OMS  at May 5th, 2020

The markets fell early completing what appeared to be an a-b-c move for wave 2 down of Wave C up within Major Wave B up.  The Dow finished with a gain of 26 points, closing at 23,750. The NASDAQ and SPX were up 106 and 12 points, respectively. Volume on the NYSE was moderate, coming in at 92 percent of its 10-day moving average.  There were 5 new highs and 10 new lows.

With the Dow failing to sustain its opening move down, it eliminated the possibility that the next impulsive move (Major Wave C down) was starting. With an oversold market and a VTI showing NO Trend, the odds for the rally I talked about this weekend started to take over. (see last Sunday’s comments). That rally should be Wave 3 up within Wave C of Major Wave B up.  It should take about 10 days +/- and carry the Dow back to the 25,000-25,500 level, possibly higher.  Once all five waves of Major Wave B up complete, another crash wave …Major Wave C down similar to Major Wave A down should drop the Dow to the 17,000 level or lower.

The Market Timing Indicators for the Major Indexes remain Neutral.

The Dean’s List and The Tide remain Positive. 

The Sector Ration stayed at 7-17 Negative after yesterday’s session.  The Strongest Sectors were Material (includes gold), Household Products, PharmaBio, Energy, and Utilities.  The Weakest Sectors were Media, Autos, Real Estate, Banks, and Insurance.   

Gold and the miners rose slightly again yesterday, but it’s still not clear if the sideways triangle pattern for wave 4 is complete.  The market timing indicators on GLD remain Neutral.  If gold pulls back today, I will look to Scalp Trade gold and mining stocks to the long side.

Bonds appear to have completed their Wave B retracement rally. If this is the case, bond yields should be getting ready to rise.  The Model will look to add to its current position in TBT on any pullback. 

The Model used yesterday’s early decline to exit its inverse shares of DXD, QID, and TWM.  Prices at time of sale were DXD – 24.15, QID – 17.91, and TWM – 15.39. The Model continues to hold 40 shares of UCO, 600 shares of TBT, and 500 shares of GOLD with a cash balance of $76,147.  

With mixed signals on the cockpit and a pattern that could terminate at any time, the Model will probably NOT chase the market higher, but instead look to re-enter the inverse positions it sold yesterday at more favorable prices.  The reason the sidelines look attractive now is because of the large downside risk.  I see a potential 1,200+ points of upside gain vs. 7,000+ points of downside risk.  Under these conditions if the Dow rallies….so be it.  But you won’t see me holding long positions overnight.  Scalp Trades only! Remember, the Dow is in the final wave of a major retracement pattern. This pattern can terminate at any time. It does NOT have to reach the target levels I mentioned above.

That’s what I’m doing,

h

The 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

05-05-2020

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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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.