Professor’s Comments November 10, 2020
Posted by OMS at November 10th, 2020
The Dow had an incredible day yesterday, rallying over 1600 points after the open, then pulling back and steadying near 1,300 points up before falling into the close. The large move on the Dow came on news that Pfizer developed a vaccine for the COVID-19 virus that has a 93 percent success rate. Rather good considering that the vaccine for the common flue virus is only about 40-60 percent effective. The Dow finished the day with a gain of 835 points, at 29,158. The intraday high was 29,934. The NASDAQ didn’t have anywhere as good of a gain as the Dow as it finished down 181 points after being up intraday. The SPX finished up 41 points after giving back about two thirds of its gain. Volume on the NYSE was extremely heavy, coming in at 174 percent of its 10-day average. There were 345 new highs and only 12 new lows.
I want to discuss yesterday’s rally a bit more before moving on……. First, even though yesterday’s rally was large, it was expected. In my WSR, I mentioned that IF the Bullish scenario were taking place, the Dow would likely rally to the 30,000 level, perhaps even 30,300. I talked about this target as being the ‘moon’. What I did not expect was that the moonshot would take place in one day! By reaching an intraday high of 29,934, the Dow ‘hit the moon’ for all practical purposes. And by pulling back 776 points after reaching its high and forming a ‘Shooting Star’ candlestick pattern, it’s possible that yesterday’s rally to 29,934 was the top. We should know if the top is in within a day or so, after a possible re-test, but for now I’d have to say the odds are high. Maybe as high as 75-25 in favor of a top.
I’m basing this on the fact that the 30 October low marked the completion of an a-b-c pattern that began on September 3. This makes the October low Wave 4 down and the rally since part of Wave 5 up. In the grand scheme of things, this would make the 23 March low the completion of Major Wave 4 down, which then makes yesterday’s high a potential level for the completion of Major Wave 5 up. It could be the completion of wave 5 of Wave 5 of Major Wave 5 up. Like I said, we should know in a few days. I can’t say that yesterday’s high was the completion of the final top, but I can say that it has high potential.
The Dow is EXTREMELY overbought after yesterday’s session with a 2-period RSI of 96.3. My VTI is showing a reading of 59.88, which means NO TREND. So, without a trend and overbought, the market should begin to pull back within the next day or so. The futures are positive as I write this, but right now I’m looking at this as more of a short-term scalping opportunity than anything else. BTW, did any of you fade yesterday’s opening rally using the Scalp Trading Indicators? They were screaming at me, especially as the day wore on. You might want to look at them after you read this because I believe there will be many opportunities in the days ahead to do the same type of short-scalp trades. Then once the signals change, I’ll start leaving the positions on.
One of the reasons I still must remain cautious about the short side is that yesterday’s high could also be wave 1 of Wave 5 up. If this is the case, we should have a bit more up-down-up action in the days ahead before the final top is in. A decline below the 30 October low would eliminate this wave count. Just so you know, I don’t give this wave 1 scenario much of a chance right now, but I mention it because it’s still technically possible.
The Market Timing Indicators for the Major Indexes are Positive.
The Dean’s List and The Tide are Positive.
The Sector Ratio improved to 23-1 Positive after yesterday’s session. The top 5 strong sectors were Retail, Banks, Leisure, Real Estate, and Semiconductors. The only weak sector was Computers. BTW, the Banks had a big day yesterday, moving to the #2 spot on the Strong List. While this might seem like a positive for the market, its usually not the case. More times than not, when the Banks have a big day in a strong market, it usually leads to lower equity prices the following week.
Gold took a big hit yesterday turning its timing signal Negative. As you know, I was looking to establish a gold position in the Model but shied away from doing so after looking at the Scalp Trading Indicators. Yesterday’s early rise in gold could have been wave ‘c’ up in the large triangle pattern that has been developing since July. If this the case, gold may have more downside ahead before Wave 4 down completes and Wave 5 up begins. There is also an extremely high level of optimism among small traders now in the gold market. This is another reason I remain cautious. Also, the pattern suggests gold (the metal) could drop another 100 points or so before Wave 4 down completes. It’s another reason I’m staying on the sidelines for now.
There were NO Changes to the Model after yesterday’s session. The Model remains 100 percent in cash. The Model will likely remain in cash for the next few days until the conflicting patterns are resolved.
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
11-10-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 09 Nov 2020 |
NASDAQ | POS | 06 Nov 2020 |
GOLD | NEG | 09 Nov 2020 |
U.S. DOLLAR | NEG | 09 Oct 2020 |
BONDS | NEG | 09 Nov 2020 |
CRUDE OIL | NEG | 27 Oct 2020 |
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