Professor’s Comments November 23, 2022
Posted by OMS at November 23rd, 2022
Stocks rose yesterday on light pre-holiday volume. The rally pushed the indexes closer to completing their Wave 2 retracement patterns. The Dow finished with a gain of 397 points, closing at 34,098. The NASDAQ and S&P were up 150 and 543points, respectively. Volume on the NYSE came in at 82 percent of its 10-day average. There were 76 new highs and 68 new lows. Students should note how the number of new lows continues to increase. However, they are still not enough to turn the Hi-Lo indicator negative.
After yesterday’s session, it still appears that the Dow is completing sub-wave 5 up of Wave ‘c’ up in a Bearish Rising Wedge or Ending Diagonal Pattern for Wave 2 up. The NASDAQ and RUT still appear to be completing a corrective 3-3-5 Double Zig-Zag Pattern for their Wave 2s. Once these waves complete, the next set of down waves should begin. The waves should be a dramatic sell-off for Wave 3 down,
The Market Timing Indicators for the Dow remain positive. The same timing indicators on the NASDAQ are also positive. I need to see these indicators turn negative before I start shorting.
The Sector Ratio stayed at 4-20 positive after yesterday’s session. The top five strong sectors were CapGoods (7), PharmaBio (4), Semiconductors (4), Energy (4) and Leisure (3). The top four weak sectors were Telecoms (-2), Utilities (-1), Household Products (0), and Healthcare (0).
Something to think about: Yesterday, after the market closed, I had a consulting session with a student who was having problems with his trades during the past few weeks. He was wondering why he did so well in previous months but was being taken out of his scalp trades almost immediately or within 2-3 bars after entering. Another student I was working with last week expressed a similar issue with his shorts (inverse ETFs). So, I asked them if they had been checking the Bias on the Daily Bars before they were placing their trades. If they had been checking, they would have seen that the Bias on ALL the major indexes has been rising for the past month or so. So, any inverse trades places had to fight this rising, and now positive Bias. (This might be a good time to take a quick look at the Bias on the DIA, SPY, QQQ and IWM).
A positive and rising Bias on the Daily bars means that any inverse scalp trade placed on the short-term bars, like the 4s or 5s, will have low odds for success. So even though the Professor’s Methodology says to check the Bias on the short-term bars before you scalp trade with the Arrows, you should always know what the major trend of the market is doing. And you know this by checking the Bias on the Daily bars.
For example, yesterday was a good day to trade the long side of the market with UDOW. There was a positive seasonality bias in place due to the approaching Thanksgiving Holiday. The Daily Bias was positive and rising. And finally, when you went to the short-term screen for any of the indexes, you saw that the short- term Bias was also positive and rising. All you had to do to be successful was buy a few shares of UDOW and hang on until the Red Arrow appeared at the 12:10 mark. Later in the day, there were two additional trades for about 40 cents each that could have been taken after seeing a rising Bias and a positive trend indicator. The thing that made for a successful day was the rising and positive Bias on BOTH the Daily and short-term bars. You were trading with both the short-term AND longer-term trends.
Monday was a little different, because while the longer- term Bias was still positive, the short-term Bias on the Qs and IWM started out negative. So, IF you took a scalp trade in SQQQ or TZA, you knew that you were trading against the major trading. You knew going in that it was likely going to be a quick, short-term trade, with a limited gain. And that’s exactly what happened. By noon, the Bias on the short-term bars started rising, so the better bet was to trade the positive index ETFs and go with the major trend. It just makes trading a lot easier.
Anyhow, once we get past the Thanksgiving Holiday, students might want to pay attention to the Bias on the Daily bars of the indexes. See if it starts to change. Then once the Bias crosses it’s signal line and begins to head down, it’s likely that trades with the inverse index ETFs, like SQQQ and TZA, will become more successful. I think we’re getting close to a top, maybe within days. Be patient and let the Bias tell you when the top is in.
That’s what I’m doing,
h
Remember: Always check the Bias on BOTH the short-term AND longer term (Daily) bars before you place a trade. That way you will know if the trade is with or against the major trend. Then once you know the trend, just trade the Arrows. Enter on a Green and exit on a Red. If the Trend Indicator moves above the 50 level, I’ll add shares to my initial position. The Trend Indicator is a very important money management tool. It’s faster than the Bias and helps identify the start of a tend.
Market Signals for
11-23-2022
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 04 Nov 2022 |
NASDAQ | POS | 22 Nov 2022 |
GOLD | POS | 22 Nov 2022 |
U.S. DOLLAR | NEG | 14 Nov 2022 |
BONDS | POS | 16 Nov 2022 |
CRUDE OIL | NEU | 21 Nov 2022 |
CRYPTO | NEG | 10 Nov 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.
Category: Professor's Comments