Professor’s Comments November 5, 2020
Posted by OMS at November 5th, 2020
The markets rallied again yesterday. The Dow rose 822 points early, then pulled back in the afternoon session. The large cap index finished the day with a gain of 358 points, closing at 27,848. The NASDAQ and S&P were up 430 and 74 points, respectively. Volume on the NYSE was moderate, coming in at 110 percent of its 10-day average. There were 92 new highs and 14 new lows.
In Tuesday’s Comments, I talked about two scenarios for the markets, both of which were Bullish for the week after the election. I also mentioned that historical data suggests the market usually rallies during the week after the election but pulls back the following week. So right now, both the scenarios (based on technical patterns) and the historical data appear to be playing out.
By rallying yesterday, the Dow filled the two gaps I mentioned as likely near-term targets. However, even though the market rallied as expected, it is still possible that it’s only wave 2 up within a five wave sequence for Wave 3 down. In other words, we still don’t know if the rally is part of the Bear Market or the next major leg up of the old Bull. If its only wave 2 up of wave 3 down in the Bear Market, the Dow should begin to decline in the next day or so, if a re-test of yesterday’s highs occurs.
Yesterday’s rally was not that strong when viewed in terms of breadth. The advance-decline ratio on the NYSE was only 1.21:1. The ratio was considerably weaker on the S&P where only 47 percent of the issues advanced. The weak breadth was one of the reasons the Dow pulled back from its mid-day highs of 28,302 after partially filling the gap. Students who saw the EXTREME divergence on the short term bars were able to use my Scalp Trading indicators to take advantage of the 454 point afternoon decline once the volume indicator turned negative.
So where are we now?
Well, like I said, IF the market is about to start its next major wave down, any rally from this point should not go much beyond yesterday’s high. A re-test is OK, but any rally should not go much beyond the high point of the ‘gap’ which is at 28,336. A move above 28,336 would mean that the 30 October low is the completion of corrective Wave 4 down in the Bullish Scenario. This mean that the Dow and the other indexes are starting Wave 5 up and will likely rally to new highs. My target in the Bullish Scenario is above the 30,000 level with 30,300 possible. So, what I’m telling you is that the next few days will be critical in determining the next major move in the market.
The Market Timing Indicators for the Major Indexes are Neutral. The Weekly Timing Indicators on the Dow remain Negative. The same indicators on the NASDAQ (QQQ) are Neutral.
The Dean’s List is Neutral. The Tide is Neutral.
The Sector Ratio improved to 12-12 Neutral after yesterday’s session. The top five strong sectors were PharmaBio, Transportation, Semiconductors, Autos, and Consumer Products. The top five weak sectors remain Energy, Media, Computers, Real Estate, and Technology.
The Scalp Trading indicators on Gold (GLD) remain negative, so I’m still watching the metal. I MUST see positive indicators on GLD before I re-enter the trade.
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 until the conflicting patterns are resolved. Be patient and continue to protect yourself.
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
11-05-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 03 Nov 2020 |
NASDAQ | NEU | 04 Nov 2020 |
GOLD | NEU | 02 Nov 2020 |
U.S. DOLLAR | NEG | 09 Oct 2020 |
BONDS | NEU | 04 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