Professor’s Comments October 12 2021
Posted by OMS at October 12th, 2021
The indexes rallied early on Monday but finished the day sharply lower. The Dow finished with a loss of 250 points, closing at 34,946. The S&P and NASDAQ and S&P were down 93 and 30 points, respectively. Volume on the NYSE was low, coming in at 85 percent of its 10-day average. There were 153 new highs and 64 new lows.
At this point, it’s not clear if yesterday’s early rally to 34,951 on the Dow was the completion of Wave 2 up. It could be, especially since the decline that followed formed an outside day reversal candlestick pattern often seen at market tops. If the rally was not the completion of Wave 2 up, the early rally and subsequent decline were likely waves ‘a’ up and ‘b’ down of an a-b-c pattern within final Wave 2 up. If this is the case, the indexes could still have one more rally (wave ‘c’ up) before Wave 2 completes. We should know in the next day or so. A decline below 33,800 would confirm that Wave 3 down is underway.
The key to any remaining bullish potential now is the 7 October high of 34,975. As long as the Dow stays below this number, the odds are high that the next major move in the Dow will be lower. If by some chance, the Dow begins to break above 34,975, it means that retracement Wave 2 up is forming a more complex pattern that will delay the start of Wave 3 down for another week or so. I don’t think this will happen, but you never know what wave 2s will do. They are totally unpredictable.
BTW, this particular wave 2 appears to be occurring within a Major Wave 3 down. In other words, in my wave count labeling, Wave 1 down completed on 19 August when the Dow fell to 34,709. This was followed by Wave 2 up which was completed in late September. So, everything since has been a series of down-up-down-up waves that make up the early waves of Wave 3 down. So, if the Dow breaks below the 33, 800 level I mentioned, it should be a wave 3 of Wave 3 of Major Wave 3 down. It should be a significant decline. I’m using the same wave count for the S&P. The critical number I’m using is the 1 October low of 4,288. If prices break this level, my first target is the 4,000 level. Much greater Bearish potential exists after that, but I want to see how the decline unfolds before posting additional targets. Yesterday the S&P closed at 4,361.
My projected target for the NASDAQ is near the 12,400 level. This level is a standard 0.382 Fibonacci retracement of the recent rally. Yesterday the NASDAQ closed at 14,713.
The Market Timing Indicator for the Dow (DIA) and S&P (SPY) turned Negative after Monday’s session. The same timing indicator on the NASDAQ remains Negative.
The Scalp Trading Indicators for the Dow (DIA), S&P (SPY), and NASDAQ (QQQ) are Negative.
The Dean’s List remains Negative. The Tide is Neutral.
The Sector Ratio weakened to 13-11 Positive after yesterday’s session. The top five strong sectors were Energy (9), Banks (4), Leisure (2), Autos (2) and Insurance (2).4
The five weakest sectors were Retail (-3), Telecoms (-3), Consumer Products (-3), PharmaBio (-2) and Semiconductors (-2).
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
With Retail being the weakest sector, I started shorting two retail stocks that might be of interest to you. The first is Shake Shak (SHAK). The company grew out of a hot dog stand in New York. It currently consists of 311 Shaks that offer hot dogs, hamburgers, chicken, fries, and other products. As with many other restaurants, it’s been having problems keeping its head above water in the post covid environment. Yahoo finance shows its current earnings at -0.58 cents. But here’s where I differ with Yahoo. Their target is 97.93. My interim target is closer to 50, with 30 possible. Yesterday I had a nice day scalping SHAQ to the downside. If it pops today, I’ll do it again. I’ve been using the ST Indicators on the 10s to short the stock.
The second retailer I’m looking to short is Target (TGT). I think the stock is going to get hit hard by shortages. The thing that caught my attention on TGT is its low volume accumulation numbers. The stock has been selling off since it peaked at 267.01 on 11 August. Since then, the volume and money flow numbers are showing a slow, steady bleed. When I see a continuous decline in Volume accumulation and Money Flow, it usually spells trouble. Big trouble. It means the Big Boys are dumping the stock. Target is one of those stocks that when it rises, the volume accumulation and MF usually rise with it for months on end. But when it starts to decline, it shows the same pattern. VA percent and MF usually decline for months. I don’t have a down-side target for TGT, but there are two obvious support levels at 203 and 166, the March low. So, I’m making both SHAK and TGT as my ‘go-to’ shorts for the next few months. This means that anytime I’m looking for a stock to short if the market pops, both SHAK and TGT will be high on my List. BTW, …I’m NOT gonna say this, but if things get really ugly in the months ahead, its possible that SHAQ could go bankrupt. I didn’t really say that…. did I?
BTW, Bitcoin (BTC) jumped above $57,000 today after posting a strong weekly close above $54,000. So now its only 8,000 from its all-time high. My Market Timing Indicator for the cryptos remains Positive. Like I said in the WSR, “the crypto ETFs could be a nice place to be during the next few months.”
There were no changes to the Market Timing signals on Gold, The Dollar, Bonds, or Crude Oil because of Monday’s trading action.
One final comment: It’s actually a story. On the way home from IKEA on Sunday, I stopped by the Lobster Truck parked near the Publix on Hodges and JTB. I thought I’d get one of their delicious Bar Harbor sandwiches, which they normally sell for $24.95. Normally, the place is crowed, but this time I was able to drive right up without any problems. I knew something was wrong when I looked at the menu. Instead of $24.95, the sign said, ‘market price’. Hmmm? When I asked, ‘how much,’ the guy said $45…..for a lobster roll. I said no thanks. He went on to tell me how much the price of lobster had increased in the past few weeks. I’m relaying this story so the next time the government tells you there in NO inflation, you can say B.S. Maybe they should check out the price of lobsters and crude oil or use my Bass Boat index to measure inflation before they publish their next lie. If you wonder why Bitcoin and the Bitcoin miners are moving higher….think lobsters.
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
10-12-2021
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 11 Oct 2021 |
NASDAQ | NEG | 28 Sep 2021 |
GOLD | NEU | 06 Oct 2021 |
U.S. DOLLAR | POS | 17 Sep 2021 |
BONDS | NEG | 28 Sep 2021 |
CRUDE OIL | POS | 15 Sep 2021 |
CRYPTO | POS | 04 Oct 2021 |
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