Professor’s Comments October 14, 2021
Posted by OMS at October 14th, 2021
The indexes were mixed to slightly higher yesterday on light volume. The Dow finished with a loss of one point, closing at 34,377. The S&P and NASDAQ were up 13 and 106 points, respectively. Volume on the NYSE was moderate, coming in at 95 percent of its 10-day average. There were 71 new highs and 35 new lows.
The decline on the Dow since 7 October into yesterday mornings early low consisted of five distinct waves. So yesterday afternoon’s rally was likely the start of a small retracement wave 2 up. If this is the case, the rally could continue into today, reaching the 34,500 level. A perfect 0.382 Fibonacci retracement would put it at 34,535. If the rally does not complete near 34,535, it’s possible that it could be a 0.618 retracement which would put it near 34,650. So, for today, I’ll be looking to get short from either of these target levels. Once the current rally completes, the next wave should be wave 3 of Wave 3 down. It will be confirmed by a break of the 33,800 level.
From a pattern perspective, the past few weeks of trading have continued to form the right shoulder of a Major Head & Shoulders topping pattern. The pattern has a downside target near the 32,000 level. If this happens, it will likely start a major Bear Market that will last for 3-4 years as the decline will only be Major Wave 1 down of five major waves. In other words, the decline could be significantly stronger than the one experienced from mid-2007 into March 2009. This decline has the potential to drop the Dow down to the 18,000 level or below.
There were no changes to the Market Timing Indicators for the Dow (DIA, S&P (SPY) and the NASDAQ after yesterday’s session. They all are still Negative.
The Scalp Trading Indicators for the Dow (DIA), S&P (SPY), and NASDAQ (QQQ) are also Negative.
The Dean’s List is still Negative. The Tide stays Neutral.
The Sector Ratio remained at 13-11 Positive after yesterday’s session. The top five strong sectors were Energy (7), Service (3), Banks (3), Leisure (2), and Autos (2).
The five weakest sectors were PharmaBio (-2), Retail (-2), Telecoms (-2), Consumer Products (-2), and Semiconductors (-2).
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
Yesterday I started shorting Shake Shak (SHAK). The short was good for almost 2 points before the afternoon rally closed out the trade. I never got the chance to short Target (TGT), the other stock I was looking to short, as the ST Indicators were positive at the open and stayed positive all day.
I also had a nice day trading Marathon Digital (MARA). I entered the trade just after the open near 40.65 and stayed in the trade until just before the close. The trade was good for about 3 points. BTW, this is what I’m doing now. Anytime I see the 10 or 15 min ST indicators on MARA or GBTC, I’m in the trade. For me, it’s a no brainer. As I’ve mentioned several times in the past few weeks, I believe Bitcoin has started its Wave 5 up. If I’m right about this, Bitcoin should easily exceed its old high near $64,000. Yesterday, an analyst at J.P. Morgan said Bitcoin could hit $130,000. As soon as he said this, an executive at Goldman said that number was way too low. He sees Bitcoin hitting $200,000 by December and possibly $400,00 by March. Kathy Wood, of ARK Investments has a target of $400,000. As for me, …I don’t know or care. But right now, all I can tell you is that the pattern suggests significantly higher prices. That’s why I’m trading the miners every chance I get…which is whenever the indicators turn positive. Think about this: A Bitcoin miner like MARA is currently using its computers to check Bitcoin transactions (hashing) and getting paid about 10-14 Bitcoins a day. Let’s say the number is 12 coins per day average. At yesterday’s price of $57,330 a coin, that’s almost $688,000 a day!!!! Show me a company that employs almost no people that can generate revenue anywhere close to those numbers. You can’t! That’s why I’m in MARA (or RIOT, another Bitcoin miner) every time the indicators are positive.
Like I said in the WSR, “the crypto ETFs could be a nice place to be during the next few months.”
There was a change to the Market Timing signal for Gold yesterday. It turned Positive. However, I’m not rushing out to buy gold or the miners yet. Yah, I saw the signal change, but when I look at the volume accumulation pct, OBV pct, and MF indicators, I don’t like what I’m seeing. Same for the miners. Besides, there’s only one miner near the top of the MWL. There should be many. So, I’m going to wait a day or so before I jump in. If gold (the metal) is really starting its next wave higher. I’d really like to see it break above 1,810 and hold the breakout. Otherwise, there is a real danger that the pattern since 1 October is a complex a-b-c flat, which suggests lower prices once a target of 1,810 is obtained. Yesterday gold closed at 1,793.
Besides….MARA is #2 on the MWL with a RS Ranking of 9. My old friend, NBR, is also up there at the #3 position with an RS Ranking of 9. So, if I’m going to trade anything to the long side today, it will likely be related to crypto or energy.
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
10-14-2021
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 | POS | 13 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