Professor’s Comments October 18, 2022
Posted by OMS at October 18th, 2022
Just when it looked like order was restored to the Bear Market, the PPT initiated several buy programs before yesterday’s open that caused the Dow to open 425 points higher. By the end of the day, the Dow was up 551 points, closing at 30,185. The NASDAQ and S&P were up 354 and 94 points, respectively. Volume on the NYSE was moderate, coming in at 96-percent of its 10-day average. There were 43 new highs and 120 new lows.
Yesterday’s opening TICK on the NYSE was extremely strong, coming in at 2,083, the highest reading ever recorded. It was accompanied by an A-D ratio of 18-1 positive. Upside breadth stayed strong throughout the day closing at 5.38:1 positive. However, despite yesterday’s extremely strong session, the indexes failed to exceed last Friday’s highs. That means that it is still possible that the ‘wile ride’ we’ve seen since last Thursday is part of an a-b-c rally for retracement wave 2 up. If so, yesterday’s rally was part or all of wave ‘c’ up.
If I’m correct about the pattern, wave ‘c’ up on the Dow could rally to the 30,700 to 31,000 level before wave 2 up completes. The 30,700 level is 0.62 percent retracement of the decline since the Major Wave 2 top made on 16 August. If the rally develops legs and carries to the point where wave ’c’ equals wave ‘a’ in length, the Dow could reach the 31,380 level. On the other hand, if the rally does not reach either of these levels and starts to move below the 4 October low of 29,614, it would mean that wave 2 is over and the next set of down waves is starting.
Yesterday’s rally was interesting from a trading perspective as the Bias on the major indexes opened positive and stayed positive all day. I started the day out thinking I would use the rally to establish positions in a few inverse index ETFs I like to trade. But I never got a chance. The Bias kept me out of the market all day. I didn’t want to trade the long side and was precluded (by the Bias) from going short. So, I stayed on the sidelines. Turns out the decision was a good one, because none of the upside trades after the initial pop ever amounted to much. I plan on staying on the sidelines at today’s open but will be watching the Bias as the day progresses for opportunities to get short.
Here’s my concern: Because there is a good possibility that wave ‘c’ up could extend to the 31,300+ level before it completes, I will not get aggressive until I see the Dow below 29,614. After that, I will need to see the Dow break below the H&S ‘necklines’ I discussed in the WSR. The ‘neckline’ I have on my Dow chart is now near the 28,660 level. A break of this level should send the Dow reeling toward 24,000.
One other thought…given yesterday’s PPT intervention, its also possible that the President’s Team continues to manipulate the market into the November elections. If this happens, and it’s a real possibility, the decline I see coming could be delayed until after 4 November. This is something options players should be aware of and adjust (roll over) their Put positions until after the elections.
The Dean’s List is negative, but The Tide has turned neutral.
The Market Timing Indicators on all the major indexes are still negative.
The Sector Ratio came in at 6-18 negative after Monday’s session. The top five strong sectors were Energy (5), Real Estate (2), Cap Goods (1), Banks (1) and Insurance (1). The top five weak sectors were Semiconductors (-7), Telecoms (-5), Retail (-4), Consumer Products (-4) and Household Products (-4).
Bottom Line: Continue to watch how wave ‘c’ of wave 2 up unfolds. If the Dow approaches the 31,700 level today and starts to head down, I’ll check the Bias on the 4-min bars of TZA and SDOW. If the Bias is positive on TZA, I’ll take all Green Arrow trades and exit the positions before the close. I won’t hold inverse positions overnight until I see the Dow below 29,614.
That’s what I’m doing,
h
Market Signals for
10-18-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 15 Sep 2022 |
NASDAQ | NEG | 15 Sep 2022 |
GOLD | NEG | 11 Oct 2022 |
U.S. DOLLAR | POS | 07 Oct 2022 |
BONDS | NEG | 11 Aug 2022 |
CRUDE OIL | NEU | 12 Oct 2022 |
CRYPTO | NEG | 07 Oct 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