Professor’s Comments September 17, 2020
Posted by OMS at September 17th, 2020
The markets were mixed yesterday after the Fed announced they would keep interest rates at zero until inflation starts to move above 2 percent. That could be a long time as the Fed has been trying to get inflation above 2-percent for almost 10 years and hasn’t been able to do so. The market initially rallied on the news, but then pulled back when it realized that this was not good news, as low inflation is a sign of a weak economy.
After being up over 360 points, the Dow finished with a gain of only 37 points at 28,032. The NASDAQ and SPX were down 140 and 16 points, respectively. Volume on the NYSE was moderate, coming in at 110 percent of its 10-day average. There were 89 new highs and 7 new lows.
Yesterday’s up-down action was negative from a candlestick perspective, as it could be interpreted as the initial body of a reversal pattern. We will know more about the pattern today if the market continues the decline that started about 15 minutes after the Fed announcement. One thing that’s troubling is the action on the S&P, as yesterday’s post Fed decline broke through the lower trend-line of a small triangle pattern that has been forming for the past three days. Going into the Fed announcement, the triangle had completed 4 waves of the triangle, with the short post announcement rally to 3,429 being wave 5 of retracement Wave 2 up. I previously mentioned the 3,425 level as trend-line resistance, so yesterday’s rally to 3,429 held for all intents and purposes. If this is the case, the ‘Blade’ of the S&P’s recent rally, which is also an Ending Diagonal, could be complete. If so, the next decline should drop the S&P to about the 3,325 level with the 3,062 level likely after that.
The key level to watch on the Dow remains at 27,500. This level represents the ‘Neckline’ of a Bearish H&S Pattern. Yesterday’s rally in the Dow appeared to complete the Bearish complex flat pattern that has been developing for the past week or so. A break of 27,450 would confirm that a stair-step decline from ‘Neckline’ support is underway. My target for this decline is near the 25,000 level.
The Market Timing Indicators for the Major Indexes remain mixed. The Timing Indicator on the Dow is Neutral. The same indicator on the NASDAQ remains Negative.
The Dean’s List is Positive, with a Neutral Tide.
The Sector Ratio stayed at 21-3 Positive after yesterday’s session. The top five strong sectors were Consumer Products, Transportation, Service, Retail and Media. The three weak sectors were Energy, Semiconductors, and Computers.
I remain of Full Red Alert as I continue to watch the developing H&S patterns on the major indexes. Again, the key support levels for these indexes are Dow 27,500, S&P near 334.87, NASDAQ near 10,730. BTW, my initial target for the NASDAQ, based on its H&S pattern is near the 9,500 level. Yesterday, the NASDAQ closed at 11,050.
There were NO CHANGES to the Model after Monday’s session. The Model continues to hold trial positions of 1,200 shares of TWM, 1,600 shares of DXD, 400 shares of DUST, 800 shares of QID, and $35,531 in cash. The Model continues to look for opportunities to buy shares of inverse index ETFs.
Gold (GLD) rose 0.52 cents to 183.97. Gold remains on a Neutral signal as its triangle pattern continues to form. Students should continue to watch for a breakout from the triangle as prices could move significantly higher or lower from current levels, depending on the direction of the breakout. We should know the direction in the next day or so.
The Dollar (UUP) rose slightly, so if this continues, gold should begin to fall.
Bonds remain on a Neutral signal. It’s likely that Bonds are in the process of completing a small corrective wave 2 within a larger Wave 3 down. TBT, the inverse ETF for Bonds, rose slightly yesterday (+11 cents) at 15.65. I bought a few shares of TBT yesterday for my IRA using the timing indicators on the hourly bars. Students should watch for a change in signal on the daily bars.
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
09-17-2020
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 14 Sep 2020 |
NASDAQ | NEG | 16 Sep 2020 |
GOLD | NEU | 26 Aug 2020 |
U.S. DOLLAR | NEU | 10 Sep 2020 |
BONDS | NEU | 09 Sep 2020 |
CRUDE OIL | NEG | 04 Sep 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