Weekend Strategy Review April 23, 2023

Posted by OMS  at April 23rd, 2023

Stocks continued to trade sideways on Friday, not doing much of anything. The only thing I did notice was that two of the breadth indicators that make up The Tide turned negative, so overall The Tide has turned neutral. The reason I’m leading off by mentioning these two indicators is because it takes a lot to turn the Summation Indicator and the A-D Oscillator negative, The last time these indicators changed direction was on 27 March. The change from negative to positive marked the beginning of a 1,610 point rally in the Dow. So it should be interesting to see what happens to stocks when trading resumes on Monday. Will the major decline I see coming start on Monday or will wave 5 up of the Ending Diagonal Pattern continue into early May when the next Fibonacci turn window is scheduled to occur? We shall see….

Other than that, I don’t have much new to report. The slow, sideways trading we’ve seen for the past week hasn’t done anything to change the Market Timing Indicators. And until they turn negative, I don’t see much point in trading anything now. I believe the potential for gains to the upside are limited at this point, with way too much risk, but I don’t see any point in establishing any more short positions in Put Options. If the market does want to chop higher into early May, all those Put positions will do is lose money.

The two things I believe students should be focused on now are the Market Timing Indicators and the VIX. On Friday, the VIX closed at 16.77, which is an incredibly low number. You have to go all the way back to October 2021 to see VIX numbers this low, and coincidentally, it was just before the last market crash. Like I said last Thursday, the VIX is telling me that there is absolutely no fear in the market now. In the past, this lack of fear has almost always led to a major decline in the indexes. So with the VIX this low, start paying attention to the Market Timing Indicators on the major indexes. Start by looking for Green Arrows on the hourly bars of inverse index ETFs, like SDOW, SQQQ and TZA. If I’m right about the decline, whether it starts early next week or waits until the turn window of 1-10 May, the coming Wave 3 down is going to drop stocks to lows we haven’t seen in awhile.

You might want to check out the targets I gave in Thursday’s comments…

As of Friday’s close, the Market Timing Indicators on the cockpit for the Dow are positive.  The same indicators on the NASDAQ are neutral.

The Dean’s List is positive. The Tide has turned neutral. BTW, the fact that the A-D Oscillator has turned negative means that more stocks on the NYSE are moving down now than moving up. This is something that usually happens just before the market starts a major decline. Major turns almost always start sloooooowly…

The Sector Ratio weakened to 6-18 negative after Friday’s session. The top five strong sectors were Healthcare (2), Household Products (2, PharmaBio (1), Foods (1), and Computers (1). The top five weak sectors were Retail (-6), Banks (-4), Technology (-3), Autos (-3), and Energy (-2).

My Trades:  I didn’t trade on Friday. I finally got to Paris after a long delay at the airport. It took me over three hours from the time I landed to get through passport control. The lines were massive. Apparently only one in 15 people responsible for checking documents showed up for work. Then once we got our bags, there was another two hour delay getting transportation to the ship. We found out that the taxi drivers decided to use the day to protest French President Macron’s decision to extend the retirement age from 62 to 64.. Pension reform in France, where the right to retire on a full pension at 62, has always been a deeply cherished tradition. After talking with a few people here, I can see that its a very sensitive issue and even more so in recent months with social discontent mounting over the surging cost of living. I tried to be understanding, but the delays made for a long day. .

Have a great weekend.

That’s what I’m doing, ….or at least trying to :>)

h 

Market Signals for

04-24-2023

DISCLAIMER

As always, the Professor never makes recommendations. The information is provided on an educational basis so you can have informed discussions with your financial advisors and/or accountants about your individual investment decisions.

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.