Weekend Strategy Review April 25, 2021
Posted by OMS at April 25th, 2021
The past few days of up-down-up action have provided some clarity to the final stages of the market’s rally to a top. It appears that the 16 April high of 34,257 was sub-wave 3 of Wave 5 up which makes Tuesday’s low of 33,678 part or all of sub-wave 4 down. The reason I use the term ‘part or all’ is because sub-wave 4 could develop into a sideways triangle that could take another day or so to complete. Once complete, the Dow will likely begin a sub-wave 5 rally to a new high, probably close to the 34,700 level I mentioned in Thursday’s Comments. The alternative to this scenario, a lower probability, is that Wave 5 up on the Dow ended with the 16 April high. This alternate scenario would be confirmed if the Dow closes below 33,200. If my primary scenario unfolds early next week as I expect and the Dow rallies, I believe that initial short or inverse positions established near or above the 33,600+ level will have a high probability of success.
Think about this. After making a high of 34,256 on16 April, the Dow declined 123 points on 19 April. It lost another 256 points the following day, then rallied for 316 points on Wednesday, lost 322 points on Thursday, then gained 228 points yesterday, closing at 24,043. So, for the week, after over 1,245 points of up-down-up trading action, the Dow finished with a loss of 156 points. If you think you missed something this week by being on the sidelines…you didn’t. All that’s happening now is churning. Stocks are moving from strong hands into weak hands, something that happens at important tops.
The pattern on the S&P and NASDAQ also suggests that the 16 April high was the sub-wave 3 up, with the 20 April low being associated with sub-wave 4 down. However, because the sub-wave 4 decline on the S&P consisted of 3 waves, it’s likely complete. If this is the case, the past three days of choppy up-down-up action on the broader S&P are more likely associated with final sub-wave 5 up, with yesterday’s 45 point rally being part of micro-wave 3 of sub-wave 5 up.
At this point, students should not get caught up in the micro and sub-wave counts. The thing they should take-away from the discussion is that the market is getting awfully close to a final top. The S&P closed at 4,180 on Friday after making a high of 4,194. On Thursday, I mentioned the target of 4,200 for the S&P. I have not seen anything after the past two days of trading action that would make me change that target.
Same for the NASDAQ. The 16 February high of 14,175 still appears to be the Wave 3 high with the decline into 5 March being Wave 4. The trading action off that low has occurred in four distinct waves, with yesterday’s rally being part of final Wave 5 up. Because of this I’m still using a target of 4,200 …or slightly above the 16 February high, as mt target. Yesterday the NASDAQ Composite closed at 14,017.
Bottom Line: This is a time when we need to pay close attention to what the market is telling us. Right now, the Market Timing Indicators are still Positive. The Scalp Trading Indicators are still Positive. If they start to turn Neutral or Negative…pay attention.
The Dean’s List remains Neutral as RWM, the inverse ETF for the small cap Russel 2K, remains on the List. The Tide has turned Positive.
The Sector Ratio weakened slightly to 22-2 Positive after Friday’s session. The top 5 strong sectors were Service, Autos, Retail, Banks, and Cap Goods. The two weak sectors were Energy and Semiconductors. Continue to look for changes to the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks. Just for grins, I checked to see what the top 10 stocks from Thursday’s MWL did during yesterday’s rally. All were winners! Some like Seagate Technology, STX, #5 on the List, were Big Winners gaining over 5 points! #1 TDC gained 1.68 points. #3 FSLR finished up 1.41 points, with #6 ABMD gaining 7.63 points. So once again, when the market rallies, we see the Top Stocks from the MWL lead the way higher. That’s exactly what we expect! If you were using the ST indicators on the short-term bars, you had a ball yesterday.
We have had several new and returning students purchase the ST video Class in the past two months. Because of this, I will be doing a free follow-on training session for these students to clarify the information received and answer questions. If you purchased the Class recently, look for an email announcing the training session. It will contain all required details needed to enter the GoToMeeting web training room.
Gold: The 3-3-5 flat corrective pattern I have been discussing for gold appears to have ended on Wednesday 12 April. The metal’s decline since the recent high of 1,789 has consisted of 3 waves. If gold breaks below 1,770 next week, the 3 wave pattern will likely extend to 5 waves which will confirm that the next major leg down is underway. If this is the case, the metal should trade down to the 1,660 level. If it breaks below 1,660, it could go as low as 1,560. Gold closed at 1,776 yesterday.
Bonds: The ST indicators on Bonds remain Positive, but I’m still avoiding Bonds for now. I still believe that the recent rally is associated with a retracement wave 4 up. Once this wave completes, Bonds should fall below their 18 March low.
Have a great weekend. Get some rest. Next week could be an exciting week for the markets.
That’s what I’m doing.
h
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
04-26-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 07 Apr 2021 |
NASDAQ | POS | 23 Apr 2021 |
GOLD | NEU | 23 Apr 2021 |
U.S. DOLLAR | NEG | 12 Apr 2021 |
BONDS | POS | 20 Apr 2021 |
CRUDE OIL | NEU | 22 Apr 2021 |
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.
Category: Professor's Comments, Weekend Strategy Review