Weekend Strategy Review August 29, 2021
Posted by OMS at August 29th, 2021
The market rallied yesterday after Fed Chairman Powell’s relatively tame comments on tapering. He said the economy has reached a point where it no longer needs as much policy support, but also said he still sees interest rate hikes off in the distance. It was just the kind of news the market wanted to hear to start the final wave ‘c’ rally.
Yesterday’s rally did not exceed the Dow’s wave ‘a’ high made on 25 August and with yesterday’s better than 5:1 advance to decline ratio and up volume at 86 percent of total volume, the short-term odds continue to favor the Bulls. I still believe that the market will top by 10 September +/-, depending on how wave ‘c’ of Wave 5 up develops.
The Market Timing Indicators for the Dow, S&P, and NASDAQ remain Positive.
The Scalp Trading Indicators for the Dow (DIA), S&P (SPY) and NASDAQ (QQQ) remain Positive.
The Dean’s List remains Positive. The Tide remains Neutral after yesterday’s session.
The Sector Ratio strengthened to 19-5 Positive after yesterday’s session. The top five strong sectors were Insurance (2), Food Drug (2), Cap Goods (2), Household Products (2,) and Financials (2). The five weak sectors were Energy (-2), Autos (-1), Foods (-1) and Service (-1) and Real Estate (0).
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
Top Stocks: Friday was a BIG day for the crypto miners. In Friday’s early Comments, I said I would be buying the miners as soon as the Scalp Trading Indicators turned positive, and that’s exactly what I did. With MARA, and RIOT at the top of the Member’s Watch List, and GBTC at the top of the Dean’s List, it was an easy decision. The crypto stocks and ETF had been leading both Lists all week! MARA finished the day up 3.98 points at 40.2. It got as high as 40.66. RIOT was up 2.29 points at 38.57 after being as high as 39.35. The momentum indicators on both stocks suggests higher prices are still to come. I don’t know about you, but I can’t wait to trade them next week, especially with the pre-Holiday / end of month Bullish bias that should be present.
Like I said in previous Comments, Bitcoin still appears to be starting a Wave 5 up, which should propel the miners toward new highs. Earlier this year, Bitcoin reached a Wave 3 high of 63,300. Wave 5 up should exceed that level. As Bitcoin was pushing toward its high, MARA and RIOT were pushing toward their Wave 3 highs near 57.75 and 79.5, respectively. If the current rally is a Wave 5 up, both stocks should re-test and likely exceed their previous highs in the months ahead.
The only thing I’m concerned about now with the cryptos is how they will respond to the pressure of a decreasing stock market. The pattern for Bitcoin remains Bullish, and because the miners get paid in Bitcoins, they should continue to rally. This is a lot different from mining gold, where the pattern on gold (metal) is also Bullish, but the pattern on the gold miners, who don’t own any gold, is Bearish.
Anyhow, with MARA and RIOT continuing to lead the MWL, all I’m doing early next week is trading the miners. I’m simply watching them on the 10 min bars and taking all trades to the upside once the ST indicators confirm the trade. That’s it.
BTW, thanks to the many students who emailed me on Friday saying they were also having fun with the miners. I love to get that kind of feedback. Right now, the miners are hot. But in a few months, once several of the other new technology issues I mentioned in my last Update Class start to become more mature, and begin to attract attention, I fully expect that these issues will also move to the top of the MWL.
BTW, I want to make a few comments on some of the stocks involved in these advanced technologies. The comments were trigged by a conversation I had last week with my friend and partner, Harvey S. Harvey loves new technology and is always suggesting that I look at a few of his stocks as additions to the data base for the MWL. But here’s the problem with companies that are involved in new technologies or companies that only have a bunch of new patents and new ideas. You can wait forever on these companies before the new patents and new ideas start to attract the attention of new investors to move the stock price. I don’t have forever! I want to see the stock price move NOW! New technology stocks can stay at the same price for years before they attract investor money. If you have money invested in these stocks, it could be dead money for years. Here’s another problem. If the Bull Market is really near its end, and you’re still holding a ‘promise’ stock, the odds are high that the stock will get hammered during the next Bear Market. Worse yet, it could go out of business. I learned this the hard way about 40 years ago when I invested in an antenna company. The company had great ideas but couldn’t turn these ideas into marketable products during a down business cycle. It eventually succumbed to the pressure of a Bear Market.
So, with a Bear market approaching, I don’t want to be owning any ‘promise’ stocks. I only want to own or trade the top stocks on the Member’s Watch List. When a stock is at the top of the MWL, I know it is one of the of strongest stocks on the planet! I also know that it is in play. I don’t have to wait months or years for some news event to trigger a price move. I already know that something is happening with the stock, otherwise it wouldn’t be at the top of the List.
Like I said earlier, there will likely be a time and place for these new ‘promise’ stocks, but if they’re not on one of my List, I’m NOT interested in them. A good example of this is what happened to Cathie Wood’s new technology ARK Innovation Fund (ARKK). I love to listen to Cathie when she talks about new technology stocks. Last year, when many of these stocks were hot and being discussed daily in the press, on the net…everywhere, her fund rose from the low 80s to a high of 159. Cathie was everywhere. A lot of her stocks were high on my Lists during the run-up. But in the past 6 months, the bloom has fallen off the rose. ARKK dropped from 159 to 122. You don’t see Cathie on TV much anymore, and you don’t see any of her stocks at the top of the MWL. The time for many of Cathie’s stocks will come, but the negative indicators on AARK are telling me that time might have to wait. BTW, I really like many of the stocks in Cathie’s ARKK ETF, so I will be adding the ETF to the data base for Dean’s List. That way, if you want to invest in some of her new technology stocks, you will be able to see how ARKK ranks against other ETFs in the future. Then if technology starts to come back, and ARKK starts to move up the Dean’s List, you can use the ST indicators to buy it.
Gold: Gold (GLD) had a strong rally yesterday, gaining 2.52 points to close at 170.19. The rise turned the Market Timing Indicators on gold positive. Because gold (the metal) completed a five-wave rally from 9 to 24 August, followed by a three-wave pullback, it’s likely that gold will continue to rally to the mid-1830s. The alternate is that gold will start falling early next week to the 1,770 level in wave C down. Either scenario is possible, but a close above 1,830 would tilt the odds in favor of higher prices. I’m still avoiding the miners, no matter what gold (the metal) does.
Bonds: Bonds (TMF) continue to suggest they are nearing completion of a Wave 4 retracement. A break below Thursday’s low of 28.16 would suggest that Wave 5 down in Bonds is underway. I’m watching Bonds closely now, because a downturn in Bonds would project a rise in interest rates, which will likely start to impact equity prices.
Have a great weekend.
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
08-30-2021
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 23 Aug 2021 |
NASDAQ | POS | 23 Aug 2021 |
GOLD | POS | 27 Aug 2021 |
U.S. DOLLAR | NEG | 23 Aug 2021 |
BONDS | NEU | 25 Aug 2021 |
CRUDE OIL | NEU | 27 Aug 2021 |
CRYPTO | POS | 20 Aug 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