Weekend Strategy Review January 16, 2022
Posted by OMS at January 16th, 2022
In my last Update, I said the next day or so could be good days to trade. They were! I had two really nice ‘cigar’ days on both Thursday and Friday. I broke out a big fat stogie after trading was done and enjoyed them with some of that nice bourbon several of you gave me for Christmas. I spent the time thinking about how fortunate I was to have friends like you to share some of the stuff I’ve learned over the years with. It made me feel good inside.
Anyhow, with the market closed on Monday for the Martin Luther King, Jr. Holiday, I will have some time to do a little prep work for my Arrows ‘Tweaks’ Class on Wednesday. Actually, there won’t be a lot of prepping, because I’ve been using these new ‘tweaks’ for the past month, so all I’m going to do is show you a few charts. You’ll be able to pick up what I’m doing in a heartbeat. It really is pretty simple. But sometimes, it’s the simplest things that make you the most money. And this is what’s happening now.
Yeah, the market has been cooperating too. Two small change signals from the A-D oscillator in the past 7 trading days have helped produce two of my double cigar days. It makes for a really nice trading day when you know ahead of time that the Dow is going to move over 100 points during the day. When I see a ‘Small Change’ signal, I can’t wait to attack the market. I just wait for the Arrows to show me the direction and then start pouring money into ETFs going in the direction of the trade. One of the new ‘tweaks’ keeps me posted on how the trade is doing. The other ‘tweak’ lets me know at least one bar ahead of time when it’s time to get out. Because I want to share my success with these ‘tweaks’ with most of my students, I will be having an Update Class next Wednesday after the market closes. Some students won’t get them. It’s really a shame. Dave tells me that 33 of the students that took my original Scalp Trading Class have not taken the Arrows Class. This really puts me in a bind, because while I want to show my new trading system to everybody, I can’t. It just wouldn’t be fair to those students who paid for the Arrows Class. What can I say?
Just so you know, I asked Dave last weekend if we could offer those 33 students a onetime reduced rate to get them on board. If they take me up on the offer, then maybe all of us can start making money with the Arrows System as the Bear Market I see coming begins to unfold. I just hope they won’t be penny wise and pound foolish.
Anyhow, the Dow rallied to an intraday high of 36,514 yesterday before pulling back to close 202 points lower at 35,911. To be honest, I really didn’t learn anything about the markets next move after yesterday’s session. It would have been nice if the Dow continued its early rally, because then it would have been wave ‘c’ up within Wave 2 up, and the next major move would be down. But it didn’t. So now we’re left with a small problem. All we know at this point is that the Dow, S&P, and NASDAQ, still appear to be tracing out the corrective waves of Wave ‘D’ down. I still believe that this wave of the Dow will find downside support somewhere between 34,950 and 35,300. I’ve been using the 35,000 level for talking’s sake. However, how it will get down to that level is problematic at this point. After seeing Friday’s early rally, the Dow could still rise to the 36,650 level and then fall. Or it could start falling hard when trading resumes on Tuesday. Trust me, there’s no way to tell. I have looked at so many patterns and scenarios since yesterday’s close, it makes my head spin. The only real clues from Friday’s action came from the internals. While the Dow was pushing higher, the S&P and NASDAQ did not follow. This caused me to look at the NYSE TRIN which was decidedly low (0.64). The low TRIN tells me that a lot of the money that was changing hands on Friday was used to keep the Dow propped up. So once this money dries up, the Dow should start falling in sync with the other indexes. What I’m telling you is that someone, probably some large money manager, is currently playing games with the Dow. This makes think that no matter what happens on Tuesday, any early rally, possibly to 36,000-36,100, should be faded. I’ll be watching the ‘arrows’ on the 15-min bars for potential entry points. If this rally happens, I’ll look to hold most of my short (inverse) positions for a move down to the targets mentioned above near the 35,000 level.
That’s for my second-best trade. My #1 trade is still a short of the Russell. As I’ve mentioned before, the RUT is NOT in an Ending Diagonal Pattern like its sister indexes. It appears to be starting Wave 3 down. So, while its possible for the Dow and its sisters to rally once Wave ‘D’ down completes, I don’t see this happening on the RUT. Once the 212 level is finally broken on IWM, the ETF should start dropping like a rock. I still believe the ‘Doctor’s Trade’ I’m using based on the 4-hour bars will pay off handsomely in the next few months. IWM has been bouncing around for the past few weeks, appearing to go nowhere. Yeah, but it’s not. Out of the spotlight of its big sisters, it’s just doing everything it needs to do. If you look closely on the shorter-term bars, you can see that the decline from its 4 January high of 227 was conducted in five distinct waves. Wave 1 down ended on 10 January at the 211 level. Since then, Wave 2 up retraced to the 219 level on 12 January. This was followed by a decline back to the 211 level and a late rally back to 214 on Friday. At this point, mostly because 212 was broken, the early decline and late rally could have been the first two sub-waves waves of wave 3 of Wave 3 down. Doesn’t really matter. Because Friday’s low established a new low for the pattern, the odds have now shifted in favor of a move down to the 187.65 to 190 level.
My only warning is IF Friday’s low was wave ‘B’ down of an a-b c move within Wave 2 up, the ETF could rally back to the 218-219 level to complete Wave 2 up. If that happens, I will look to add to my existing short positions.
The Dean’s List has turned negative. The Tide remains positive.
The Market Timing Indicators for the Dow is neutral. The same indicators on the NASDAQ and SPY are negative.
The Scalp Trading Indicators for the Dow, NASDAQ, and S&P remain negative.
The Sector Ratio weakened to 14-10 positive after Friday’s session. The top five strong sectors were Banks (6), Energy (5), Autos (3, Foods (2), and Food Drugs (2). The top four weak sectors were Retail (-4), Leisure (-2), CapGoods (-2), Computers (-2), and Telecoms (-1).
I don’t have anything good to say about gold, bonds or cryptos this weekend. As far as I’m concerned, they’re dead money for now. My VTI indicator on the GBTC is still buried in the downtrend mode. This alone makes me stay away. I’ll let you know when the indicator stops trending.
Pay attention to what the indexes are doing when trading resumes on Tuesday. I still believe that the markets have a lot more downside to go in the weeks ahead. Yeah, they could bounce, but any bounce should be limited. That’s why I still view any bounce as a shorting opportunity.
Have a great weekend. Enjoy the Holiday. My next Update will be on Wednesday, 19 January.
That’s what I’m doing,
h
Oh, when you see Dave’s email announcing Wednesday’s Update Class. Please sign up immediately. We only have a limited number of seats in the meeting room, and I’m not going to do the Class twice.
BTW, here’s two ‘testimonials’ from students who took advantage of my recent Consulting Sessions. Yvette is a long-time student who now lives in Canada. Bob runs money in Dallas. Here’s what they sent me:
Hello Hank: Thought I’d let you know that I watched the 4-hour and 5-minute bright RED arrows bars and followed you in on DIA puts yesterday, except I bought the March 365’s. I “ate my cake” today and did very well. Like your other students, I have handily covered my scalp trading and arrow courses. Yvette N
Bob writes: I want to express my gratitude to Hank Swiencinski for the tremendous impact he’s made on my trading, and to encourage other traders out there to embrace Hank’s trading discipline and methodology. Hank is a very experienced trader who has developed what every trader needs: a rules-based methodology built around a proprietary Relative Strength algorithm that consistently identifies the best stocks in the market to trade. This trading methodology has made a big difference in my trading by helping me to become disciplined to a set of buy/sell rules and by helping me to focus my attention on only the best set-ups and only on the strongest stocks that present the best risk-reward opportunities. I’ve been trading for over 20 years, and I can say without hesitation that Hank’s disciplined methodology has helped to make me a better, more consistent trader. Robert S.
Me: Aw shucks…. I don’t deserve any of those nice words. I just tell my students what I’m doing :>)
Market Signals for
01-18-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 05 Jan 2022 |
NASDAQ | NEG | 13 Jan 2022 |
GOLD | POS | 11 Jan 2022 |
U.S. DOLLAR | NEG | 12 Jan 2022 |
BONDS | NEU | 13 Jan 2022 |
CRUDE OIL | POS | 23 Dec 2021 |
CRYPTO | NEG | 06 Jan 2022 |
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