Weekend Strategy Review March 13, 2022
Posted by OMS at March 13th, 2022
Stocks finished lower on Friday, appearing to complete sub-wave wave ‘b’ down of the complex double zig-zag pattern I talked about in Thursday’s Comments. The Dow fell 230 points, closing at 32,944. The large cap index was down 670 points for the week. The NASDAQ and S&P were down 286 and 18 points, respectively. Volume on the NYSE was moderate, coming in at 96 percent of its 10-day average. There were 58 new highs and 338 new lows.
Next week should be an interesting week. The Fed will announce its latest policy on interest rates on Wednesday. With the Labor Department announcing that inflation is now at 7.9 percent, traders are expecting the Fed to increase interest rates by as much as half basis point. This could cause a lot of volatility AFTER the announcement.
Going into the announcement is another thing. With yesterday being an options expiration Friday, history suggests that next week’s early trading will be relatively flat to slightly positive going into the announcement, as most traders stay on the side lines, waiting to hear what the Fed says. Wednesday morning will likely have the usual Fed Day positive bias, helping the final leg up of the double zig-zag pattern complete sub-wave ‘c’ of Wave 2 up. So, what I’m telling you is the stage is set for a major decline wave 3 of Wave 3 down, to start immediately after the Fed announcement.
Please take all necessary precautions to protect yourself
After Friday’s action, the Dean’s List and The Tide are now negative.
The Market Timing Indicators for the Dow, S&P, and NASDAQ are still negative
The Scalp Trading Indicators for the Dow, S&P, and NASDAQ remain negative.
The Sector Ratio weakened to 6-18 negative after Friday’s session. The top five strong sectors were Energy (10), Material (3), Food Drugs (2), Cap Goods (0) and Banks (0). The top five weak sectors were Semiconductors (-8), Household Products (-7), Autos (-6), Consumer Products (-5) and Technology (-5). Students should note how both the Sector Ratio and the RS of the individual sectors continues to weaken.
My Doctor’s Trade in TZA generated a Green Arrow/green bar on yesterday’s last bar. I’m not sure if the Arrow will remain Green going into Wednesday, and I’m not really that concerned about it. What I will be concerned about is the color of the arrow AFTER the Fed announcement. So, pay attention the color of the last bar on Wednesday. I still believe that IWM, the ETF I use to track the Russell will trade down to 183 or lower in the weeks ahead.
Cryptos: With GBTC dropping 1.06 points on Friday, the cryptos have moved back to a Sell Signal.
Gold: Gold continues to pull back after generating a Red Arrow on its 4-hour chart. The pullback appears to be forming the Blade’ of a Hockey Stock which suggest higher prices. The bias indicator on GLD remains positive, but is decreasing. If a Green Bar/Green Arrow appears later in the week, I’m a buyer.
BTW, before closing this WSR, I want to talk about some of the things I’m seeing, besides the patterns, that have me concerned about where this market is going.
Besides the rise in CPI, the Labor Department also reported that the price of gasoline rose 38 percent. Food prices rose 7.9 percent, which I believe is completely false and understated. I had my son and his wife come in earlier this week for the Players Tournament, so I went food shopping. I couldn’t believe the increase in meat prices. Trust me, they weren’t anywhere close to what the guys at Labor were reporting. The increase in meat was more like 30-40 percent. Electricity was reported to be 9 percent higher. My bill was closer to 13 percent higher for the month. House prices were reported to be 4.7 percent higher. When I checked the real estate flier from my local agent, it showed that most houses here in Jax Golf were selling at prices significantly over the list price. That’s a lot more than a 4.7 percent increase.
The other thing I don’t understand is how the domestic auto makers, like Ford, can report earnings that are almost unchanged. They have huge lots of incomplete autos and trucks that they can’t sell because they don’t have the required semiconductors. Their manufacturing plants have been shut down because of lack of parts. The dealers have turned to selling used cares because they can’t get new ones, but Ford is still saying that things are OK. Really? I don’t believe them. It just doesn’t meet my smell test.
I’m seeing this same thing in other industries, like housing. We’re not seeing it too much here on the East Coast, but several large real estate corporations are buying up homes in the mid-west and West Coast, monopolizing the existing home market. This is causing prices to increase 25-50 percent in these markets. It’s crazy! Whenever I see strange things happening like this, I get concerned. I’ve learned that whenever ‘bubbles’ like this begin to develop, it’s time to batten down the hatches and prepare for the coming storm.
From the looks of things, that storm could begin by the middle of next week.
Have a great weekend.
That’s what I’m doing,
h
Market Signals for
03-14-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 11 Feb 2022 |
NASDAQ | NEG | 03 Mar 2022 |
GOLD | POS | 25 Feb 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | POS | 07 Mar 2022 |
CRUDE OIL | POS | 01 Mar 2022 |
CRYPTO | NEG | 10 Mar 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