Weekend Strategy Review May 1, 2022
Posted by OMS at May 1st, 2022
Stocks got hit hard again yesterday as wave 3 of Wave 3 down resumed its downward plunge. The Dow lost 939 points, closing at 32,977. The NASDAQ and S&P were down 601 and 155 points, respectively. The government reported that first quarter GDP fell 1.4 percent on an annualized basis – reversing the 6.9 percent growth rate of Q4 in 2021. The S&P has now declined for four consecutive weeks and is now down 13 percent since January. The Dow is down 4.9 percent for the month and has lost over 9 percent for the year.
Jeff Bezos lost $20.5 billion of his fortune after Amazon reported earnings that left investors disappointed. Amazon stock lost 406 points on the day. This happened a week after Netflix got clobbered, losing 46 percent of its value. Elon Musk lost about $30 Billion in less than 24 hours.
The decline in these stocks helped fuel the worst month for technology stocks in years.
Cathy Wood is panicking because she fears that stocks in her ARK Fund (ARKK) might be taken over, like what happened with Twitter. Hmmm?
All this is happening at a time when inflation running out of control, and the Fed wants to increase interest rates by 50 to 75 basis points. No Kathy, you shouldn’t be worried about a lack of stocks to buy for your fund…you should be worried about what the Bear Market will do to your investors, and whether you will even have a fund to manage.
Welcome to the Bear Market!
I had another great day of trading on Friday. The fun was back. All I did was follow the indicators on the short-term bars, which were negative from the get-go. The three inverse ETFs I traded, TZA, SQQQ, and SDOW produced another triple cigar day. Easy! Too bad Cathy doesn’t have the indicators. She could have saved her folks a lot of money. BTW, last August, Kathy’s ARKK Fund was trading at $132.5 a share. Yesterday, it closed at $47.13. down 65 percent! Just goes to show that it’s easy to manage stocks or a fund when the overall market is going up. The real test of a money manager is how he/she does when things start to get tough. Like now!
Anyhow, enough….
The Bear Market decline I started warning students about earlier in the year (last November for the NASDAQ and RUT), is now well underway. The first two legs of the decline, Wave 1 down and retracement Wave 2 up are now complete, and the first sub-waves of Wave 3 down are beginning to unfold. The impulse wave down we saw last Thursday, and Friday was the start of wave 1 down of Wave 3 down. The 0.38 percent retracement that occurred earlier this week was the completion of wave 2 up of Wave 3 down. Friday’s 939-point decline was the start of wave 3 of Wave 3 down. There should be a lot more downside in the weeks ahead, as the Dow continues its decline toward my target near the 31,000 level.
The Market Timing Indicator for Dow is neutral (just barely). The timing indicators for the NASDAQ, SPY, and Russell 2K remain negative.
The Scalp Trading Indicators for the Dow, S&P, NASDAQ, and Ru4sell 2K remain negative.
The Sector Ratio weakened to 4-20 negative after Friday’s session. This is the weakest the Ratio has been since mid-January when the Dow was plunging in Wave 1 down. BTW, after Friday’s decline, the Dow is still over 700 points away from its 24 February low of 32,272. This low MUST be tested and exceeded during the current decline for Wave 3 down to be valid. The four strong sectors are Energy (4), Foods (1), Utilities (1) and Real Estate (0). Take a close look at the RS ratings of the four strong sectors…except for Energy, they’re all pretty week. This alone should tell you everything you need to know about the health of the current market.
The top five weak sectors are Media (-8), Banks (-5), Autos (-5), Semiconductors (-5), and Financial (-5). If you still own stocks in these sectors, please take some time to re-evaluate the reasons why they were bought. Stocks in these weak sectors will be especially vulnerable during this Bear Market decline. They may not recover for several years. Protect yourself!
Gold and crude oil continue to form sideways triangles. I’m just waiting for an upside breakout. Before buying. Crypto is still dead money…for now. My best bets are still in the inverse index ETFs.
I’ll be spending some time this weekend getting ready for Monday night’s Class About Nothing. Like I said, the decline that lies ahead should be your best opportunity to make money this year. If you’re tired of listening to TV Commentators, and local ‘financial advisors’, who just collect your money and give it to people like Kathy Wood to manage.….do not miss this Class.
Have a great weekend.
That’s what I’m doing,
h
Also, please tell your friends about the new Arrows and bias indicators. If they send an email to Dave, via support at the market101, he will give them a free trial subscription. They’re going to thank you in the months ahead.
Market Signals for
05-01-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 27 Apr 2022 |
NASDAQ | NEG | 21 Apr 2022 |
GOLD | NEG | 29 Apr 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEG | 11 Apr 2022 |
CRUDE OIL | NEU | 25 Apr 2022 |
CRYPTO | NEG | 21 Apr 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