Weekend Strategy Review May 30, 2021
Posted by OMS at May 30th, 2021
The major indexes closed higher on Friday continuing the bullish pre-Holiday bias I discussed in Thursday’s Comments. The interesting thing about the session was that while prices rose, most of the volume was to the downside, 53 vs.47 percent. The narrow range session also produced a small change in the A-D Oscillator, so we could see a big move when trading resumes on Tuesday.
Friday’s session did nothing to change the topping patterns on the major indexes. However, it’s still not clear if the indexes completed their 3-3-5 flat patterns or if they need one more small rally to complete wave ‘c’ of an a-b-c-move for wave 2 up. Either way, a top should be close at hand.
The large opening gap that occurred during both Thursday’s and Friday’s session was mostly filled by the close. It appeared that anxious traders couldn’t wait to buy stocks at the open, but completely lost interest by the close. This might have been related to pre-holiday short covering, but it’s also something often seen at tops.
I’m still using a close below 4100 as my signal that wave 3 down is starting on the S&P.
The upward flat pattern on the Dow could have ended at Friday’s intraday high of 34,631. If so, prices should begin to fall early next week. An impulsive decline below last Wednesday’s low would be my signal that Wave 3 down is underway.
My intermediate target for Wave 3 down on the Dow remains near the 32,500 level. I’m still using the 3,900 to 3,910 level on the S&P as my initial target for Wave 3 down, and 11,700-11,800 on the NASDAQ, with 11,500 possible.
The Market Timing Indicators on the Dow, SD&P and NASDAQ are Positive. The ST Indicators for the Dow (DIA, S&P (SPY) and NASDAQ-100 (QQQ) are also Positive.
The Dean’s List and The Tide remain Positive.
The Sector Ratio strengthened to 23-1 Positive after Friday’s session. The top 5 strong sectors were Real Estate, Service, Autos, Semiconductors and Leisure. The Real Estate Sector has the highest RS rating at 8. The remaining top five sectors have ratings between 3-5. All other sectors have RS ratings of 1s, and 2s. In other words, the top sectors remain strong, but the rest of the sectors are not suggesting a lot of strength. The one weak sector was Media with an RS rating of -1. Continue to watch for increasing weakness in the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks: The Top Stock from Wednesday’s MWL was GameStop (GME). It rose 11 points on Thursday,and then gained another 12 points early Friday before plunging to close down 32 points at 222. So its daily range was 221-268. Wow! I still think GME is a piece of crap, but wow, what a trading vehicle! Once it was identified as the top stock on last week’s MWL, all you needed to do was trade it using the short-term ST indicators. The key words here… trade it, not own it!
What about DDD, the #2 stock from Wednesday’s List. How did it do? Well, it gained another 1.52 points on Thursday, then another 2 plus points early Friday before closing down 1.48 points. Again, trade it, don’t own it!
By closing down on Friday, both of these top stocks are telling me the party could be close to being over. Both stocks are clearly ‘in-play’ now, so please be careful if you plan to trade them next week. Scalp trades only!
Gold: No change in my Comments on gold. Gold remains at a major crossroads as it continues to push higher. In my previous comments, I said that gold could trade to the 1,950 level if it remains above its Upper Trend Line. Yesterday, the metal pulled back to an intraday low of 1,882 before closing at 1,907. The late bounce suggests that gold is not finished with its rally, and could still test the 1,950 level. At this point, a break below 1,860 would suggest that the rally in gold has ended.
Bonds: No change in my analysis for Bonds. They still appear to be stuck in a wave 2 retracement within Wave 5 down. I still consider Bonds to be dead money, believing that there are much better trading opportunities elsewhere.
Have a great holiday weekend,
That’s what I’m doing,
h
BTW, the market is closed on Monday, 31 May, for the Memorial Day Holiday.
I hope everyone takes some time this weekend to remember the soldiers, sailors, and airmen who gave their lives for our freedom.
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
06-01-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 27 May 2021 |
NASDAQ | POS | 27 May 2021 |
GOLD | POS | 06 May 2021 |
U.S. DOLLAR | NEG | 12 Apr 2021 |
BONDS | NEG | 11 May 2021 |
CRUDE OIL | POS | 27 May 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