Weekend Strategy Review November 15, 2020
Posted by OMS at November 15th, 2020
The markets staged a strong rally on Friday, but not enough to confirm its next directional move. The Dow finished with a gain of 400 points, closing at 29,480. The large cap index was up 1,155 points for the week. The tech heavy NASDAQ was up 120 points on Friday but was down 66 points for the week.
Not much changed from a technical perspective during the week. It still appears the markets are in the process of completing their Bullish patterns and developing those of a major Bear. For now, while the Bull appears to have the upper hand, I still believe that any rally from current levels will be limited and IF a rally occurs, it should complete near or slightly above the 30,000+ level.
Friday’s intraday rally to 29,559 was impulsive, so it would tend to suggest that more rally is coming. But there’s a problem with this Bullish analysis. At this point, the wave count is not clear, and as long as the Dow does not exceeded its 9 November high of 29,934, it’s very possible that this high marked the completion of the Bull market.
The reason I say this is because the sub-waves that have developed since the 9 November high are Bearish. The up-down-up action we’ve seen since last Monday can also be interpreted as the ‘Blade’ of a negative Hockey Stick pattern with the intraday decline on 9 November being the ‘Stick’. The pattern is a lot clearer on the S&P and NASDAQ where the decline from the 9 November high occurred in 5 waves with the next four days being an a-b-c retracement. If you get a chance, look at a 15 or 30 minute chart of the S&P and NASDAQ…you’ll see what I mean. Friday’s high on the SPY was slightly higher than the high reached on Wednesday, so it satisfied the requirement for a higher high in an a-b-c retracement pattern…all off Monday’s stick.
So, IF this negative ‘Hockey Stick’ is developing, it means the major indexes are setting up for a major decline. This pattern MUST be respected. If the lower portion of the ‘Blade’ is broken, 28,902 on the Dow and 3,513 for the S&P, prices will likely decline back to the 30 October lows. This low is 26,144 on the Dow and 3,225 on the S&P. BTW, the initial target for the HS pattern on the S&P is 3,472. IF this low is broken, it would only be a matter of time before a decline back to 3,225 occurs. So be cautious this week and watch the key support numbers I placed in bold type above.
The Market Timing Indicators for the Major Indexes remain Positive.
The Scalp Trading Indicators also remain Positive, but the negative divergence I mentioned Thursday continues to develop. Again, this divergence should be taken as a warning. At this point, the volume indicator on the NASDAQ-100 (QQQ) is hovering near the zero line. IF this indicator starts to move down with a diverging momentum indicator, it will generate a Sell Signal. Student should watch the Daily volume indicator on the QQQ in the days ahead. The NASDAQ-100 is the weakest index right now.
BTW, students using the Scalp Trading Indicators should note what happened to the QQQ the last time the volume indicator turned negative back on 14 October. The QQQ fell from an opening high of 295.32 to 266.97. Not a bad trade. Students should also note the recent negative divergence that has developed on the Q’s.
The Dean’s List and The Tide remain Positive.
The Sector Ratio mover to 24-0 Positive after yesterday’s session. The top 5 strong sectors were Retail, Real Estate, Banks, Semiconductors and Media. There were NO weak sectors.
Gold (GLD) had a small pop on Friday, gaining 1.2 points to 177.16. At this point I’m still avoiding gold as the ST indicators remain mixed. If the indicators turn negative next week, I will likely short gold in my own trading account. I’m still seeing way too much Bullish optimism with small traders in the gold market. This usually does not bode well for gold prices.
There were NO Changes to the Model after yesterday’s session. The Model remains 100 percent in cash. The Model will likely remain in cash for the next few days until the conflicting patterns are resolved.
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
11-16-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 09 Nov 2020 |
NASDAQ | NEU | 12 Nov 2020 |
GOLD | NEU | 12 Nov 2020 |
U.S. DOLLAR | NEG | 09 Oct 2020 |
BONDS | NEU | 12 Nov 2020 |
CRUDE OIL | POS | 11 Nov 2020 |
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