Weekend Strategy Review November 22, 2020
Posted by OMS at November 22nd, 2020
The markets were relatively quiet on Friday, except for the last 30 minutes when they sold off into the close. Late sell-offs are usually not something you want to see if you’re Bullish as it’s usually means the institutions, …the smart money, are selling stocks. However, this time the breadth and volume of the sell-off was relatively tame, so I’m not sure what to glean from the late decline.
The Dow finished the day down 220 points, closing at 29,263. It was down 216 points for the week. Not so bad when you consider that the large cap index had rallied almost 3,000 points during the previous two weeks. It needed a rest. The NASDAQ dropped 50 points on Friday but was up 26 points for the week.
Friday’s pullback did not change anything from a technical perspective. The two scenarios I talked about last week are still in play. While the recent pullback was expected, I still can’t tell if Friday’s decline is the start of something larger (a major wave 3 down) or a slight pullback (a wave 2 within a 5-wave sequence to complete final Wave ‘B’ up. Either scenario is still possible. However, if the Dow stays above the key support number I mentioned in Tuesday’s Comments (28,902) I MUST still go with the Bullish Scenario. I had been using the 29,200+/- level as my target for wave 2 down. On Friday, the Dow got as low as 29,231. So, it’s possible that corrective wave 2 down was completed on Friday. We’ll see when trading resumes on Monday.
BTW, my custom VTI indicator for the Dow (DIA) and NASDAQ-100 (QQQ) continues to flirt with the Trend Mode after Friday’s session. The DIA had a reading of 74.1 while the Q’s are at 67.5. So, the DIA remains in the trend zone, while the Q’s are just shy. If the DIA remains in the trend zone, above the 70 level, the odds favor a continuation of the uptrend.
The Market Timing Indicators for the Major Indexes remain Neutral. If the indicators turn positive next week, it will likely mark the start of Wave 3 of 5 up. On the other hand, if they turn negative, it will likely signal the start of Major Wave 3 down.
The Scalp Trading Indicators on the Dow (DIA) remain Positive, but the Daily volume indicator remains close to turning negative. The volume indicator on the NASDAQ-100 (QQQ) has turned negative but the momentum is still positive. Students should continue to watch the Daily volume indicator on the QQQ in the days ahead. If the volume indicator on the Q’s strengthens, the other indexes should have no problem moving higher. What happens to the Q’s in the days ahead will be critical to determining the next direction of the overall market.
The Dean’s List has turned Neutral (QID is on the List). The Tide remains Positive.
The Sector Ratio continues to remain strong, finishing the week at 22 – 2 Positive. The top 5 strong sectors were Retail, Media, Real Estate, Energy and Banks. The two weak sectors were Computers and PharmaBio.
Gold (GLD) continues to look Bearish. Even though GLD rose slightly on Friday, it continues to test support at the 175 level. If this level is broken next week, GLD could fall to the 155-156 level. I continue to avoid gold for now.
There were NO Changes to the Model after yesterday’s session. The Model did not purchase the Q’s on Friday as the 15 min Scalp Trading indicators I was using to trigger the trade remained negative. The Model remains 100 percent in cash. The Model will likely remain in cash until the conflicting patterns are resolved.
One of the things I’m looking at this weekend is the large moves that have been occurring in the market every Monday for the past few months. For example, when the market was on positive signals during the last three Mondays, the Dow rose 470, 835 and 423 points. Before that when the signals were negative, the Dow fell -650, and -450 points on Monday. This large point Monday action has been going on since last Spring. (I didn’t check much before that, but it appears to be a reliable phenomenon.) Anyhow, one of the things I did in an attempt to take advantage of these ‘Big Monday Moves’ was to go back and look at what happened to the stocks near the top of the Member’s Watch List in the days after being highlighted. The results were amazing! So, IF a stock was near the top of the List, on Friday, AND the Dow started higher on Monday, the top stocks shot higher. This is something you would expect as the stocks at the top of the DL are among the strongest stocks on the planet.
I then took my research a bit further. I started to look at what happened when the Scalp Trading Indicators were used to trigger the trades on Monday. Again, very impressive results. For example, on Friday, 13 November, Signature Bank (SBNY) was at the top of the MWL trading at 102.65. The following Monday, it was up 8.48 points to 111.13. It opened at 108.36 with positive ST indicators, so if purchased at the open, you could have made almost 3 points profit by the end of the day. Imagine what the profit would have been if options were used?
The week before, Ubiquiti (UBNT) was at the top of the MWL on Friday, 6 November. Again, the following Monday with the market opening higher, UBNT gained 11.79 points. It opened at 252.58 with positive indicators, closed at 257.01, for a gain of 4.43 points. During the day, the stock was up over 14 points from the open. Wow!
A $40 stock like Acadia Healthcare (ACHC) was #2 on the List on Friday 5 November. It gained 1.49 points the following Monday. Nabors Ind., a $32 stock in the #3 position, jumped 6.85 points the following Monday. Ok, some of this may have had something to do with the post-election rally. But if we go back a week, on Friday, 30 October, TCBI and ACHC were #1 and # 2 on the List, trading at 45 and 35.65, respectively. Two weeks later, the stocks were trading at 51.5 and 41.79. So, even though the Monday phenomenon and the pre/post-election rally gave the stocks a boost, the key thing was that the MWL was able to identify the stocks. The only thing you needed to do was to use the Scalp Trading indicators to trigger the trades. The MWL told you which stocks to trade, which is a huge advantage!
If you go back to Friday, 23 October, a period just before the market started to fall, you will notice that stocks like BBBY and DDD were at the top of the MWL. Both stocks had been on the List the previous Friday at 24.83 and 6.77. They both rose to highs of 26.16 and 8.58 during the week after nice rallies going into the 23rd. So, the MWL worked again on the 16th. But if you wanted to buy them after seeing them on the List a week later, you couldn’t because the SC indicators were saying NO on Monday! They kept you out, avoiding the decline that occurred the following week.
Anyhow, it appears that using the MWL on Friday to identify stocks to trade the following week has some interesting possibilities. I only looked at the top five stocks on the MWL and only went back to the late April 2020. But when I used to Scalp Trading Indicators to trigger trades on these top stocks, the results were amazing. You might want to do your own research on this if you have some time this 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
11-21-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 18 Nov 2020 |
NASDAQ | NEU | 18 Nov 2020 |
GOLD | NEG | 18 Nov 2020 |
U.S. DOLLAR | NEG | 09 Oct 2020 |
BONDS | POS | 19 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