Weekend Strategy Review November 28, 2021
Posted by OMS at November 28th, 2021
There was a lot of red ink before the markets closed on Black Friday. The TV pundits credited the decline to a new strain of the Corona virus, something called Omicron. We know better…the decline was exactly what we were expecting, namely Wave 3 down. Call it anything you want, the decline wiped 905 points off the Dow, causing it to close at 34,899. It put a damper on many who were trying to save a few bucks on Black Friday sales. Not a lot of fun when you’re trying to save 10 bucks on a sweater, but then see thousands lost in your trading account or IRA. Anyhow, those who saw the Arrows turn Green on TZA (4 hour bars) on Tuesday 17 November were happy campers by Friday’s close. Same for those who were holding SDOW, SQQQ, and SPXU. And like I said above, because the decline was an anticipated Wave 3 down, and NOT something caused by Omicron, its likely that the decline has a lot more downside to go.
One of the reasons I say this is because Friday’s decline cannot be part of some type of a Wave 4 correction. That’s because of how Friday’s decline took place. During the day, when the Dow moved below 34,750 it fell below high of a previous sub-wave 1, invading the territory of a previous sub-wave 2. This cannot happen. Well behaved wave 4s just don’t do that, so I MUST eliminate that possibility. So given that the Dow appears to have topped on 8 November at the 36.565 level and has since made what appears to be wave 1 down and wave 2 up, Friday’s impulsive decline, with plenty of the downside momentum I was looking for, can be now labeled a wave 3 with a high degree of probability. It means that I must now be looking at a few downside targets.
If you look at a chart of the Dow, you will immediately see that Friday’s decline stopped at the top of the large Wave 4 triangle that formed from 17 September to 13 October. just under the 35,000 level. This level is now acting as support and was the first logical target for the Dow’s initial Wave 3 decline. The Dow could have a small rally after testing this trend line support or not, but the next support level (target) is the lower trend line of this triangle, located near the 33,785 -33,850 level. This is an EXTREMELY critical level, as it is not only contains the triangle support lows, it is also where the 200-day moving average is located. The 200 is slightly above the triangle support level, so a move below 33,785 would place the Dow below the 200 without support until the 34,000 level, then 28,000 and finally the March 2020 low of 18,213. BTW, that last low is where Major Wave 5 of the Great Bull Market that started in March 2009, so it MUST be considered. Will the Dow ever see a low like this again? I don’t know, but it is NOT unusual for a Wave 5 Ending Diagonal to decline to the level where it started. And 18,213 is that level. That’s a 50 percent decline in the Dow…again not unusual for a Bear Market. Remember, the Bear of 2007-2008 saw many stocks decline over 75-80 percent. The Dow fell from 14,279 to 6,440. The NASDAQ fell from 2861 to 1265.
On Friday, the Dow generated a CONFIRMED Red Arrow on the Weekly chart. Take a look! BTW, while you’re at it. Make sure you noticed the confirmed Red Arrow that was generate on 24 February 2020. After you look at it……take the time to look at it again. Let it sink in. That Red Arrow was the start of the Covid panic. Now we’re dealing with a lot more than Covid. Rising gas and food prices (inflation), a boarder crisis, a Fed that is starting to taper, a government that is trying to pass an insane spending bill that will raise taxes from 20 to 39 percent, and a President who has less than a 38 percent approval rating. You wonder why I’m concerned? Take another look at the Weekly CONFIRMED Red Arrow.
Anyhow, that’s enough for now.
This is my Weekend Strategy Review. So, from a strategy perspective, I MUST be short this market until I see something that tells me otherwise. I MUST!!! This is NOT to say that there won’t be rallies along the way, as a Bear Market is always characterized by significant sell offs followed by sharp, brief, snap back rallies. Because of this, and the fact that my Weekly overhear cover is now Bearish, I MUST start to favor the downside.
I’m currently looking to add to my inverse positions in the indexes on any rally. That’s my strategy. If I have overhead cover on the Daily bars, I’m adding top my positions. I’m holding my longer term positions, based on the 4 hour charts, and using the 120 minute charts to conduct positions trades. I’m using the 12 min charts to enter or add to positions in inverse index ETFs, like TZA, SDOW, and others whenever the Arrows give say so.
We’re in the initial stages of a Major Bear Market. It’s not going to get any better. Yes, there might be rallies along the way. We might even get one next week. But for the next few months…possibly years, I’m going to trade this like a Bear. The charts are telling me that prices are going to be a lot lower a few years from now than they are today. This is not the time to be aggressive by trading or holding stocks to the long side in your portfolio. You might want to talk with your financial advisor this week. Show him the Red Arrows. Ask him what he plans to do about them. If he says something like…. ‘I’m gonna watch it” …dump him! Watching is NOT a strategy. You need more form him. Remember…it’s your money. He MUST have a strategy that will protect your money.
BTW, ask him if he is making the decisions to manage your money or IF he’s farming the decisions out to someone else…like a mutual fund manager. If he is, he’s only a money gather. You do not need money gatherers in a Bear Market. You need someone who is going to protect your money.
Have a great rest of the weekend.
After a looooooong drive home from Northern Virginia with tons of Thanksgiving traffic along the way, it feels great to be back in Northern Florida. I feel very thankful to call Jacksonville home.
That’s what I’m doing,
h
Market Signals for
11-29-2021
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 26 Nov 2021 |
NASDAQ | NEU | 26 Nov 2021 |
GOLD | NEG | 26 Nov 2021 |
U.S. DOLLAR | POS | 19 Nov 2021 |
BONDS | POS | 26 Nov 2021 |
CRUDE OIL | NEU | 23 Nov 2021 |
CRYPTO | NEU | 24 Nov 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