Weekend Strategy Review November 29, 2020

The markets were relatively quiet during Friday’s session as most traders took time off to enjoy the Thanksgiving Holiday. 

The Dow finished the day with a gain of 38 points, closing at 29,910.  It was up 647 points for the week.  The tech heavy NASDAQ gained 111 points on Friday. It was up 351 points for the week.

Not much changed after Friday’s shortened session. The indicators remain positive, with the indexes tracing out positive but unclear wave patterns.  With unclear patterns, it’s just about impossible to project where the current post-election rally will end.  However, for now I’ll continue to stick with the 30,000 to 30,300+ level.  That’s only about 300 to 400 points from current levels, and somehow, with the indexes in the Trend Mode, that projection feels low.

On the other hand, with the EXTREME investor sentiment readings and low Put-Call ratios I mentioned in Friday’s brief Comments, I can’t get too Bullish. 

With no wave count to go on, except that the overall pattern is Bullish, all I’m doing now is watching the indicators.  That’s not a bad thing to do, because as we know, wave counts, and patterns can and do morph into other wave counts and patterns.  That’s why I only use them as a possible ‘road map’.  I rely on the indicators, especially the volume and momentum indicators.  And right now, all of them are incredibly positive. My VTW Indicator, the indicator that drives the cockpit indicators, has been in the Trend Mode (above the 70 level) since 13 November.  I’ve learned not to buck this indicator.  Other trend indicators, like the 35-period CCI, are also in the Trend Mode, so while I don’t see a clear, discernible pattern, I must continue to favor the long side until these indicators change.  The one thing with trend indicators is that they can and do stay in the Trend Mode for a long time, usually longer than expected, and with December usually a positive month, the current rally can easily carry into January.

I’d feel a lot better about the current rally on the Dow if I saw the S&P make a new high next week. Friday’s rally on the S&P only reached the 3,644 level, so it’s still a point shy of the 9 November high of 3,645.  That’s not a lot, but even one point is still inter market divergence which is a negative.

The Market Timing Indicators for the Major Indexes remain Positive. 

The Scalp Trading Indicators on the Dow (DIA) and NASDAQ remain Positive.

The Dean’s List and the Tide are Positive.

The Sector Ratio strengthened to 24-0 Positive after Friday’s session.  The top 5 strong sectors were Media, Autos, Energy, Semiconductors and Real Estate. There were no weak sectors.

Gold (GLD) continued its slide on Friday, dropping another   broke through1.72 points to 167.79.  The metal is extremely oversold now with an RSI of 1.26.  If GLD does rally this week, it will likely be part of a small wave 4 rally.  Then once this rally completes, I would expect the decline to continue.  A few weeks ago, I mentioned the 155-160 level as a possible target got GLD.  I’ll stay with that target for now.

Bonds are another vehicle I’m not too crazy about right now.  A few months ago, I mentioned that Bonds would be heading lower. That happened. The indicators on Bonds turned south on 1 October and have remained negative ever since.  The pattern suggests the retreat is a major wave 2 down. If this is the case, it has significant implications for the economy going forward, because once wave 2 down completes, the next wave up in Bonds suggests a significant decline in interest rates from current levels which are already low.  This suggests a major recession, perhaps even a depression is coming.  I’m currently watching the 9 November low on TMF of 33.76.  If that low holds and Bond prices start rising, be careful.  You might want to note how Bond prices started to rise in mid to late January 2020, just before the equity markets crashed.  If the ST indicators on TMF turn positive, I’d start getting concerned about equities.  Not now.

Model Update:   There were no changes to the Model after Friday’s session.  The Model continues to hold 180 shares of QQQ with a cash balance of 52,169.

I’ll be sending out the details for Wednesday’s training session later today. If you purchased my Scalp Trading Class, and want to attend the free training session, just let me know and I’ll send you the information to enter the meeting. 

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

11-30-2020