Professor’s Comments April 14, 2020
Posted by OMS at April 14th, 2020
The markets were mixed yesterday. The Dow finished with a loss of 329 points, closing at 23,391. The NASDAQ was up 39 points while the SPX was down 28 points. Volume on the NYSE was low coming in at 84 percent of its 10-day moving average. Low volume declines are generally Bullish. There were 11 new highs and 9 new lows.
The market appears to be working its way through corrective Wave C up of Major Wave B up. Once Major Wave B up completes, another crash wave (Major Wave C down) should begin. This wave should see the Dow trade back down to the 17,000-18,000 level, with 12,000 to 13,000 possible if Major Wave C down extends.
So far, the Dow has retraced about half its decline since it topped in early February. The current retracement rally has taken the form of a five wave 5-3-5 flat or zig-zag pattern. By making 5 waves up, Wave C of Major Wave B up can be considered complete. However, there is always a possibility that the pattern can extend. If so, it would form a nine wave impulse pattern and could push as high as the 25,000 level before completing. This is one of the reasons the Model exited some of its shares of DXD yesterday, especially when it appeared the Market Timing Indicators would remain Positive.
The Dean’s List and The Tide also remain Positive.
The Sector Ratio strengthened to 14-10 Positive after yesterday’s session. The Strong List was led by Material, Utilities, Telecoms, PharmaBio and Food. The Weak List was led by Leisure, Media, Autos, Banks and Transportation. Students should note the lack of Technology Sectors (computers, semiconductors, and Technology) on the Strong List. One of the reasons for this is that the tech heavy NASDAQ has been led by three stocks: Amazon, Netflix and Tesla. So, the rally in the NASDAQ has not been broad based. Yesterday there were more declining stocks than advancers yesterday, even though the NASDAQ finished in positive territory.
The Model sold half of its position in DXD yesterday at 24.95. So now the Model owns 750 shares of DXD, 800 shares of TWM, and 1,000 shares of UCO, the ETF for Crude Oil, with a cash balance of 68,102.
Bottom Line: The Dow and NASDAQ appear close to completing their Major corrective rallies. However, the indicators suggest they are not there yet. If the markets rally today, the Model will look to re-establish the position in DXD it sold yesterday and look to add additional shares in inverse index ETFs. But given the Positive Sector Ratio, the Model will exercise caution in these potential new purchases.
Gold (GLD) rose 2.72 cents yesterday to 161.41. The rise caused GLD to touch its Upper Bollinger Band with an overbought 2-period RSI reading of 91.4. So, it’s possible that Gold has reached an intermediate top. If so, gold should begin to pull back during the next few days. However, because the pattern is not clear, the Model planes to wait for a signal change before establishing an inverse position in gold.
The pattern in Bonds is also unclear. It’s very possible that minor wave 2 up in Bonds is complete. If so, the short-term indicators on TBT should begin to turn Positive. Right now, they’re still Neutral. If the signals change, the Model will look to buy a ‘Trial’ position in TBT as next decline in Bonds could be a nice trading opportunity.
My Scalp Trading Class starts at 6:30 tonight. And even though a good portion of the Class is devoted to short-term trading, the Methodology can be used for Position Trades (60 min bars) and End of Day trades as well. One of the reasons I’m conducting this Class now is because the coronavirus is preventing a lot of my students from going to work. I know I haven’t been outside, except for a quick trip to the local Publix, to pick up food and prescriptions. So, I’ve had a lot of time to focus on my trading. Instead of reading or watching TV, I’m watching a few indicators. And truth be told, it’s been a very profitable experience. For one thing, I’m NOT bored! Not at all! At a time when most people are confined to their homes and losing money, I have done very well. I’m making about 5-8 trades a day, and generating profits between $500 to $2,000 per day. It’s been FUN!!! Most of the time I’m trading 500 shares or less of a 25 dollar stock. So each investment is about $12,500. If this sounds like something you would like to do now that you’re staying home like me, you might want to check out my new Class. If you can’t attend this Class, you might want to look for the email announcing my next Class through AIQ Systems. BTW, Scalp Trading is something every trader should learn. Yeah, I know that a lot of you prefer to Buy and Hold positions. But when I look at the charts, I’m of the opinion that Buy and Holders might have to wait a loooooong time before this strategy works again. And as they wait, all they’re going to do is lose money. Don’t wait…learn how to take advantage of the volatility provided by this Bear Market. You’ll be glad you did.
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
04-14-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 31 Mar 2020 |
NASDAQ | POS | 08 Apr 2020 |
GOLD | POS | 07 Apr 2020 |
U.S. DOLLAR | NEG | 13 Apr 2020 |
BONDS | NEU | 06 Apr 2020 |
CRUDE OIL | NEG | 24 Feb 2020 |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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