Professor’s Comments April 16, 2020
Posted by OMS at April 16th, 2020
The markets had another rough day yesterday. The Dow finished with a loss of 445 points, closing at 23,504. The NASDAQ and SPX were down 123 and 63 points, respectively. Volume on the NYSE was low again, coming in at 84 percent of its 10-day moving average. Low volume declines usually lead to a short-term rally the next day. There were 10 new highs and 22 new lows.
The market continues 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.
It appears that yesterdays early decline followed by a relatively flat session was a small corrective wave 4 within final wave 5 of Major Wave B up. If this is the case, the market should have a small rally today, possibly into tomorrow, to complete the corrective wave process. This does not have to occur in the Dow or S&P, as both patterns appear complete. However, I would feel better if the NASDAQ moved slightly above its recent high of 8,708. If it did, it would make the pattern picture perfect.
After last night’s class, I was looking at a few sentiment survey’s that came out during the day. Right now, market sentiment remains Positive, as usually happens during a Wave 2 retracement. The investing public has seen the market crash and make a 50 percent rebound, so they believe that things are still OK. They still have hope of a quick, V-shaped recovery. After all isn’t that what that what the nations #1 stock forecaster, The President himself, is saying? And even though the media hates Mr. Trump, he’s being backed up by the media on this one issue as the cheerleaders on CNBC and Fox Business news are saying the same thing…. that the recent decline is only a correction. The other day I heard Liz Claman, a Fox Business News anchor, declare the Bear Market is over. And she should know…right? Hmmm?
No Liz, this Bear ain’t over. It’s only beginning. If you don’t believe the indicators and the patterns, you only need to look at the sentiment surveys. Liz…do you ever look at things like indicators, patterns, or sentiment readings? Do you ever look at anything besides what’s on your teleprompter? Hmmm? Well, if you did, you would see that the recent AAII survey showed that 55.2 percent of small investors only made small changes to their portfolio in March. They are still maintaining 55.2 percent of their portfolio in stocks and 18.7 percent in Bonds. A whopping 66 percent of those same investors said they INTENTIONALLY made no changes to their portfolios. Really???? This is what they ALWAYS do during the first two legs of a new Bear market. Sentiment reading remain high. The numbers don’t begin to decline until the third Wave down of the Bear raises its ugly head again and investors begin to realize that maybe the cheerleaders are wrong. By then, after it’s too late, they have lost another major chunk of their portfolio. Anyhow, I want my students to understand that seeing positive sentiment or high sentiment readings now, at the tail end of a corrective rally is perfectly normal. It’s what always happens just before the next crash leg down begins. Protect yourself.
The Market Timing Indicators remain Positive.
The Dean’s List and The Tide also remain Positive.
The Sector Ratio weakened to 9-15 Negative after yesterday’s session. The Strong List was led by Material, Telecoms, Utilities, PharmaBio, and Household Products. The Weak List was led by Media, Leisure, Autos, Banks, and Transportation.
There were NO CHANGES to the Model after yesterday’s session. The Model continues to hold 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 Major indexes appear close to completing their Major corrective rallies. However, the indicators suggest they may need one smaller rally to complete the patterns. If the indexes rally today, the Model will look to re-establish the position in DXD it sold recently and look to add additional shares of other inverse index ETFs.
That’s what I’m doing,
h
The Model just bough 800 shares of QID, the inverse ETF for the NASDAQ-100. Price paid was 18.21.
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
04-16-2020
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 | NEU | 15 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