Professor’s Comments April 20, 2023

Posted by OMS  at April 20th, 2023

Stocks traded sideways again yesterday on moderate volume. The Dow finished with a loss of 79 points, closing at 33,897.  The NASDAQ lost 4 points; the S&P was unchanged. Volume on the NYSE came in at 99 percent of its 10-day moving average. There were 54 new highs and 33 new lows.

Yesterday’s price action still appears to be consistent for wave 5 up within a five wave Bearish Rising Wedge or Ending Diagonal Pattern. Once this wave completes, the indexes should initially fall to levels where the patterns began.  On the Dow, this is the 31,429 level.  For the S&P, it’s the 13 March low of 3,808.86. Lower after that. Yesterday, the S&P closed at 4,154.

I’m still thinking the markets could top sometime in early May because of the Fibonacci Cluster Window I mentioned in previous Comments.  However, I’m seeing a lot of weakness in the breadth indicators, so there is no guarantee that this must happen.  The markets could top sooner.

On Tuesday, I talked about how the Dow has started to make five waves down and three up since last Friday’s high of 34,083. I also said that if the top for the Dow is in, the large cap index should start to decline during the next few days. So, yesterday’s small decline was consistent with this Bearish scenario. I did a quick calculation for this Bearish scenario last night and came up with a target slightly under 30,000 if this scenario unfolds as I expect. In other words, if the Dow continues to fall today, students should be looking for a change in the Market Timing Indicators within the next day or so.  Right now, the NASDAQ looks especially vulnerable to a signal change.  BTW, the target I came up with for the S&P is near the 3,600 level for this scenario, coming as early as late June.  The volume – breadth for the S&P and the techs is looking the weakest. If the upside momentum on these major indexes starts to turn negative, …pay attention. It’s a loooong way down.

If you have time this morning, take a quick look at the VIX. Yesterday it dropped to an incredibly low level of 16.17 with a diverging Bias. This alone is enough to spark at least a short-term decline…. maybe more.  A VIX reading this low tells me that almost nobody is concerned about a market sell off.  But I am! 

As of last night, the Market Timing Indicators on the cockpit for the Dow are positive.  The same indicators on the NASDAQ are neutral.

The Dean’s List and the Tide remain positive.

The Sector Ratio strengthened to 12-12 neutral after Wednesday’s session. The top five strong sectors were Healthcare (2), Utilities (1), Household Products (1), Foods (1), and Telecoms (1). The top five weak sectors were Retail (-5), Banks (-3), Semiconductors (-1), Autos (-1), and Technology (-1).

My Trades:  I didn’t trade yesterday.  I spent most of the day packing for a European River Cruise that we leave for later today. This cruise was booked and re-scheduled several times during the past three years because of Covid. It starts and ends in Paris with stops in and several ‘artsy’ ports along the Seine.  This part of Europe should have excellent internet connectivity, so receiving data and posting my Comments shouldn’t be an issue.  However, the six hour time difference will be, and because of this, I only plan to update the Lists on days when I post Comments.

Gold:  The Market Timing Indicator for gold turned positive last night, but it’s barely positive.  I still believe that Wave 1 up topped at last Thursday’s high and that GLD will now start its Wave 2 retracement in the next day or so.  Yesterday, gold the metal, closed at 1,995.  I’m still looking for gold to pull back to the wave 3 high of 1,950 as a minimum.  All I’m doing now is waiting.

That’s what I’m doing,

h 

Market Signals for

04-20-2023

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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