Professor’s Comments April 26, 2022

Posted by OMS  at April 26th, 2022

Yesterday’s early decline to 1909 on the Russell 2K completed five waves down from last Thursday’s high.  It appeared to be wave 1 of Wave 3 down.  The choppy rally that started at the 10.:20 mark appeared to be the start of retracement wave 2 up.  If this wave did not complete with yesterday’s rally to 1954, it might push toward 1960 to 1665, which would make it a 0.38 percent retracement of Wave 1 down.  Because the retracement is within a Major Wave 3 down, it should be relatively weak and not exceed the 1965 level. Once this retracement completes, possibly sometime today, wave 3 of Wave 3 down should begin.  This decline should take several weeks and be larger than Wave 1 down. My first target on IWN is still near or below the 183 level.  

The two weakest indexes continue to be the RUT and NASDAQ.  These indexes should continue to lead the broader market lower. Yesterday the NASDAQ fell to the 13,240 level before starting its retracement rally. The early decline also appeared to be the completion of wave 1 of Wave 3 down. The wave 2 rally off the wave 1 low carried to the 13,533 level. If this rally is not complete, a likely target is near 13,700.  There is an alternate wave count on the NASDAQ that if correct, could see the index go as high as 14,000.  However, at this point, I must give this scenario low odds.

Because I believe that wave 3 of Wave 3 down is fast approaching, I started shorting the RUT near yesterday’s close by buying TZA, the inverse ETF for the RUT.  Up until yesterday, I have been scalping TZA on the 5s while holding shared based on the 4-hour bars.  If I see the bias indicator on the 5 min bars of TZA turn negative today, I will start holding these shares overnight, like I do with my shares in the Doctor’s Trade.

In the WSR, I mentioned that the Hockey Stick pattern should see TZA trade to the 37.73 level before pulling back.  Yesterday, TZA got as high as 38.32 before pulling back to close at 35.69. The trade is still on a green bar with a positive bias.  

The key to today’s trading is bias indicator on the 5 min bars. If it turns negative on IWM and QQQ. I’ll look to buy TZA and SQQQ on a confirmed Green Arrow. 

The Dean’s List and The Tide have turned negative.  Once again, students should note how short the Dean’s List has become.  They should also note that the top ETFs on the List are now mostly inverse index ETFs.

The Market Timing Indicators for Dow have turned neutral.  The timing indicators for the NASDAQ, SPY, and Russell 2K remain negative. 

The Scalp Trading Indicators for the Dow, S&P, NASDAQ, and Russell 2K are negative.  Students should note how the bias on the Daily chart of the Dow still is positive, while the bias on the other three major indexes has turned negative.  This is the main reason why I am shorting the RUT and the Q’s now and NOT the Dow.

The Sector Ratio strengthened to 10-14 negative after Friday’s session. The top five strong sectors were Telecoms (5), Utilities (3), Food Drug (3), Foods (2), and Energy (2).  Crude Oil took a big hit yesterday with UCO shedding 5.58 points to 154.35.  The ETF appears to be in the process of completing a sideways triangle for Wave 4 down. If I’m right about this, once Wave 4 down completes, crude should see another nice rally during Wave 5 up. The level I’m watching to start buying UCO is near or below the 29 March low of 141.5.

BTW, the early March high for a barrel of West Texas Crude was slightly above the 130 level. My current chart shows that WTC should complete the next leg down of its triangle near the 95 level.  After that, crude should rally to somewhere between 150-160. If this happens, there’s going to be a lot of unhappy drivers going into the November elections. Ouch!

 The top five weak sectors were Media (-4), Banks (-3), Financial (-3), Technology (-3) and Semiconductors (-3). 

Still nothing to new report on gold, bonds or cryptos.  They’re dead money for now.  The action is clearly in the inverse index ETFs.

That’s what I’m doing,

h

Also, please tell your friends about the new Arrows and bias indicators. If they send an email to Dave, he will give them a free trial subscription.

Market Signals for

04-26-2022

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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