Professor’s Comments August 16, 2022
Posted by OMS at August 16th, 2022
Stocks rose modestly yesterday on relatively light volume. The Dow finished with a gain of 151 points, closing at 33,912. It reached an intraday high of 33,954. The NASDAQ and S&P were up 81 and 17 points, respectively. Volume on the NYSE came in at 87 percent of its 10-day average. There were 61 new highs and 19 new lows.
Yesterday’s rally on the Dow reached the top of the range I mentioned last week, between 33,500 and 34,000, for where Wave 2 up should end if it extends in an Ending Diagonal. The reason that 34,000 is important is because this is where an earlier gap formed on 5 May, and many times a stock or an index needs to fill that gap before heading lower. The Japanese call this closing the window.
There are two other reasons, both from a Fibonacci perspective, that a top could be close at hand. The first has to do with a retracement. Yesterday’s rally to 33,954 was only a few points shy of 34,061, which if it occurs would be an exact 0.618 retracement of Wave 1 down. The other reason has to do with time.
Today, 16 August, is exactly 155 days from the Dow’s top on 3 January. It is also 96 days form the 19 March sub-wave 2 top within Wave 1 down. Coincidentally, this top occurred exactly 59 days from the top made on 3 January. All of these days are Fibonacci numbers. So, in terms of both time and retracement levels, today could be an important date.
Yesterday’s high also occurred on decreasing momentum. It’s easier to see this on a 15 min chart, as its difficult to pick up useful momentum changes on a daily chart. If you look at a chart of DIA, SPY, or IWM, you can clearly see that momentum is slowing. Yesterday’s momentum was lower than last Thursday’s momentum even though prices were substantially higher on all the indexes. This negative divergence is usually an important warning sign of an approaching top. We’ll see
There were no changes to the indicators after yesterday’s session.
The Dean’s List and The Tide remain positive.
The Market Timing Indicators on the Dow, S&P (SPY), NASDAQ and Russell 2K (IWM) remain positive.
The Scalp Trading Indicators on the Dow, S&P (SPY), NASDAQ, and RUT (IWM) are also positive.
The 4-hour bars on the major indexes are still Green. I need to see them turn Red and be confirmed by negative indicators before I begin shorting.
The Sector Ratio weakened to 22-2 positive after yesterday’s session. The top five strong sectors were Retail (9), Autos (7), Real Estate (7), Leisure (4), and Cap Goods (4). The two weak sectors were Energy (-3) and Material (-1).
I made a small scalp trade with SARK that was good for 0.40 cents at yesterday’s open to get paid. The rest of the day I stayed on the side lines as the Bias on the 3-day, 12 min chart was still negative. If the indicators on the same chart turn positive today, I’ll re-enter the trade again. The Bias is very close to turning positive. Keep your on the 12-min chart of SARK for an early sign that the overall market is turning.
Bottom Line: I’m still watching and waiting for Red Arrows to appear on the major indexes. Red Arrows followed by a five-wave decline will be my signal to start getting short.
That’s what I’m doing
h
Dave should be sending out an email announcing the next Update Class where I will introduce my new trend indicator. The Class will be held next Tuesday afternoon after the market closes. Yesterday’s trade with SARK was a good example of how useful this new indicator is at spotting a developing trend. If you look closely at our old trend indicator, it was not showing trend at the open. It didn’t reach the trend stage until the fourth bar. On the other hand, with my new trend indicator, I was able to enter the trade on the very first bar! The indicator gave me the confidence to enter this trade and add to my position. It also kept me out of the flip-flop trades that occurred during the rest of the day. This is a huge trading edge.
Market Signals for
08-16-2022
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 27 Jul 2022 |
NASDAQ | POS | 12 Aug 2022 |
GOLD | NEU | 08 Aug 2022 |
U.S. DOLLAR | NEG | 08 Aug 2022 |
BONDS | NEG | 11 Aug 2022 |
CRUDE OIL | NEG | 15 Aug 2022 |
CRYPTO | POS | 03 Aug 2022 |
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