Professor’s Comments August 18, 2022
Posted by OMS at August 18th, 2022
Stocks fell yesterday on increasing breadth and volume. The Dow finished with a loss of 172 points, closing at 33,980. Yesterday’s intraday high was lower than Tuesday’s high and the intraday low was lower than Tuesday’s low. So, the Dow is now making lower highs and lower lows, the first sign that the market might be turning. The NASDAQ and S&P were down 164 and 34 points, respectively. Volume on the NYSE came in at 97 percent of its 10-day average. There were 32 new highs and 34 new lows. Yesterday’s breadth numbers were the worst in over two months.
Yesterday’s decline came the day after a key Fibonacci turn date cluster window. As I mentioned in Tuesday’s Comments, 16 August was 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. So, Tuesday’s high of 34,281 could be the top of retracement Wave 2 up, with yesterday’s decline being the first sub-waves of wave 1 of Wave 3 down. We’ll see.
Students should watch yesterday’s low on the Dow of 33,828. A break of this low would be another lower low.
Another thing that students should note is the increase in meme stock trading that is happening now. The last time we saw stocks like Bed, Bath, and Beyond, Dillard’s, Marathon, and Riot at the top of the Member’s Watch List was late last year, just before the market topped. Could the same thing be happening now? Bloomberg said that BBBY was the most purchased stock yesterday, with buy orders being over twice sell orders. The net purchases were five times those of Tesla. Earlier this year, just before the crash, BBBY was trading at 30. It reached a low of 4.38 on 1 July. On 1 August it was trading at 5.77. Yesterday, only 12 trading days later, BBBY traded to a high of 30! It closed at 23.08. Earlier this year, I warned about meme stocks like BBBY, GME, DDS, and others. I said they were all overpriced pieces of crap that were being manipulated by young people with practically no trading experience. I said a lot of them were going to get hurt by trading them. Their recent run up has not done anything to change my opinion of them. As far as I’m concerned, they’re still overpriced pieces of crap. But now that they have become popular trading vehicles again, they are providing us with another warning sign that major top could be at hand.
There was a change to one of the market timing indicators after yesterday’s session.
The Market Timing Indicators on the NASDAQ turned neutral. The timing indicators for the Dow, S&P (SPY), Russell 2K (IWM) remain positive.
The Scalp Trading Indicators on the Dow, S&P (SPY), NASDAQ, and RUT (IWM) are also positive.
The Dean’s List and The Tide remain positive.
The 4-hour bars on TZA, the inverse ETF for the Russell 2K, turned Green yesterday. However, the buy signal is still not confirmed by the momentum. If the signal is confirmed today, I’ll start holding TZA overnight. Right now, without confirmation, I’m still being cautious. Same for SQQQ, which has a Green bar with no confirmation. The Green bar on SARK is confirmed. BTW, yesterday’s scalp trade on SARK was good for almost 2 1/2 points before a Red Arrow took me out of the trade. The Bias on a 3-day, 12 min chart of SARK has been positive for the past two days, and every Green Arrow trade has been a winner. Pay attention to the Bias!
The Sector Ratio stayed at 22-2 positive after yesterday’s session. The top five strong sectors were Retail (11), Autos (7), Real Estate (6), Leisure (6), and Cap Goods (4). The two weak sectors were Energy (-2) and Material (0).
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
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Dave’s email announcing next Tuesday’s Update Class has been sent out. Yesterday, I used the new Trend Indicator that I will demonstrate in the Class to enter a scalp trade in SARK right out of the opening gate. Two hours and 45 minutes later, the indicator was still trending, and I was up over two points. If you need something to help you enter trades, add to positions, and keep you in trades, this is it. Remember, in the Professor’s Methodology, the Arrows put you into trades. But once in, money management takes over. The new trend indicator will quickly identify when a stock or ETF is starting to trend so you can size your positions to take full advantage of the move. Like I said, this is a huge advantage. It helped produce another cigar day for me yesterday. What more can I say?
Market Signals for
08-18-2022
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 | NEU | 17 Aug 2022 |
GOLD | NEU | 08 Aug 2022 |
U.S. DOLLAR | POS | 16 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