Professor’s Comments August 20, 2020
Posted by OMS at August 20th, 2020
The markets fell yesterday, the final day of the Fibonacci cluster window where the probability of a major market turn is high. This particular cluster window also included a Phi Mate turn date which increases the probability of a major market turn even more.
So yesterday, the Dow dropped 85 points, closing at 27,692. It reached an intraday high of 27,920 which was likely wave 5 of a 5 wave sequence to complete Major Wave 2 up. Major Wave 3 down should be next. The NASDAQ and SPX fell 64 and 15 points, respectively. Volume on the NYSE was moderate, coming in at 95 percent of its 10-day average. There were 88 new highs and 15 new lows.
Yesterday’s decline in the Dow changed its market timing indicator to Neutral. The timing indicator for the NASDAQ remains Positive. A break below 27,624, the 11 August pattern low for the Dow would increase the odds that Major Wave 3 down is underway as the Dow would be making new lows instead of new highs. Students should watch this level carefully during the next day or so as it will reduce any remaining bullish potential and increase the potential for further weakness. Also, if the Dow stays above 27,624, there is still a possibility that the Dow could make one more run to the 28,154 level to complete Major Wave 2 up.
The level to watch on the NASDAQ is 10,763 which also occurred on 11 August. A break of this level would move the index out of its rising channel pattern and suggest the rally is over. I will go to Full Red Alert if either of these support levels are broken.
Scalp traders should note that the hourly timing indicators on the Dow remains Negative. The hourly bars on the NASDAQ (QQQ) and S&P500 (SPY) remain Positive. However, the two 3 Scalp Trading volume indicators on the SPY are now Negative, so if the market begins to head south today, I will be looking to establish a Position Trade (short) once the momentum indicator turns Negative.
The Dean’s List remains Positive while The Tide remains Neutral. Three of the 4 breadth indicators that make up The Tide are now Negative. The only holdout is the Up-Down oscillator which remains positive. The important thing to now here is that the two most important breadth indicators in The Tide, the Hi-Lo indicator, and the A-D oscillator, are now negative.
The Sector Ratio stayed at 18-6 Positive after yesterday’s session. Students should continue to watch the Sector Ratio as the week progresses, especially if the 27,624 level on the Dow is broken. When I look at the Relative Strength of the Strong Sectors, I noticed that 7 of these sectors have RS ratings of 1 or Zero. So, any weakness in the market during the next day or so could easily turn the Ratio negative. Pay attention.
The top five strong sectors were Retail, Service, Material, Consumer Products, and Transportation. The five weakest sectors were Banks, Financials, Leisure, Energy, and Real Estate.
There were NO CHANGES to the Model on Monday. The Model continues to hold trial positions of 1,200 shares of TWM, 1,600 shares of DXD, 400 shares of DUST, and $43,379 in cash. The Model continues to look for opportunities to buy shares of inverse index ETFs.
Gold (GLG) fell 5.94 points yesterday and appears to be starting Wave 3 down. This wave should eventually take gold (the metal) down to the 1,700 level, possibly lower. A break of the 12 August low of 1,870 would confirm that Wave 3 down is underway.
There were no changes to the timing signals for the Dollar and the Euro yesterday. Both still appear to be completing major reversal patterns. If the timing signal for the Dollar turns Positive in the next few days, it would tend to confirm that gold is going lower.
The 60-minute bars on Apple (AAPL) remain positive, since turning positive last Wednesday at the 448.54 level. If the 60s turn negative, I’ll hold APPL as a Position Trade short. For now, I’m still scalping. Because of its large size in terms of market cap and volume, APPL’s indicators produce some nice signals as a Position Trade. Student who purchased my Scalp Trading Class should look at the indicators on the 60s to see what I mean.
That’s what I’m doing,
h
Market Signals for
08-20-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 19 Aug 2020 |
NASDAQ | POS | 30 Jul 2020 |
GOLD | NEU | 11 Aug 2020 |
U.S. DOLLAR | NEG | 24 Jun 2020 |
BONDS | NEG | 13 Aug 2020 |
CRUDE OIL | NEU | 14 Aug 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