Professor’s Comments August 25, 2022

Posted by OMS  at August 25th, 2022

Stocks were flat to slightly higher yesterday on weak volume. The Dow finished with a gain of 60 points, closing at 32,969. The NASDAQ and S&P were up 50 and 12 points, respectively. Volume on the NYSE came in at 92 percent of its 10-day average. There were 38 new highs and 75 new lows.

The Dow appears to be tracing out the first waves of an impulsive Wave 3 decline from the 16 August intraday high of 34,281. The decline either needs one lower low below yesterday’s low to complete wave 1 of Wave 3 down or yesterday’s low could have done the job.  If the Dow doesn’t make another low this morning, yesterday’s low was the end of wave 1 down within Wave 3 down and yesterday’s choppy intraday trading were sub-waves A and B on an A-B-C retracement within wave 1 down.  If I’m correct about the retracement, the Dow should rally today to complete sub-wave C up to about the 33,200+/- level.  Once this retracement is complete, the Dow and the other indexes should resume their downward slide. My short-term target for the Dow is still near the 32,700-32,750 level with 32,250 after that.  My target for Wave 3 down is still near the 27,500 to 28,000 with 24,000 to 25,000 a low odds (20 percent) possibility.

The Market Timing Indicators on the Dow, S&P, NASDAQ, and Russell remain neutral.

The Scalp Trading Indicators on the same indexes are still negative.

The Dean’s List and The Tide are neutral. 

The Sector Ratio strengthened to 22-2 positive after yesterday’s session. The top five strong sectors were Autos (6), Utilities (4), Leisure (4), Energy (3), and Cap Goods (3). The two weak sectors were Semiconductors (0) and Computers (0).

Crude oil made a big pop yesterday, a day after its timing signal turned positive. There are lots of energy related ETFs at the top of the Dean’s List now. The first twelve selections are all related to energy in some way. I saw one analyst talk about $500 crude yesterday. I find this hard to believe with GDP contracting, but my chart is saying 150-170 WTI crude is possible by year’s end. The reason I say this is because crude appears to have completed a Bullish descending triangle for Wave 4 down with Wave 5 up just getting started. WTI Crude closed at 90.44 yesterday.

BTW, DIG is at the top of the Dean’s List and showing a Green Arrow on its 4-hour chart. The Bias is positive, so if you want to add a few shares of an energy related ETF to your mix, you might want to use a 3-day,12 min chart to look for entry points.

Bonds also appear close to completing a major a-b-c retracement pattern for Wave 2 down. The 30-year bond close at 138.09 yesterday. If I’m right and Wave 3 up is starting in response to lower equity prices, the long bond could see the 185-195 level. TMF and TLT, the two bond ETFs I use to trade Bonds are still on Red Arrows on their 4-hour charts I’ll consider buying once I see a Green Arrow. Both bonds and crude are starting to look interesting.

Gold and silver are completing a primary degree Wave 2 of an A-B-C 3-3-5 corrective pattern. I’m still not ready to trade either metal, but the pattern suggests the time could be getting close. If I’m right and gold starts its next leg up (Wave 3 up), it could move from current levels near 1,760 to the 2,500 to 3,000 level. I believe this move will happen, but when (the timing) is another matter. I’m being patient.

I’m still on the side lines with crypto.

I took about half off in my Doctor’s Trade of TZA yesterday when I saw the Red Arrow appear. I didn’t sell it all because SQQQ and SPXU were still showing Green Arrows on their 4-hour bars. If a Green Arrow re-appears, I’ll restore my earlier position.

Bottom Line:  All I’m doing now is looking for opportunities to add to my positions in inverse index ETFs. I’m using a 3-day, 12 min chart for this.

That’s what I’m doing

h

Market Signals for

08-25-2022

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.