Professor’s Comments August 4, 2022
Posted by OMS at August 4th, 2022
Stocks were sharply higher yesterday on strong volume. The Dow finished with a gain of 416 points, closing at 32,812. It reached an intraday high of 32,912. Remember, the target I have been using for Wave 2 up is slightly above the 33,000 level. The NASDAQ and S&P were up 319 and 64 points, respectively.
In Tuesday’s Comments, I discussed how the recent sideways action resembled a small triangle. I said that IF this was the case, it’s possible that it could be sub-wave 4 of a five-wave rally within wave ‘C” of Wave 2 up. Wednesday’s 402 point decline to 32,387 was NOT impulsive and because of this, appeared to complete sub-wave 4 down setting up yesterday’s sub-wave 5 rally. This rally should complete somewhere between 33,000 -33,270 with the higher level being the earlier Wave 4 extreme. I mentioned the 33,270 level before as a possible stopping point, mainly because it has eight days of sideways trading near that level which should supply formidable resistance.
The rallies on the S&P, NASDAQ, and Russell 2K have been similar to the rally on the Dow. All have been A-B-C affairs in the shape of a classic 5-3-5 pattern. Yesterday’s rally in the Russell got as high as 1912.77 just a few points shy of the 1920 level which was its earlier Wave 4, so it could be complete or almost so. Earlier wave 4’s are common stopping points in retracement rallies. If the RUT decides to push even higher, the next potential stopping point is near the 1950 level, which would be a 0.38 percent retracement from the November 2021 high.
The two main reasons I believe the current rally is not finished yet is because of the pattern and yesterday’s volume, which came in at 105 percent of its 10-day average. While 105 percent appears strong, it’s not the kind of number that I would expect to see at a final exhaustion top. Major wave 2 rallies usually terminate with some type of spike rally accompanied by extremely high volume, usually between 120-130 percent of the 10-day average. This has not happened yet, but its one of the things I’m looking for in the days ahead as the indexes approach their target levels.
The 4-hour bars on the major indexes are still Green. IF they begin to turn Red and are confirmed with negative indicators, I’ll start getting short with a few inverse index ETFs.
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 Sector Ratio weakened to 18-6 positive after Wednesday’s session. The top five strong sectors were Autos (6) Cap Goods (3), Semiconductors (3), Leisure (3), and Computers (3). The top five weak sectors were Material (-2), Energy (-1) Telecoms (-1), Insurance (0), and Banks (0).
I’m still on the side lines with the Doctor’s Trade in TZA. A Red Arrow took me out of the trade on 15 July at the 46.25 level. Yesterday, TZA closed at 32.46. Like I said, I’m not trading TZA to the downside, but maybe next time I’ll take a closer look at TNA.
BTW, IWM, the ETF I use to gauge the RUT reached a high of 190.15 yesterday before closing at 189.78. The 190 level is the level I have been using as a potential Wave 2 target, so we could be getting close. During yesterday’s rally, both the volume and momentum indicators on the 4-hour bars did not reach last Thursday’s high which is a negative divergence. So, pay close attention the volume in the days ahead. If the volume turns negative on IWM, it will likely be followed by a Red Arrow. That’s what I’m looking for to start buying TZA again.
As I mentioned in Tuesday’s Comments, I have also started to trade a few shares of gold (ULG) and silver (SLV) on a 5-minute chart. Right now, both metals appear to be forming short-term bottoms. At this point, I can’t tell if the bottom is a major bottom or if it’s just the bottom of an a-b-c move off the bottom. But given the history of gold in August, I’m looking to do some quick, in and out scalp trading. If I’m right, gold, currently trading near 1765 should move to the 1,800 level. Then after a B wave pullback toward 1730, it could rally toward the 1,900 level into late September. To tell the truth, I’m not that excited about gold as I am about silver which appears to be starting the fifth wave of wave A within an A-B-C sequence. If I’m right, silver, currently trading near 20 should rally above 21, then pull back to about 19. If that happens, I’ll load the boat for a rally to 23. I’m NOT loading to boat on either gold or silver now, but I am buying a few shares to keep me interested. It’s something to do while I wait for the indexes to top.
Bottom Line: All I’m doing now is waiting for Red Arrows to appear on the major indexes. Red Arrows and an impulsive move to the downside will be my signal to start getting short. Keep your eyes on the 4-hour charts.
That’s what I’m doing
h
Market Signals for
08-04-2022
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 | 27 Jul 2022 |
GOLD | POS | 01 Aug 2022 |
U.S. DOLLAR | NEU | 27 Jul 2022 |
BONDS | POS | 03 Aug 2022 |
CRUDE OIL | NEG | 03 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
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Category: Professor's Comments