Professor’s Comments February 16, 2023
Posted by OMS at February 16th, 2023
Stocks rose modestly yesterday on better than average retail sails numbers from the government. This was the second consecutive day that stocks rose, even after the Labor Department reported that inflation rose 6.4 percent year over year. I wouldn’t put too much into this number, mostly because it is contrived, one where the government can leave out things if they believe the increase is a one-time spike. (They left out a lot this time). But nevertheless, the number is what it is and the markets rose in spite of the number coming in higher than expected. Same thing with retail sales. The government said that retail sales rose 3 percent in January. (That’s a lot!) But we need to remember that the number just measures revenue and is NOT adjusted for inflation. So, if sales revenue stays the same, the impact of inflation will cause a higher sales (revenue) number. The bottom line is that the two numbers combined (retail sales and inflation) now gives the Fed a free pass to raise interest rates again at their next meeting. I have to admit that it was puzzling for me to see the market rally in view of these two numbers. Go figure?
The Dow finished with a gain of 37 points, closing at 34,128. The NASDAQ and S&P rose 170 and 11 points, respectively. Volume on the NYSE was moderate, coming in at 97 percent of its 10-day average. There were 83 new highs and only 7 new lows.
The market is now moving out of its Fibonacci Cluster Turn Window. If the market is going to turn lower, it must happen soon. The past few days of trading have been basically sideways movement with no clear direction. The decline since the 2 February high of 4195 on the S&P has been as series of lower lows and lower highs, which is the classic definition of a down trend. But the decline itself looks more like an a-b-c corrective retracement. So for now, at least from an Elliott Wave perspective, putting a label on the decline is problematic. If Wave 2 up is not complete, the market could still rally above the 2 February high (4195) before the next series of down waves begins. The 10 February low of 4061 is now a key number. Anything above this number increases the odds for more rally. Anything below increases the odds for a decline.
The key number for the Dow is still the 13 January high of 34,342, which I’m labeling as Minor Wave 2 up of Wave 3 down. If the Dow moves above 32,342, it will likely test the 34,712 level. A move above this level will require a reassessment of the Wave count.
After yesterday’s action, the Tide remains neutral. At this point, two of the four breadth indicators that make up The Tide are negative. These are the important Hi-Lo indicator and the A-D Oscillator. A negative A-D Oscillator means that more stocks on the NYSE are moving lower than higher. BTW, the A-D Oscillator has been negative for the past six days.
The Dean’s List remains positive.
The Market Timing Indicators for the Dow and NASDAQ are now positive.
The Sector Ratio stayed at 21-3 positive after Wednesday’s session. The top five strong sectors were Media (6), Retail (5), Semiconductors (4), Real Estate (3), and Technology (3). The top three weak sectors were PharmaBio (-1), Food Drugs (-1), and Foods (-1).
My Trades: The Bias on the 5-min bars turned positive on IWM at the 10:15 mark producing tow nice trades in TNA, the positive ETF for the Russell. Other than that, I didn’t do much. I was probably paying too much attention to the Dow (DIA), which was chopping all over the place until it steadied and started to move higher in the early afternoon. I didn’t take the Green Arrow trade that occurred at 12:40 mark, preferring to remain on the side-lines.
The markets are now at critical levels in terms of patterns and the Fibonacci Cluster Turn Window. All I’m doing now is watching and waiting for something to happen. Again, if the ‘Turn Window’ is going to work, the market needs to start moving lower now.
That’s what I’m doing,
h
Market Signals for
02-16-2023
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 13 Feb 2023 |
NASDAQ | POS | 15 Feb 2023 |
GOLD | NEG | 15 Feb 2023 |
U.S. DOLLAR | POS | 15 Feb 2023 |
BONDS | NEG | 09 Feb 2023 |
CRUDE OIL | NEG | 15 Feb 2023 |
CRYPTO | POS | 05 Jan 2023 |
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