Professor’s Comments February 17, 2022
Posted by OMS at February 17th, 2022
Stocks were mostly lower yesterday, but then reversed and rallied into the close. The Dow finished with a loss of 54 points, closing at 34,934. The NASDAQ lost 16 points; the S&P was up 3. Volume on the NYSE was low, coming in at 89 percent of its 10-day average. There were 63 new highs and 157 new lows.
Yesterday’s early decline was likely sub-wave ’b’ down of corrective Wave 2 up. The later rally was likely part or all of sub-wave ‘c’ up. Once Wave 2 up completes, the major indexes should start Wave 3 down. This wave should be an impulsive decline that drops the indexes to new lows.
Yesterday’s rally on the Dow got as high as 35,042 which was slightly below the sub-wave ‘a’ high of 35,047 made on 15 February. So, it’s possible that sub-wave up has truncated, and Wave 2 up is complete. We should know if this is the case very soon.
One of the reasons I’m still not sure has to do with two of the breadth measures I use to decide short-term strength. At yesterday’s close, the A/D ratio was very positive, coming in at 1:8 :1. Same for the TRIN which was 1.42. When both the A/D ratio and the TRIN close at relatively high levels during a retracement wave, it’s usually a sign that the retracement is not finished. If the Dow does decide to rally today, 50-50 proposition at this point, I don’t see it getting any higher than 35,250. IF a rally begins, I will look to short the Dow from any level above 35,100. Doesn’t really matter what happens on the upside anymore, because IF the Dow starts dropping below 34,650, it will be my signal that Wave 3 down is underway and at that point, I will become aggressively short. Simply put, I’m no longer worried about any small rallies now given that a decline below 34,650 would suggest a move down to the 30,000 level or lower. The impulsive Wave 3 decline should be the strongest move down since the Bear Market started in January. Please take all necessary precautions to protect yourself if you start to see Red Arrows appear on the intermediate-term bars of the indexes.
After Wednesday’s Monday’s action, the Dean’s List is negative. The Tide is neutral.
The Market Timing Indicators for the Dow, S&P are NASDAQ remain negative.
The Scalp Trading Indicators for the Dow, S&P, and NASDAQ are also negative.
The Sector Ratio strengthened to 15-9 positive. The top five strong sectors were Energy (7), Media (5), Banks (5), Leisure (5), and Material (4). The top five weak sectors were Household Products (-2), Cap Goods (-1), Service (-1), Retail (-1), and PharmaBio (-1).
Gold: After pulling back on Tuesday, gold (GLD) rose 1.78 points yesterday. It’s still not clear if gold is breaking out or if it is completing wave 2 up. To date, the rally in gold has not been confirmed by silver. So, for now, I’m still on the side-lines with the metals, focusing on the possibility of a major decline starting on the indexes.
BTW, the symbol for Barrick Gold has changed from ABX to GOLD. The stock jumped 1.55 points yesterday on news of a variable dividend linked to debt levels. The dividend could be as much as 3 percent based on its current share price. Interesting.
Cryptos: GBTC has generated an unconfirmed Green Arrow on the 4-hour bars. The momentum bias has turned positive, so I’m watching closely. It should be interesting to see what the cryptos will do IF the major indexes begin to decline dramatically. This is unexplored territory. Will they be a safe haven or not?
My plan for today: I still believe it’s all about inverse index ETFs now. The momentum bias on the daily charts is still negative, so except for an occasional scalp, I cannot trade the long side. I’m still looking for opportunities to establish inverse positions in TZA, SQQQ, and SARK. SDOW and SPXU are also candidates.
With positive momentum bias on SARK yesterday, I entered the trade at 11.20 after the Green Arrow at 11:15 was confirmed. The scalp trade was good for 80 cents. A Green Arrow also appeared on the 5-min bars of TZA yesterday, adding another 50 cents to the day’s gain. All I’m doing now with these two inverse ETFs is scalping while I wait for Green Arrows to appear on the 4-hour bars. I’m being very patient.
I will be having another Update Session next week (maybe) where I plan to show students how I determine the momentum bias. Knowing if the bias is positive or negative is extremely important in determining which Arrow Trades to take. When Bias is positive on the chart I’m trading, I take all trades with Green Arrows and avoid trades with Red Arrows. By doing this, I have eliminated almost all of the false trades. The new momentum bias indicator eliminates the need to continually check the ‘High Cover’ on the longer time periods as it is now right at the bottom of your trading screen. The two trades made yesterday knowing the bias was positive on SARK and TZA resulted in another cigar day. That’s five in the past five days! It’s the reason why I have decided to share it with you.
That’s what I’m doing.
h
Market Signals for
02-17-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 11 Feb 2022 |
NASDAQ | NEG | 09 Feb 2022 |
GOLD | POS | 07 Feb 2022 |
U.S. DOLLAR | NEG | 26 Jan 2022 |
BONDS | NEG | 11 Feb 2022 |
CRUDE OIL | POS | 23 Dec 2021 |
CRYPTO | NEU | 16 Feb 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