Professor’s Comments February 23, 2021
Posted by OMS at February 23rd, 2021
The markets were mixed yesterday as the diverging trends between the various indexes continued. The Dow worked its way to another new high, reaching 31,653 before pulling back to close 27 points higher at 32,522. The NASDAQ and SPX both looked like they were in a completely different universe, with techs getting slammed for 341 points while the broader S&P dropped 30. In all my years of trading, I can’t remember such a large disparity between the major indexes. With the S&P down 30 points, the Dow should have been down about 240 points. Instead, it closed 27 points higher! Volume on the NYSE was heavy, coming in at 121 percent of its 10-day moving average. There were 332 new highs and 15 new lows.
The pattern on the Dow appears to be an Ending Diagonal with the final wave forming a Rounding Top. Rounding Tops are dangerous patterns because they lull you into thinking everything is OK. No, things are NOT OK! The pattern gives up ground slowly at the beginning, but then accelerates and eventually leads to a plunge. The many down-up-down waves lull you to sleep with mostly sideways movement during the initial stages of the pattern making it difficult to analyze, especially at the beginning. That’s why we need to pay attention to the numbers I mentioned in the WSR. If the Dow breaks below 31,285 today, it will confirm the break down in the NASDAQ which confirmed the start of wave 3 down yesterday. The breakdown level for S&P (SPY) is 387.74. If the Dow and S&P confirm what’s happening on the NASDAQ, you might want to start managing your money.
Remember, the NASDAQ-100 (QQQ) generated a Sell Signal on 17 February when its ST Momentum Indicator moved out of the Trend Zone with the Volume Indicator already negative. If you checked The Matrix, you knew this was a Sell Signal. The SPY did the same thing yesterday. So, don’t get faked out by what’s happening with the Dow’s 30 stocks. Right now, the two broadest indexes for the market are on ST Sell Signals.
Yesterday’s action was not enough to turn The Tide negative. It remains Neutral. The Dean’s List remains Positive.
The DMI on the Dow turned positive on 5 February and remains Positive. The Market Timing Indicator on the Dow (DIA) remains Positive. The same timing indicator for the NASDAQ is Negative. The Scalp Trading Indicators on the DIA remains Positive. The ST Indicator on the NASDAQ-100 (QQQ) has turned Negative. Because of the mixed signals, students should remain cautious and pay close attention to the support levels mentioned above and look for a change in signals if these numbers are violated.
The Sector Ratio remained at 22-2 Positive after yesterday’s session. The top 5 strong sectors are Banks, Media, Service, Autos and Energy. The two weak sectors were Telecoms and PhamaBio. Continue to pay attention to the Sector Ratio as the week progresses.
The 0-98 Sell Signal kicked out by AIQ’s artificial intelligence algorithm on 12 February remains unconfirmed. As I mentioned in the WSR, I continue to pay close attention to the ST momentum indicator, especially if the DIA begins to break below Thursday’s low of 313.38.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks: In the WSR, I mentioned that 3 of the top 5 stocks on the MWL were energy related. So yesterday, while the NASDAQ and SPY were tanking, CVI, HFC, and NBR were all up. Top Stock CVR Energy (CVI) was up 1.6 points closing at 24.5. Holly/Frontier was up 1.31 points. Our old friend Nabors (NBR) finished up 1.85 points after being up 4.55 points during the day. Wow!!! Does the MWL identify the stocks that are moving higher or what? If you get a chance today, take a quick look at a chart of these stocks. The one thing that makes these stocks different from the rest of the pack is that all these energy stocks are in the Trend Mode. That’s where you want to be. Once a stock stops trending, get out. There is never a good reason to be in a stock…any stock, that is not working for you. Once a stock stops trending, get out!
You all saw what happened to TSLA once it stopped trending. Yesterday, TSLA was down another 66.8 points! It moved out of the Trend Mode on 28 January when it fell 28 points to 835+. Yesterday it closed at 714.5. That’s over 120 points since the ST Indicators on TSLA gave their Sell Signal. How good is that? If you owned 100 shares of the stock, the signals generated by the ST Indicators just saved you over $12,000. Compare this to the cost of getting the ST Class ($250) to learn the indicators.
How ‘bout Apple (AAPL). The stock generated its ST Sell Signal on 29 January. It was at 131.21 back then. Yesterday it closed at 126. It’s still on a Sell Signal! I previously mentioned that my short-term target, based on its HS Pattern, was below the 110 level. I’ll stay with that target for now, but I expect much lower prices for the stock in the future. Yesterday AAPL entered the Down Trend Zone.
Bottom Line: Pay attention to the numbers I mentioned above. If all three of the major indexes break below these numbers, it would eliminate any further Bullish potential. BTW, in the WSR, I said pay attention to APPL if it breaks below the 127.41 level. That happened yesterday…..
That’s what I’m doing,
h
Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
Market Signals for
02-23-2021
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 05 Feb 2021 |
NASDAQ | NEG | 18 Feb 2021 |
GOLD | NEG | 08 Jan 2021 |
U.S. DOLLAR | NEU | 17 Feb 2021 |
BONDS | NEU | 27 Jan 2021 |
CRUDE OIL | POS | 11 Nov 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