Professor’s Comments February 24, 2022
Posted by OMS at February 24th, 2022
Stocks continued to decline yesterday and are now deep inside Wave 3 down. I discussed a lot of this during last night’s Update Class, so I’m going to keep these Comments brief. The major thing that students should take away from yesterday’s trading was that the Dow, S&P, and NASDAQ-100 are now all below their 24 January low, which was Wave 1 down. From an Elliott Wave or technical analysis perspective, this means that the mid-November and early January tops are in and that we are now in a confirmed Bear Market. It also means that U.S. economy is in danger of moving into a deep recession, or possible depression.
So far, the Dow is down about 10.5 percent from its all time high. Technology stocks on the NASDAQ-100 are now down 19.4 percent from their 22 November high. The S&P 500 has broken below its critical H&S neckline support level at 4,250 which means its next target is near or below the 33,700 level. I’m still using a target of 183 as my first downside target for the IWM, the ETF I use to track the Russell 2K. Note the word, ‘initial’ as once this Bear gets rolling, IWM will be trading a lot lower. The 150 level or lower is possible.
One of the reasons I say this is because the Fed will likely not be able to bail us out, like they did in 2009. Because interest rates are so low already, this historically reliable tool has been taken away. Same for increasing the money supply (quantitative easing), the other tool has available. But given that the Fed’s balance sheet is already over $9 Trillion; heck, they want to dump stocks and mortgage-backed securities, not add to them. If they try to print more money at this point, with CPI and PPI rates at over 8 and 12 percent, inflation will go through the roof. So, they will likely be forced to stand on the side-lines, watching as equity values continue to decline. This will cause unemployment to rise substantially at the same time the cost of living is increasing.
Real estate will not be spared. The rise in unemployment will cause home values, which have been skyrocketing higher recently, to come back down to earth. Banks with substantial real estate loans will begin to falter as Fed mandated collateral ratios begin to come into effect. During the 2007-2008 stock market crash, there were several homes in my community that went into foreclosure. Expect this to happen again.
In the last two Comments I posted, I used the phrase: “Please take all necessary precautions to protect yourself now that we have Red Arrows on the intermediate-term bars of the indexes.” One student asked me to explain this Comment further and address why I put it in Red. So now you know. Since I started teaching at UNF in 2009, and writing these Comments, my goal was always to educate people so they knew how to recognize a Major Bear market and could protect themselves.
It’s been almost 14 years since the 2007-2008 market crash. A lot of people have forgotten about the devastating effects that many in the community had top go through. Retirement accounts were wiped out, funds for a child’s education vanished and some people lost their homes. Yeah, the Fed came through back then by flooding the system with newly printed money. It prevented a major depression and started a new Bull Market, one that lasted for over 13 years. That’s a long time for any Bull. But now the Fed is in an entirely different place. It doesn’t have the same tools anymore. If it continues to print money with current rates of inflation, it risks starting hyperinflation which will cause the dollar to tank. The world’s once stable (?) reserve currency will be placed in jeopardy, something both Russia and China have been trying to do for years.
So maybe there’s more to what we’re seeing this morning with respect to Russia’s invasion of Ukraine. We should know more in a few months once China sees what the West’s reaction to Russia’s invasion will be. Right now, we don’t know. The only thing we do know is the chart patterns and our indicators are saying that things could get very ugly in the next 2-3 months.
Protect yourself.
That’s what I’m doing,
h
Market Signals for
02-24-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 11 Feb 2022 |
NASDAQ | NEG | 09 Feb 2022 |
GOLD | POS | 07 Feb 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEU | 17 Feb 2022 |
CRUDE OIL | POS | 23 Dec 2021 |
CRYPTO | NEG | 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