Professor’s Comments February 28, 2023
Posted by OMS at February 28th, 2023
Stocks closed modestly higher yesterday after gaping higher at the open. However by the close, a good portion of the early momentum was lost and caused a shooting star candlestick pattern to form on the indexes. Shooting stars are often found at the end of a rally, so it will be interesting to see what happens today.
The Dow finished with a gain of 75 points, closing at 32,889. The NASDAQ and S&P finished with gains of 77 and 12 points, respectively. Volume on the NYSE was moderate, coming in at 97 percent of its 10-day average. There were 72 new highs and 25 new lows.
S&P support at the 3,940 level still looms large. The question for today is whether the S&P will begin to test that support immediately or if will it stage one more rally toward 4,080 before starting a major decline. From a wave count perspective, Friday’s low appeared to be the end of a five wave decline from the 2 February high. So yesterday’s bounce to 4,018 could be part or all of sub-wave 4 of wave 1 of Wave 3 down. On the other hand, it could also be wave ‘a’ of an a-b-c move that will take the S&P back to the 4,080 level and form a Double Zig-Zag. In other words, yesterday’s action really didn’t tell us much. A move above 4,040 now will increase the odds of a rally to 4,080+. A close below 3,940 will increase the odds that wave 1 of Wave 3 down is underway. A break of the 22 December low of 3,764 on the S&P will eliminate all Bullish scenarios. Actually, the S&P doesn’t have to trade all the way down to 3,764 before I’ll turn bearish. That’s because a close below 3,858 will make the current decline larger than the previous wave ‘B’ of Wave 2 up. Mr. Elliott would not see anything Bullish in that.
The Dean’s List has turned negative. The Tide is also negative.
The Market Timing Indicators for the Dow and NASDAQ have turned neutral.
The Sector Ratio strengthened to 14-10 positive after Monday’s session. The top five strong sectors were Media (4, Banks (2), Financial (1), Material (1) and Leisure (1). The top five weak sectors were PharmaBio (-3), Computers (-2), Food Drugs (-1), Retail (-1), and Utilities (-1). Students should note that the Sector Ratio has turned positive.
My Trades: I didn’t do much yesterday. TD Ameritrade finally released the consolidated 1099s, so now I can complete my taxes. I did make one trade on TZA in the mid-afternoon for a small gain. The Green Arrow with positive Bias at the 14:14 mark was an obvious trade, but with the market in a retracement mode, it didn’t produce much juice.
Bottom Line: The markets remain at or near critical support levels. The patterns and wave counts suggest that wave 1 of Wave 3 down could be underway. However some of the indicators are giving mixed signals, so a retracement rally toward 4,080 is still possible. If during the next few days, IF S&P support at the 3,940 level is broken, I will start buying (and holding) inverse ETFs, like SDOW, TZA, SQQQ and SPXU. Follow the Arrows and trade in the direction of the Bias.
That’s what I’m doing,
h
Market Signals for
02-28-2023
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 27 Feb 2023 |
NASDAQ | NEU | 27 Feb 2023 |
GOLD | NEG | 14 Feb 2023 |
U.S. DOLLAR | POS | 15 Feb 2023 |
BONDS | NEG | 09 Feb 2023 |
CRUDE OIL | NEG | 15 Feb 2023 |
CRYPTO | NEG | 24 Feb 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