Professor’s Comments February 9, 2021
Posted by OMS at February 9th, 2021
As anticipated and discussed in the WSR, the markets rallied to new highs yesterday, with the Dow closing 237 points higher at 31,386. It was the sixth consecutive day the Dow closed higher, which is its longest winning streak since last August. The NASDAQ and SPX gained 131 and 29 points, respectively. Volume on the NYSE was low coming in at 75 percent of its 10-day average. There were 315 new highs and 2 new lows.
The Dow’s rally still appears to be part of a final Wave 5 rally that started in late October. In the WSR, I discussed a possible ‘target’ for the completion of Wave 5 up near the 31,500 level. Right now, I don’t see anything to change that forecast. On the other hand, a decline below 31,054 in the next day or so would make me believe the current rally is over.
One thing to keep an eye on this week is GE. The company will be announcing its earnings on Wednesday. Here’s the thing about GE: When the earnings were positive, its stock usually continued to rally for the next few days. The earnings pop also tended to keep the rally going for the next few weeks. On the other hand, if the earnings were poor, which occurred most of the time, the stock declined in the two sessions following the announcement, which also led to further declines the following month. So, with the Dow at record highs and appearing to be nearing the end of a major five wave pattern, will GE be the stock that removes the punch bowl from the party? I’ll be watching GE very closely to see what happens on Thursday and Friday.
The DMI on the Dow turned positive on 5 February and remains Positive. The Market Timing Indicator on the Dow (DIA) and NASDAQ remains Positive. The Scalp Trading Indicators on the DIA and QQQ remain Positive.
The Dean’s List and The Tide remain Positive. The Sector Ratio remains at 23-1 Positive after Monday’s session. The top 5 strong sectors are Insurance, Retail, Media, Service, and Energy. The only weak sector was the Telecoms. Continue to pay attention to the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Gold and Silver. I’ve been hearing a lot of talk recently about gold and silver. But truth be told, I just don’t see it …at least not yet. So, one of the things I did last weekend was go back and look what happened with my algorithms, especially the one that drives the Top Stock Rotation Strategy. Did it work for gold and silver? The answer is YES! The two times that gold gave a Buy Signal in 2002, causing gold stocks to populate the Top Stocks on the MWL, were on 24 March and 9 June. Both times gold and silver stocks had nice gains. For example, on 24 March, the Top 5 gold and silver stocks were #2 ABX, #5 RGLD, #6 WPM, #7 PAAS, and #8 SA.
Here’s what happened in the weeks that followed…
ABX went from 28.13 to 40.13. RGLD went from 95.35 to 137.9. WPM went from 27.90 to 47.15. PAAS went from 16.89 to 30.41 and finally, SA went from 8.76 to 16.67.
So, the while the algorithm was working hard to identify the Top Stocks, it saw strength in several gold and silver stocks and moved them to the top of the List. This is NOT happening now. So, at least for now, I’m not gonna pay attention to any of the ‘talk’ about gold and silver. Once I see gold and silver stocks pushing other stocks from the top of the MWL, that’s when I’ll become interested. Not now.
Right now, I continue to focus on stocks like #1 DDD and #3 TDC. DDD was up another 4.4 points yesterday at 52.35. TDC was up even more, gaining an amazing 11.17 points on the day to close at 48.25. Westport (WPRT), which was the #4 stock on Friday’s MWL gapped higher at yesterday’s open to close 3.51 points higher. The stock was in the #3 position on last Thursday’s List, up from # 4 on Wednesday, giving students plenty of time to become interested. Again, I’ll become interested in gold and silver when they can start outperforming stocks like DDD, TDC and WPRT. Not now.
Bottom Line: With the Dow and the other major indexes looking like they are forming major topping patterns, I continue to trade Top Stocks from the MWL. But just remember what I always say about skyrockets…… protect yourself. There’s nothing wrong with taking a few bucks off the table and let the rest ride using a tight stop. If you get stopped out, there’s always another Top Stock to trade tomorrow.
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
02-09-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 05 Feb 2021 |
NASDAQ | POS | 03 Feb 2021 |
GOLD | NEG | 08 Jan 2021 |
U.S. DOLLAR | POS | 27 Jan 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