Professor’s Comments January 26, 2021
Posted by OMS at January 26th, 2021
The markets started the week with a wild ride. The Dow gapped lower and fell over 200 points within the first half hour, then started to rally only to fall over 400 points by late morning. The large cap index then rallied into the close to close 37 points lower at 30,960. While the Dow was falling, the NASDAQ opened 186 points higher, but it too experienced some extremely choppy trading, being down as much as 360 points intraday before closing 93 points higher.
Volume on the NYSE was heavy coming in at 134 percent of its 10-day average. There were 287 new highs and only 2 new lows.
From its 21 January high of 31,272, the Dow has traced out what appears to be wave 1 down and an a-b-c retracement for wave 2 up. If the Dow stays below 31,102, which was last Friday’s high, the pattern suggests the next major series of waves will start to drop the Dow down to the 30,000 level.
Yesterday’s decline on the Dow caused its DMI to turn negative. The decline also caused the Scalp Trading Momentum Indicator to move out of the UP Trend Zone with the Scalp Trading Volume Indicator being slightly negative. The Market Timing Indicators on the Dow remain neutral while the same indicators for the NASDAQ remain positive. So overall, the signals are still mixed.
The key level to watch on the Dow is still the 30,800 level. This level was broken for the second time yesterday, as the Dow dropped slightly below the 15 January low of 30,612 in a five wave decline. (The five declining waves can be clearly seen on a 30 min chart of the Dow). The rally off that low was a 3 wave a-b-c advance. So again, if the Dow stays below Friday’s sub-wave 2 high of 31,102, the odds favor lower prices. A third break of the 30,800 level should get things rolling.
The Dean’s List remains Positive; The Tide remains Neutral, with 2 of the 4 breadth indicators being negative.
The Sector Ratio remains at 22-2 Positive. The top 5 strong sectors are Insurance, Retail, Media, Semiconductors and Energy. The two weak sectors are Telecoms and Household Products. Pay attention to the Sector Ratio this week. If it starts to turn negative, you might want to start managing your money.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Yesterday was another interesting day for many of the stocks in our Top Stock Rotation Strategy. Superstar 3-D Systems, DDD, gained another 2.03 points while the Dow was falling. It was positive all day!! BBBY was another rising almost 16 points higher intraday before closing 0.47 cents higher. (I really need to do a data check on that one) Same for Dillard’s (DDS) which was also up over 16 points intraday. Folks, this is unbelievable stuff!!!! Think about it…. the Dow is tanking over 400 points intraday, while 2 of the 3 top stocks on the MWL are gaining over 16 points. Incredible!!!! Talk about an algorithm being able to identify strong stocks.
But guess what? It didn’t stop there. In the WSR, I talked about a few mining stocks that I would be looking to short now that the ST Volume Indicator turned negative. Here’s what I said,” There are several gold and mining stocks at the top of the Weak List, like #1CDC, #4 PAAS, #10 FNV and #11 WPM that appear to be short-term trading candidates”. So, what happened? CDE closed 0.27 cents lower at 8.33; PAAS closed down 0.47 cents. (I had a nice day shorting this one.) FNV was down 0.39 cents. And WPM was down 0.11 cents. All Winners! But my Superstar of the Day was Royal Caribbean (RCL) which finished down 3.54 points after being almost 5 points lower. I made enough on RCL to pay for a couple of cruises.
Anyhow, enough! If you’re not trading my Top Stock Rotation Strategy with my new indicators, I don’t know what to tell you. Maybe I should say this…Just do it! Send Dave or Steve an email. Get the course and I’ll also send along the links to the follow-on training sessions.
BTW, several students have asked me where the Weak List is located. Stop already! There is NO WEAK LIST! I only post two Lists. They are the Dean’s List, which is mostly ETFs, and the Member’s Watch List, which is mostly stocks. At this point, I do not plan to post a ‘Weak List’. But I will mention a few ‘Weak Stocks’ stocks that are potential short candidates once the signals begin to change. Right now, the miners are still high among the weak stocks. The weakest ranked miners are #2 CDE and #5 PAAS. The two cruise lines I’m shorting are #15 CCL and #29 RCL. Once the overall market begins to generate sell signals, I’ll start positing more weak stocks. But right now, It’s still early. None of the mentioned stocks are recommendations. I don’t make recommendations. I just trade what I talk about.
That’s what I’m doing,
h
BTW, thanks to those students who have sent me some really nice emails, cigars, and booze recently. I really appreciate your kind words and will think about you when I light up my stogie after a tough day of trading.
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
01-26-2021
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 22 Jan 2021 |
NASDAQ | POS | 20 Jan 2021 |
GOLD | NEG | 08 Jan 2021 |
U.S. DOLLAR | POS | 13 Jan 2021 |
BONDS | NEG | 09 Dec 2020 |
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