Professor’s Comments July 13, 2021
Posted by OMS at July 13th, 2021
The markets rose yesterday, as expected, on weak volume. The Dow finished with a gain of 126 points, closing at 34,996. It reached an intraday high of 35,014 which is still shy of the 10 May all time high of 35,091. The NASDAQ and S&P rose 31 and 15 points, respectively. Volume on the NYSE was noticeably low, coming in at only 86 percent of its 10-day average. There were 209 new highs and 14 new lows.
Yesterday’s rally appeared to be a continuation of final wave ‘E’ up. The current rally started from the 18 June low of 33,271 which was the completion of Wave ‘D’ down. Wave 1 up of Wave ‘E’ up may have completed yesterday. If that is the case, the Dow should decline to about the 34,600 level in a wave 2 retracement during the next few days before starting another rally leg to test the 10 May high. The extent of the wave 2 pullback will help determine the final target for the completion of Wave ‘E’ up. Right now, I’m projecting a final target near the 35,450 to 35,600 level. This target does not have to be achieved, as Wave ‘E’ up could truncate at any time. However. the sideways triangle pattern that formed for corrective Wave D down suggests the 10 May high will be exceeded before Wave ‘E’ up is complete.
The ‘Island Reversal’ pattern on the S&P I discussed in the WSR is still very much in play. Yesterday’s rally carried to the 4,366 level, before closing at 4,385. The rise exceeded the upper trend line of a channel that started from the 12 May low. Given that the rally since 12 May occurred in five distinct waves, it’s possible that yesterday’s high was the top of some type of wave 5. It’s even possible that yesterday’s high was the final top for the S&P. We’ll see. A decline below last Thursday’s low of 4,289 will be especially important now as it will increase the odds that the final top is in for that index. That’s because a reversal of a Bullish Island Reversal pattern often indicates exhaustion of the uptrend and the start of a new trend. So, pay attention to the 4,289 level on the S&P.
There were NO CHANGES to the Market Timing Indicators after yesterday’s session. The indicators on the Dow, S&P, and NASDAQ all remain Positive.
The Scalp Trading Indicators for the Dow (DIA), S&P (SPY), and NASDAQ-100 (QQQ) remain Positive.
The Dean’s List remains Positive. The Tide has turned Neutral as the Hi-lo indicator, one of the 4 breadth indicators that make up The Tide, has turned Negative.
The Sector Ratio strengthened to 19-6 Positive after yesterday’s session. The top 5 strong sectors were Semiconductors with an RS rating of 3, Service (3), PharmaBio (3), Financial (2) and Household Products (2). The top five weak sectors were Transportation (-1), Banks (-1), Foods (-1), FoodDrug (0), and Material ((0). Continue to watch for weakness in the Sector Ratio as the indexes complete the final waves of their Bullish patterns.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks: A quick look at the Top Stocks from Friday’s MWL is very revealing. The #1 stock on the List, BIIB was not in play as its ST volume indicator was negative going into Monday. So, you had to toss it out. The #2 stock, CLF, was in play as a trade, as both ST indicators were positive. It made for a nice day trade as it opened at 22.37 before closing at 23.08. But the real winner on the day was REMX, the Rare Earth/ Strategic Minerals ETF. Ranked at #3 on the MWL, the ETF gained 3.85 points on the day. It opened at 97.87 with all ST indicators on the 10s positive and never looked back. At 13:30, the ST volume indicator turned negative telling us it was time to exit the trade with a nice 1.8 point profit.
Again, when you’re looking for a short-term trade, just go to the top stocks on the MWL and check out the indicators to see if they still qualify. Then simply use the ST indicators on the short-term bars to tell you when to enter and exit the trade.
Gold: Gold fell 0.21 cents yesterday. The decline caused the Market Timing indicator for gold to turn negative. It’s possible that yesterday’s decline marked the end of the counter-trend rally that started on 29 June. If yesterday’s decline begins to develop legs, wave ‘c’ down could drop the metal to the 1,560 level +/-. On the other hand, gold could retrace to the 1,850 level or higher before the rally is complete. Gold closed at 1,806 yesterday. I’m still on the sidelines with gold, but now that the indicators have turned negative, I’m looking for an entry point to short gold on the short-term bars.
Bonds: No change in Bonds. Bonds still appear to be completing a retracement wave 4 that started from the 18 March low. The Timing Indicators on Bonds turned positive on 28 June and remain Positive. TMF, the positive ETF for Bonds, is still on the Dean’s List with an RS rating of 3. All I’m doing now is waiting for a change in signal which would likely indicate the start of wave 5 down. Again, no need to hurry into the trade. I’d like to see TMF replaced by TBT before shorting Bonds. Wait for the signal to change.
That’s what I’m doing,
h
The 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
07-13-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 09 Jul 2021 |
NASDAQ | POS | 07 Jun 2021 |
GOLD | NEG | 12 Jul 2021 |
U.S. DOLLAR | POS | 06 Jul 2021 |
BONDS | POS | 28 Jun 2021 |
CRUDE OIL | POS | 09 Jul 2021 |
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