Professor’s Comments July 21, 2022
Posted by OMS at July 21st, 2022
Stocks were mostly higher yesterday in choppy trading. The Dow reached an intraday high of 31,944 before pulling back to close at 31,874, up 47 points. The NASDAQ and S&P finished up 185 and 23 points, respectively. Volume on the NYSE was moderate, coming in at 106 percent of its 10-day average. There were 13 new highs and 31 new lows.
Tuesday’s Big Move that started sub-wave ‘c’ up of wave ‘C’ up of Wave 2 up was the Big Move predicted by the small change signal in the A-D oscillator. In last weekend’s WSR I discussed how the Dow would likely rally to somewhere between 31,511 to 32,000+ before Wave 2 up completes. So, yesterday’s intraday high of 31,944 satisfies that requirement. However, students should remember that final wave ‘C’ up of a double zig-zag pattern, the pattern which Wave 2 up has morphed into, can have 5, not 3 sub-waves. So, it’s possible that the indexes make a small pullback today before starting one more final rally to complete wave ‘C’ up of Wave 2 up.
The market is EXTREMELY overbought now. Yesterday’s cumulative TICK on the NYSE was over 100,000. This was the second cumulative TICK reading over 100,000 in less than a week. Large TICK readings like this are rare and usually occur near the end of a large move to the upside. They are produced by a last gasp of buying power, and are often followed by large moves to the downside. So, with the calendar moving into the final days of a major turn window, with a pattern that suggests a top is near, we’ll see if the TICK is correct in reflecting an exhaustion of buying power.
I’m still using a downside target range for the Dow between 26,500 to 28,000, with 25,000 possible. A move below 31,070 on the Dow would suggest that Wave 3 down is underway. I’m still using a break below the 16 June low of 1,685 to confirm the start of Wave 3 down on the Russell.
The Dean’s List is positive. The Tide is also positive.
The Market Timing Indicators on the Dow and S&P (SPY) are neutral. The same indicators on the NASDAQ and Russell 2K (IWM) are positive. BTW, AIQ’s artificial intelligence indicator had a negative 1-98 reading on IWM last night. This early Sell Signal will need to be confirmed by a momentum shift to the downside before it becomes valid.
The Scalp Trading Indicators on the Dow, S&P (SPY), NASDAQ, and RUT (IWM) are positive.
The Sector Ratio was 19-5 positive after Wednesday’s session. The top five strong sector are Leisure (5), Semiconductors (4), Autos (4), Retail (3) and Consumer Products (3). The top five weak sectors are Foods (-1) Material (-1, Utilities (0), Energy (0), and Insurance (0). Continue to avoid these weak sectors as they will likely lead the market lower as Wave 3 down unfolds.
I’m still on the side-lines with the Doctor’s Trade in TZA waiting for the next Green Arrow to appear. By moving to the side-lines, I have avoided an 8.84 point loss on this trade. However, I’m wondering if my strategy of only taking positive trades on TZA in the Doctor’s Trade, and not using TNA during times when the Russell is retracing is optimal? On the other hand, I also see the return, over 200 percent in 6 months, by just using TZA and wonder if I’m starting to think like a hog? For now, I’m still only going to use TZA in the Doctor’s Trade but will likely adjust this strategy once Wave 3 down completes. Eight plus points of profit is just too much to leave on the table for this trader.
Bonds still appear to have completed retracement Wave 4 and should be moving lower. If I’m right, the Wave 5 decline should last into mid-late August. Yesterday, the long bond closed at 138.19. I’m still looking for a move down to the 125 level. This would put TBT, the inverse Bond ETF, near or above the 30 level. Yesterday, TBT closed at 26.04. TBT is still on a Green Arrow on the 4-hour bars. The only issue I see is that the Bias while rising, is still negative.
I’m still on the side lines with crypto and gold.
That’s what I’m doing.
h
Market Signals for
07-21-2022
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 19 Jul 2022 |
NASDAQ | POS | 15 Jul 2022 |
GOLD | NEG | 30 Jun 2022 |
U.S. DOLLAR | POS | 05 Jul 2022 |
BONDS | NEU | 19 Jul 2022 |
CRUDE OIL | NEU | 19 Jul 2022 |
CRYPTO | POS | 19 Jul 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