Professor’s Comments June 10, 2021
Posted by OMS at June 10th, 2021
Yesterday was another relatively quiet day in the stock market. The Dow was down 152 points at 34,447. The NASDAQ and S&P were down 13 and 8 points, respectively. Volume on the NYSE was moderate, coming in at 94 percent of its 10-day average. There were 373 new highs and only 5 new lows.
It still appears that the major indexes are in the final stages of developing significant topping patterns. Yesterday was the lowest trading range of the year for the S&P which caused its volatility index (VXX) to hit 32.76, its lowest value in years. Periods of low volatility are usually precursors to periods when volatility begins to rise, so we could see some large price moves in the days ahead.
Also, yesterday’s Put/Call ratio on the S&P came in at 0.35, the second lowest ratio in over 11 years! Put/Call rations like the one we saw yesterday reflect EXTREME Bullish optimism, something almost always seen at major tops.
So, against this cautionary back drop, the Dow quietly dropped 152 points, which caused its Market Timing Indicator AND its ST Indicator to turn Neutral. The same indicators on the S&P also turned Neutral as the volume indicator turned Negative. The indicators on the NASDAQ remain Positive.
I continue to watch the 3 June low of 34,334 on the Dow and 13,549 on the NASDAQ. If both indexes break below these numbers, it’s likely wave 3 down is starting on these indexes which should create the selling pressure to start the S&P heading lower. The critical number on the S&P to signal the start of wave 3 down is 4,168.
The Market Timing Indicators for the Dow has turned Neutral. The same indicators for the S&P and NASDAQ remain Positive after yesterday’s session. The Scalp Trading Indicators for the Dow (DIA) and S&P (SPY) have turned Neutral. The same indicators for the NASDAQ-100 (QQQ) remain Positive.
The Dean’s List has turned Neutral. The Tide remains Positive.
The Sector Ratio weakened to 21-3 Positive after Wednesday’s session. The top 5 strong sectors were Service, Energy, Retail, Financial, and Leisure. The Service Sector still has the highest RS ratings at 6. Energy and Autos had an RS rating of 4. The remaining top five sectors had ratings of 2 and 3. All other sectors have RS ratings between 0 and 2. The three weak sectors were the Telecoms, Household Products, and Media. Continue to watch for increasing weakness in the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks: Yesterday was another wild trading day in several of our Top Stocks.
GameStop, (GME), the Top Stock from Monday night’s MWL was up 19.99 points during Tuesday’s session. It gained another 2.56 points yesterday. The thing about GME is that it opened at 292 on Tuesday, giving traders more than a 50 point intraday ride during the session. The #2 stock, BBBY, was up another 11.52 points yesterday after skyrocketing higher earlier in the week. The stock was trading at 280 last week, so it gained over 120 points in less than a week. That’s crazy! …and likely unsustainable. DDS, the #3 stock, was up another 5.8 points yesterday after gaining 10.39 points during Tuesday’s session. The #4 stock, BBBY, gained 2.27 points in Tuesday’s session, it opened at 34.7 on Tuesday and traded as high as 40. It was an easy day trade if you used the ST indicators on the short-term bars.
Again, if you traded some of the ‘in-play’ stocks on the MWL, please remember what I have been saying about these guys. Even though they have produced some incredible gains, DO NOT hold these stocks overnight. They can come down just as fast as they go up. I still believe that they will be selling 50-60 percent or more lower in the months ahead. Pay attention to the short-term bars.
BTW, I must comment here on some of the new stock picking services I’m seeing pop up recently. The recent EXTREME volatility in ‘in-play’ stocks, has caused a lot of new stock “tipsters’ to come out with new trading systems. Many of these trading systems are ridiculous on face value. None of them are based on indicators, patterns or RS Lists..where you have to do some work/analisis. However, because there are so many new traders in the market now, they think these simple systems are terrific. I saw one guy advertise a system where you just enter the market on Tuesday and are rich by Friday. He says if you buy his system, which costs about $2,000 per year, you can take every Monday off and play golf during the weekend without ever having to worry about your stocks. Really? BTW, his system is based on the fact that Monday is usually a down day in the market. So theoretically, if you buy early on Tuesday, the rest of the week should produce a nice profit. Again, really? Guys like this are little more than carnival scammers. They tend to pop up near the end of a Bull Market like mushrooms after a day of rain. Please be careful!
I’m still avoiding gold and bonds. However, the Market Timing Indicator for Bonds has turned Positive. TMF and TLT are now on the Dean’s List with TMF occupying the #7 position. From a wave count perspective, it appears that Bonds are in the process of completing a wave 4 rally that took the form of a 3-3-5 zig-zag or flat pattern. Because the final wave of this pattern appears nearly complete, the ‘Buy’ signal on Bonds is likely a false alarm. The next major wave down (wave 5 down) on Bonds should erase all the gains Bonds made since late March. Like I said, I’m avoiding Bonds for now.
That’s what I’m doing,
h
Market Signals for
06-10-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 09 Jun 2021 |
NASDAQ | POS | 07 Jun 2021 |
GOLD | POS | 06 May 2021 |
U.S. DOLLAR | NEG | 12 Apr 2021 |
BONDS | POS | 09 Jun 2021 |
CRUDE OIL | POS | 27 May 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