Professor’s Comments June 15, 2021

Posted by OMS  at June 15th, 2021

The indexes were mixed yesterday. The Dow was down over 250 points by noon but recovered a good portion of its losses by the close.  It finished the day down 86 points.   The NASDAQ and S&P were up 105 and 8 points, respectively.  Volume on the NYSE was light, coming in at 88 percent of its 10-day average.  There were 272 new highs and 12 new lows.

It still appears that the major indexes are in the final stages of developing significant topping patterns and will top soon.  The NASDAQ and S&P appear to be completing the final fifth waves of Ending Diagonal (ED) Patterns.  The NASDAQ is finishing the fifth wave of a small ED within a larger ED. Both indexes are diverging from the Dow which is usually a warning that a major top is approaching.  Healthy markets usually rise together.  This is not the case now.  

Students should continue to watch the 3 June low of 34,334 on the Dow and 13,549 on the NASDAQ.  Yesterday, the Dow broke below 34,334 getting as low as 34,212 during the day.  However, the late rally caused the index to close at 34,394 keeping it above its key support level. The early decline was the second time the index tested the 34,334 level.  The decline increased the odds that the third re-test will not hold.  A close below 34,334 would suggest that wave 3 down is underway.  

The Market Timing Indicators on the Dow, NASDAQ and S&P remain Positive after Monday’s session.

The Scalp Trading Indicators for the Dow (DIA), and S&P (SPY), and NASDAQ-100 (QQQ) remain Positive. 

The Dean’s List has turned Positive.  The Tide remains Neutral after Monday’s session.  Only this time, it’s the Up-Down Oscillator that is keeping the Tide neutral.

The Sector Ratio stayed steady at 19-5 Positive.   The top 5 strong sectors were e, Energy, Service, Autos, PharmaBio and Retail. The Energy Sector is now the highest ranked sector with an RS rating of 5.  Service is second with an RS Rating of 4.  The rest of the top five sectors have ratings of 3.  The five weak sectors were the Telecoms, Transportation, Household Products, Banks, and Semiconductors.  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:  Most of the Top Stocks consolidated yesterday, a day when the Dow traded down for most of the day. The exception was Biogen (BIIB) which was ranked #1 on Friday’s List.  It rose 9.5 points to 406.14.  That’s the thing about Top Stocks.  They are #1 for a reason. To illustrate this, I want to talk about a gold trade that occurred after the indicator for gold turned positive on 6 May.  If you saw the indicator turn positive and then used my Scalp Trading Methodology, you caught a nice trade.  It was easy.  You simply went to the Member’s Watch List and noted that Hecla Mining (HL) was at the top of the List trading at 7.29.  Last Friday, a little over a month later, HL was trading at 9.04 for a 24 percent gain. Like I said, it was an easy trade.  All you had to do was watch for a change in the timing signal for gold and go to the List.  If you get a chance in the next day or so, you might want to go back and review the HL trade.  It’s all there….

BTW, I always note the day of the last signal change in the Market Timing Indicators on the cockpit.  This way you can tell if the signal is fresh or not.  If you missed the first day of the signal change, it’s probably still OK if you’re a few days late.  Just go to the List and see what happened to the top stocks in the sector.  If they haven’t moved up too much, they’re probably still OK.   In the case of HL, it took several days before the stock started moving up.  There was plenty of time to get in.

The reason I wanted to talk about using the other Market Timing Signals (for gold, crude oil, and Bonds) today is that several of the commodity charts I monitor are beginning to show signs of weakness. Both gold and crude oil are looking especially vulnerable. Also, Caterpillar (CAT), a stock that tends to move with commodities, got hit hard late last week and is now on a Sell Signal.

Because of this, students might want to watch GSG, a commodity indexed ETF, as a potential short. The ETF has been in a steady up trend since mid-April as commodity prices have moved upward.  However, if you look at the ST Indicators on a daily chart, you can see a significant negative divergence on both the volume and momentum indicators.  If these indicators turn negative, it will likely signal the up-trend is over. An early heads-up will be a close below 15.40. Beyond that is the 50-day moving average at 15.15.  Given the negative divergence in GSG, students should look for and be prepared for any change to the Market Timing Signals on gold and crude oil.

I’m still avoiding Bonds even though my Market Timing Indicator for Bonds has turned Positive.  I still believe that current rally in Bonds is part of a wave 4 zig-zag pattern.  So, while Bonds will likely rally next week to complete wave ‘c’ up of the pattern, I believe the rally will be limited. 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

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

06-15-2021

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.