Professor’s Comments June 28, 2022

The indexes were modestly lower yesterday, on low volume.  Declines on low volume are always suspect. The Dow fell 63 points, closing at 31 438.  The NASDAQ and S&P were down 83 and 12 points, respectively. Volume on the NYSE was only 82 percent of its 10-day average.  There were 14 new highs and 65 new lows.

It still appears that corrective wave 2 up of Wave 3 down is in the process of topping.  However, because there is a major turn date window scheduled for between 15 to 21 July, it’s starting to look like retracement wave 2 up might develop into an even more complex a-b-c pattern.  If the turn date window is to come into play, it’s possible that the first wave of the rally ends in the next day or so.  Yesterday’s small pullback could have been sub-wave 4 of the five waves for wave ‘a’ up. If so, the Dow should rally today to complete wave ‘a’ up of the double zig-zag or flat pattern.

After this ‘a’ wave completes, the Dow would then fall to the 30,600 to 30,800 level for wave ‘b’ down.  Then once this wave is complete, the index could rally toward 32,000 to 32,400 into the turn date window. This is now my primary scenario.

Remember, there is a positive end-of-month bias going on now, in addition to the positive bias from the upcoming long holiday weekend.

The alternate is that stocks begin to fall hard in the next day or so as wave 3 of Wave 3 down begins. If this happens, the decline will be impulsive and powerful, with the Dow dropping several hundred points each day for weeks. You will know it when you see it.

At this point, both scenarios have a high probability of occurring. The main difference is that in the first scenario, the major decline I see coming will be delayed until mid-to-late July. Both scenarios should lead to significant, crash-like, declines once wave 2 up is complete.

The Dean’s List and the Tide are positive.

The Market Timing Indicators on the Dow and S&P (SPY) remain negative. The same indicators for the NASDAQ and RUT are neutral. 

The Scalp Trading Indicators on the Dow, S&P (SPY), NASDAQ (QQQ) and RUT are positive.

The Sector Ratio strengthened to 3-21 negative. The top three strong sector are Retail (3), Telecoms (2), and Household Products (0). The top five weak sectors are Media (-8), Real Estate (-7), Energy (-7), Material (-7), and Autos (-6).  Continue to avoid these weak sectors as they will likely lead the market lower as Wave 3 down unfolds.

My Doctors Trade with TZA is still on a Red Arrow, so I’m out of the trade and on the side-lines waiting for the next Green Arrow.  Students should continue to watch as the week progresses as TZA continues to form the ‘Blade’ of a large Hockey Stick pattern. With a 17.45 point ‘Stick’, I’m still a buyer on the next Green Arrow.

Still no change in my comments on Bonds, crypto, or gold. I still don’t see any reason to own them now.  

All I’m doing now is waiting for Green Arrows to appear on SDOW, SQQQ, and TZA.

That’s what I’m doing.

h

Market Signals for

06-28-2022