Professor’s Comments June 30, 2022

Posted by OMS  at June 30th, 2022

The indexes closed mixed to flat yesterday on low volume.  The Dow gained 83 points to close at 31,029.  The NASDAQ and S&P were down 4 and 3 points, respectively. Volume on the NYSE was only 83 percent of its 10-day average.  There were 9 new highs and 199 new lows.

In Tuesday’s Comments I talked about two scenarios for the market.  The first, my primary scenario, had the Dow completing wave ‘a’ up of an a-b-c move and then falling to the 30,600 to 30,800 level in wave ‘b’ down, followed by a rise toward 32,000, possibly higher. The second scenario had also the Dow falling but continuing lower as wave 3 of Wave 3 down got underway.

The action of the past two days of trading suggests that either scenario is still possible.  Yesterday the Dow reached a low of 30,894 before bouncing into the close.  The Dow’ futures are down hard this morning indicating that the cash index will likely open somewhere in the 30,600 to 30,800 range mentioned above.  So, the question for today is will the Dow stop within the above-mentioned range or will it continue to decline as wave 3 of Wave 3 down begins to unfold.  At this point, the odds are a tossup.  A close below last Thursday’s low of 30,292 would suggest that wave 3 of Wave 3 down is underway.  On the other hand, if the Dow holds the 30,600 level and starts to rally, it likely means that my primary scenario is taking place, and the market should rally into the mid-month turn date window before the major decline I see coming begins.

One fly in the ointment for lower prices has to do with the recent low volume we’ve been seeing. Given that last Friday was an options expiration day, it was no surprise to see lower volume on Monday. But Tuesday’s and yesterday’s volume was also exceptionally low. The reason I mention this today is because three consecutive days of exceptionally low volume usually leads to a bounce! So IF the Dow does open lower this morning, and does not continue to move impulsively lower, the low volume data suggests the market could begin a significant rally from the 30,600 +/- level. Be careful!

The Dean’s List and the Tide remain 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 and S&P (SPY) are neutral.  The same indicators for the NASDAQ (QQQ) and RUT are negative.

The Sector Ratio weakened to 2-22 negative. The top two strong sector are Telecoms (2) and Retail (1). The top five weak sectors are Media (-8), Autos (-7), Semiconductors ((-6), Energy (-6), and Consumer Products (-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 generated a confirmed Green Arrow on yesterday’s first bar, so I’m back in the trade.  Students should watch this trade closely during the next few days because the trade could reverse if Wave 2 up is not complete, and the market starts to rally.  I might even place a temporary stop on the trade if the market opens several hundred points lower today to protect against a potential wave ‘c’ rally.

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

BTW, I haven’t talked much about gold for the past few weeks as the metal appears to be forming the handle portion of a major cup and handle pattern.  The current wave, which started from last July’s high, appears to be Wave 2 down of the handle.  This wave could drop gold down to the 1550 to 1600 level before it completes.  Then once gold bottoms, the next rally should be Wave 3 up.  It could take gold to the 3,000 level, possibly higher. I’m still not interested in buying gold now, but if it gets down to the levels I mentioned above, I’ll put on my hard hat, grab my pick, and go mining.  Same for the HUI, the gold bugs Index.  Right now, its trading near 240.  If it drops below 200, I’ll start to become interested.  If it gets down to 160-175, I’ll rent a truck and start loading up on mining stocks.  Same comments for silver:  I’m looking to buy SLV closer to 17.  Yesterday, SLV closed at 19.14.

That’s what I’m doing.

h

Market Signals for

06-30-2022

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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