Professor’s Comments March 11, 2021
Posted by OMS at March 12th, 2021
The Dow and S&P staged a strong rally on Wednesday on relatively light breadth and volume. The Dow rose to a new high as it continues to complete wave 5 up of final Wave E up. The NASDAQ had a small 5 point loss as it continued its Wave 2 retracement. At this point, the NASDAQ has now recovered about 1/3 of its Wave 1 loss of about 1,650 points. The pattern on the S&P is not as clear as its sister indexes, but after yesterday’s 23 point gain, it still appears to be in a retracement Wave 2 up. The primary reason I say this is because the S&P is still below its 16 February high of 3,950. Yesterday, the SPX closed at 3,899 so it would take a move above 3,950 to change the wave count. Volume on the NYSE was moderate, coming in at 98 percent of its 10-day average. There were 392 new highs and 14 new lows.
Basically, the 30 stocks on the Dow are pushing the index to new highs while the other two major indexes appear to have started their declines but are currently in retracement patterns. If you look at what’s been happening with two of the major stocks in the indexes, it’s clear that both Apple (AAPL) and Tesla (TSLA) have suffered some severe technical damage since reaching their highs on 25 January. I believe both stocks will see significantly lower levels once their current Wave 2 retracement completes. TSLA has already lost over 300 points from its high of 900.4 on the current decline, and the pattern suggests it could be cut in half again before the downdraft ends. TSLA is now the #7 stock on the Weak List, with APPL at #12. My intermediate term target for TSLA is near the 360 level. Once the current retracement wave completes, these two stocks should put pressure the NASDAQ and drop it to the 11,600 level before Wave 3 down completes. Yesterday, the NASDAQ closed at 12,752.
I remind students that even though the markets are currently in a short-term rally mode, the is an official Hindenburg Omen on the Board. This means that once the current rally phase completes, the probability for a general market crash remains high.
The Market Timing Indicators on the Dow remain Positive. However, the same Timing Indicators on the NASDAQ remain Negative. The Scalp Trading Indicators on the DIA are Positive while the same indicators on the NASDAQ (QQQ) remain Negative.
The Dean’s List remains Neutral. The Tide has turned Positive.
The Sector Ratio strengthened to 22-2 Positive after Wednesday’s session. The top 5 strong sectors were Retail, Energy, Service, Media, and Autos. The 2 weak sectors were Semiconductors, and PharmaBio. Continue to look for changes to the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash. Remember, the Model is based on the NASDAQ-100 (QQQ) and right now the Q’s are on a Sell Signal.
Top Stocks: During the morning of 8 March, the Volume indicator on the DIA turned positive. So, if you bought a few of the Top Stocks on the previous day’s MWL, here’s what happened in the past two days:
Top Stock, NBR rallied from 126.75 to 130.43. TDC gained over 2 points to close at 43.25. Most of the energy stocks on the List, other than NBR, held their ground, with most seeing small gains. ADS gained over 5 points. Again, when the volume trigger on the DIA says its time to trade, it Pay$ to be in the Top Stocks.
BTW, during the past few days I have added several stocks to the data base for the MWL that represent the Electronic Vehicle (EV) and Autonomous Vehicle (AV) sectors of the market. And while I believe that stocks in these sectors will pull back with the overall market in the next few months, they also represent the future in developing the next generation of car and truck transportation. I believe that we are fast approaching a turning point in this technology that will lead to a new generation of EVs and Autonomous Vehicles that will change our lives within the next 5 years. I’ll be talking more about how this new technology is progressing in the months ahead. But in the interim, I want to have a few of these ‘technology’ stocks in the data base for the MWL, just in case things begin to get hot in the sectors. BTW, my coverage of TSLA is related to this new technology as the company is one of the leaders in EV and AV development. Having TSLA in the data base, along with other AV leaders, will give us an opportunity to participate in these stocks once they complete their corrections. Not now.
Gold: As discussed in Tuesday’s Comments, gold had the small pop I expected. However, I’m still not sold on gold’s bottom. I’m still waiting for a change in indicators. If Major Wave 4 down in gold is completing and the Major Wave 5 rally I expect is about to begin, there’s still plenty of time (and points) remaining before I need to commit to the metals. I’m still on the sidelines for now.
Bonds: Same for Bonds. However, I’m beginning to see the first signs of life. If the equity markets start to roll over, Bonds could be a nice place to be. Continue to watch Bonds.
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
03-12-2021
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 08 Mar 2021 |
NASDAQ | NEG | 01 Mar 2021 |
GOLD | NEG | 08 Jan 2021 |
U.S. DOLLAR | POS | 09 Mar 2021 |
BONDS | NEG | 27 Jan 2021 |
CRUDE OIL | POS | 11 Nov 2020 |
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