Professor’s Comments March 18, 2021
Posted by OMS at March 18th, 2021
In Tuesday’s Comments I said, “In a perfect world the Dow should pull back slightly on Tuesday and then rally into the Fed Meeting on Wednesday to complete the pattern.” And that’s exactly what happened. Yesterday’s high of 33,047 met the minimum Fibonacci requirements to make wave 5 up to equal wave 1 up, so now we’ll see it the market starts to roll over.
The NASDAQ rallied to 13,620 yesterday, which was slightly more than the 13,600 level I also mentioned in Tuesday’s Comments. This means the decline into the 5 March low was likely NOT Wave 1 down but Wave 4 down, which makes the current rally part of Wave 5 up. This increases the odds that the NASDAQ will rally to a new high if it doesn’t start to pull back today. My target for a potential Wave 5 up is near the 13,700+ level. Again, this is only IF the 5 March low was not Wave 1 down.
Tesla (TSLA) rallied yesterday but did not break above last Friday’s high of 713.13. This tends to favor the Wave 2 scenario in the NASDAQ and decreases the odds that TSLA will reach the 742 level. A close below yesterday’s low of 651.01 would suggest that the next series of declining waves (Wave 3 down) is underway. Both TSLA and AAPL remain on ST Indicator Sell Signals. Students should note how the ‘Blade’ of a negative Hockey Stick pattern has formed on TSLA, and AAPL, as each stock continues to trade between its 50 and 200 day moving averages.
There was another small change in the A-D oscillator after yesterday’s session, so we need to be on the lookout for another Big Move within the next 1-2 days.
Students should continue to note that there 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.
BTW, one of the things I was looking at yesterday was the tremendous increase in trading volume on the OTC Market. The OTC market is the playground for small investors and when volume begins to pick up, it usually means an important top is approaching. To give you an idea about how much the speculative fever has risen, just think about these numbers: In November 2020, OTC volume was about 80 Million shares, which is normal. By December it increased to about 4 times to 320 Million shares. This is increase in volume, by any measure, is incredible. But it didn’t stop there. My data (if it’s correct) shows that the volume increased another 4X in January. If this isn’t speculative fever, I don’t know what is. Be careful! I saw the same thing happen in the late 90s, just before the dot com crash.
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 turned Neutral after yesterday’s session. The indicator that caused the change was the Hi-Lo indicator which is usually the first indicator to turn.
The Sector Ratio remained at 23-1 Positive after Wednesday’s session. The top 5 strong sectors were Retail, Media, Service, Autos, and Energy. The one weak sector was the Telecoms. 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 remain on a Sell Signal.
Top Stocks: All Top Five stocks from the Members Watch List had nice rallies yesterday. U.S. Steel (X) in the #2 position on Tuesday’s List gained 0.76 points; ADS in the #4 position gained 3.89 points; THO in the #5 position gained 4.18 points. PDC Energy (PDCE) in the #3 position gained 0.53 cents even though it is no longer trending. If you’re trading the Top Five, remember to exit these stocks once they stop trending.
Gold: GLD gained 1.16 points yesterday as its retracement rally continues. The ST Volume indicator on GLD turned positive but its momentum remains negative. With mixed signals, I’m still watching gold from the sidelines.
Bonds: Bonds pulled back yesterday after the Fed kept interest rates near zero. The Fed also said it would continue with its asset purchase program of at least $120 billion worth of Bonds a month. That’s $1.2 Trillion of new money being created each year out of thin air to buy Bonds. And yet, Bonds continue to fall! In the same breadth, the Fed said it still see no increase in inflation for the foreseeable future. Hmmm? If this is true, it means that they can continue to print money without consequences. So, why doesn’t the Fed print even more money and just hand it out to everyone, so people don’t have to work. What the Fed said yesterday was pure nonsense! It’s time we did away with these people.
Bonds still look horrible as Wave 3 down continues to unfold. There could be a small snap back rally in Bonds during the next few weeks which would be wave 4 of Wave 3 down. But I’m still not buying Bonds now. The ST Indicators remain negative.
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
03-18-2021
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | SM CHG |
DEANs LIST | NEU |
THE TIDE | NEU |
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