Professor’s Comments March 2, 2023

Posted by OMS  at March 3rd, 2023

Stocks were mixed yesterday after trading in a narrow range. The Dow finished with a gain of 5 points, closing at 32,889. The NASDAQ and S&P finished with gains of 76 and 19 points, respectively.  Volume on the NYSE was moderate, coming in at 106 percent of its 10-day average. There were 86 new highs and 51 new lows.

S&P support at the 3,940 level continues to loom large. Yesterday morning, the SPX fell to 3,939.05 before rallying.  Then later in the afternoon (at 14:52) it fell again to 3,941.51 in another re-test of support before bouncing into the close.  The reason I’ve been spending a lot of time drawing your attention to 3,940 level on the SPX is because if this level is broken substantially on a closing basis, the next level of support comes in at 3,800 and then the October lows at 3,550.  Given that the wave count suggests that Wave 3 down could be starting, the odds are high that 3,550 will be tested in a Wave 3 down.

There was a small change in the A-D Oscillator yesterday, so we need to be on the lookout for a Big Move during the next 1-2 days.  If 3,940 is broken to the downside, it could easily produce the Big Move being forecast by the A-D Oscillator. BTW, the Oscillator currently has a reading of -146.04. While readings like this are normally viewed as being oversold, when markets start to crash, the A-D oscillator starts to have readings near -140 to -150 for several days.. The oscillator has now been below -140 fro the past 8 trading days. Then once the crash starts, the oscillator usually falls to below -250. The level is EXTREMELY oversold. The market MUST bounce after a reading of -250! If it doesn’t, a crash is usually taking place.

The Dow has already broken below its 50-day moving average at 33,514 and is now only 303 points away from its 200-day moving average at 33,515.  The reason I mention this today is because IF the Dow falls below its 200, there will be a lot of large institutional investors that will take notice and start selling.  The Big Boys never like to hold stocks trading below their 200.

The Dean’s List is still negative. The Tide is also negative.

The Market Timing Indicators for the Dow have turned neutral. The same indicators on the NASDAQ are negative.

The Sector Ratio strengthened to 19-5 positive after Wednesday’s session. The top five strong sectors were Media (4), Semiconductors (3), Material (3), Technology (3), and Consumer Products (3).  The top five weak sectors were PharmaBio (-3), Food Drugs (-1), Foods (0), Utilities (0) and Computers (0).

My Trades:  I had to work for my money yesterday.  The Bias on TZA started out positive, so I took the early Green Arrow trade at 10.05.  It didn’t amount to much.  The second trade at 11.00 was much better.  I exited on the Red Arrow at 11.30.  The final trade of the day occurred at 12.55.  I started with a few shares because the Bias was still negative but rising. I added to the trade when the Bias turned positive at 13.25 and rode it into the 15.00 mark when a Red Arrow appeared and the volume turned negative. Total profit for the day was about a half cigar.

Bottom Line:  The markets remain at or near critical support levels. The patterns and wave counts suggest that wave 1 of Wave 3 down could be underway. However, the indicators are still giving mixed signals, so a retracement rally toward 4,080 can still occur. If during the next few days, S&P support at the 3,940 level is broken, I will start buying (and holding) inverse ETFs, like SDOW, TZA, SQQQ and SPXU. Follow the Arrows and trade in the direction of the Bias.

That’s what I’m doing,

h

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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