Professor’s Comments March 30, 2023

Posted by OMS  at March 30th, 2023

Stocks rose sharply at yesterday’s open and then traded sideways for the rest of the day. The Dow finished with a gain of 323 points, closing at 32,717.  The NASDAQ and S&P were up 235 and 56 points, respectively.  Volume on the NYSE was relatively weak, coming in at 82 percent of its 10-day average. There were 41 new highs and 20 new lows.

Last week I discussed how the indexes could form one of two possible patterns for their sub-wave 2 up retracement, either a single or a double zig-zag. After watching yesterday’s action, it appears the later pattern is taking place.  Yesterday’s early rally appeared to be part or all of wave ‘a’ up of the second zig-zag.  Once this wave completes, there should be a small pullback followed by another strong rally .

It’s also possible that yesterday’s early pre-market pop was wave ‘a’ up of the second zig-zag with the sideways action that followed during the rest of the day being wave ‘b’. IF this is the case, stocks could rally hard this morning to complete final wave ‘c’ up. In this scenario, the Dow could reach the 32,900-33,000 level. Then once sub-wave 2 up completes, a powerful sub-wave 3 decline should follow.

In other words, protect yourself!

The Dean’s List and the Tide are neutral.

The Market Timing Indicators for the Dow are still neutral. The same market timing indicators for the NASDAQ remain positive.

The Sector Ratio strengthened to 11-13 negative after Wednesday’s session. The top five strong sectors were Semiconductors (5), Leisure (1), Computers (1), Technology (1), and Healthcare.  The top five weak sectors were Retail (-4), Consumer Products (1-), Insurance (-1), Energy (-1), and Banks (-1). 

My Trades:  It was difficult to trade yesterday, with most of the action taking place before the market opened. With the 5-min Bias on the indexes being positive, I was limited to trading the long side. The two trades I made with UDOW came at 11:05 and 14:10.  Both produces small gains.  Fearing a possible pullback today, I moved to the sidelines just before the close.

If the Dow approaches the 32,850+ level today, I’ll start looking for opportunities to go short with SQQQ and TZA.  I still believe these are the weakest indexes that will lead the overall market lower.  I will also be looking to add a few shares of SARK to the mix.

As for options, I’m currently looking to buy a few 21 July SPY Puts with a 375 strike price.  I believe a price near 5.50 is fair.  I’d love to get them closer to 5 bucks.  I’m also looking at the same option with a 345 strike if I can get it closer to 2 bucks.

That’s what I’m doing,

h 

Market Signals for

03-30-2023

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.