Professor’s Comments March 9, 2021
Posted by OMS at March 9th, 2021
loss. The NASDAQ has lost over 1,500 points since it topped on 12 February, which is about an 11 percent loss. The S&P finished down 20 points. It was another wild and crazy day in the markets. Volume on the Big Board was moderate, coming in at 99 percent of its 10-day average. There were 461 new highs and 15 new lows.
There were two things of note during yesterday’s session that should be mentioned. The first was that almost 26 percent of yesterday’s gain on the Dow was due to Disney, which rose 11.92 points to a new high. The S&P did not make a new high and appeared to complete wave ‘c’ up of its a-b-c retracement pattern for Wave 2 up. If this is the case, we could see a small bounce back rally today in the index before the selling resumes.
The second thing I noticed was the unusual breadth and volume associated with the mixed markets. Think about this…the broad S&P actually finished down on a day when there were 1990 advancing issues and only 1279 decliners. This was really strange! As a matter of fact, it has only happened a few times in the last five years. Most of the time, the market rose the next day (today). But I wouldn’t get too excited about any rally because history also shows that the following day (tomorrow) is usually a very negative day as the large divergence between breadth, volume, and price gets resolved. In other words, if the market does rally today, it might be a good selling opportunity.
If you look at the indicators and patterns on the Dow and NASDAQ, there is a large and growing divergence between these indexes. The 30 stocks on the Dow are making new highs while the broader NASDAQ is making fresh three month lows. This inter market divergence usually marks the late stages of a Bull Market. From a pattern perspective, the Dow appears to be completing wave E up of its Ending Diagonal while the NASDAQ has already topped and is forming the early waves (wave 1 down and 2 up) of its next series of down waves. The short-term chart on the NASDAQ suggests we could see a small rally on the NASDAQ today to complete minor wave 2 up, before wave 3 down drops the index down to the 11,600 level. Yesterday the NASDAQ closed at 12,336.
Yesterday’s rally in the Dow caused its Market Timing Indicators to turn 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 back to Neutral.
The Sector Ratio weakened to 19-5 Positive after Monday’s session. The top 5 strong sectors were Retail, Service, Energy, Media, and Banks. The 5 weak sectors were Semiconductors, Computers, PharmaBio, Household Products and 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.
Top Stocks: Friday’s Top Stock, NBR, had another nice day yesterday gaining 3.7 points on the day. It was up over 6 points intraday. Most of the other top 5 stocks were up during the day but pulled back to close slightly lower. One of the things that students should note about the Top Stocks now is that most of them are energy related. This tells me that the market is no longer making the broad advance that was happening several weeks ago. It’s also disturbing for me to see most of the top stocks that were leading the market higher a few weeks ago now on the Weak List. For example, DDD and TSLA are now #2 and #3 on the Weak List. TAN is #7, with BBBY at #10. Students can learn something from these stocks by watching what happened to them once they stopped trending. Like I always say, never hold stocks when they are not trending. Once the trend ends, the party is over and your are just leaving your money at risk. Pay attention to the ST Indicators….!
Gold: Gold fell to 1,677 yesterday and is getting close to my buying zone. As you know, I have been waiting patiently for slightly lower prices as wave 4 down in the metal completes. If gold begins to turn positive, we could see a short-term snap back rally close to the 1,750 level. But even if a rally occurs, there is still a possibility for lower prices if wave 5 up doesn’t develop. Like I said in the WSR, I still want to see a valid bottom form, possibly testing 1,650. If this level holds and we get a signal change, that would be a strong positive. If it doesn’t hold, gold could drop to 1,560. Because of this, I’m being cautious and waiting for a signal change.
Bonds: Stay tuned. It’s still a bit early to be talking about Bonds, but if equities begin to roll over, bonds should reverse their downward slide and begin to shine. From a pattern perspective, Bonds have been in a wave 3 down since reaching their highs in early March. Bond futures closed near 156 yesterday. On 9 March 2020, they were trading at 191+. In other words, Bonds tanked during the past year while equities rose. This is one of the reasons I’m watching Bonds now as the situation could be reversed in the days ahead.
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
03-09-2021
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
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 | NEU | 17 Feb 2021 |
BONDS | NEU | 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