Professor’s Comments November 8, 2022
Posted by OMS at November 8th, 2022
Today is Election Day and the market held up as I thought it would. Several weeks ago, I mentioned that today, November 8, could be a key turn date as the patterns suggest this will change once the results are in. To be truthful, I don’t know why this happens, but many times, events like Holidays, Fed Days and elections seems to focus the energy of traders towards these events which causes an excessive amount of volatility in the patterns. It doesn’t change the pattern; it just makes the wave structure more pronounced. Traders are hanging onto every word that comes out of the White House and the Capitol now. Every new poll and any new piece of news is disproportionately analyzed in terms of what it could mean for the election. It’s silly because no one really knows what will happen regardless of the election’s outcome. Many Wall Street pros feel a split government is good for Wall Street. But when I researched this, I don’t see any correlation between split governments and one-party control. I can see many examples of positive and negative markets no matter of which party is in power. It’s just like a lot of people believe the winner of the Super Bowl will determine whether the market will have a good or a bad year. Predictors like this work until they don’t, which is why I rely on the Elliott wave structure. Waves do not care about political parties. They are independent. They go about doing their thing, predicting the next major moves in the stock market, no matter which team wins the Super Bowl or which party controls the House or Senate.
So tonight, as the election results start to come in, just remember that the pattern still suggests that the market is still in a retracement wave 2 up. All the volatility we’ve seen in the past few weeks has NOT changed that. So far, wave 2 up has retraced about 50 percent of wave 1 on the S&P. A normal 61.8 percent retracement would put the S&P at 3842. The only rule Mr. Elliott had for wave 2s is that they can not exceed wave 1, which is the 1 November high of 3912. Yesterday, the S&P closed at 3807.
If the S&P does exceed the 1 November 1 high, the alternate wave count would become a double zig-zag, with Friday’s low of 3708 being the ‘b’ wave of the pattern. Then once wave ‘c’ up wave completes, the next series of down waves will begin. It would still be a wave 2.
The Dean’s List is still neutral (QID is still on the List). The Tide is still positive.
The Market Timing Indicators for the Dow are positive. The same timing indicators on the NASDAQ are negative.
The Sector Ratio weakened to 13-11 positive after Monday’s session. The top five strong sectors were CapGoods (9), Energy (6), PharmaBio (3, Autos (2), and Financial (2). The top five weak sectors were Retail (-3), Consumer Products (-4), Telecoms (-3), Household Products (-2), and Healthcare (-2).
My Trades: I didn’t trade yesterday. I took a quick look at the positive but falling Bias on the 4-min charts of DIA, SPY and IWM and decided to stay on the side-lines. If the Bias had been rising, I would have taken a few trades. But with the election looming, I decided to wait for better opportunities.
All I’m doing now is looking for opportunities to position myself for the next major decline. I still plan to be cautious today. It’s still possible that wave 2 can push higher post-election and form the double zig-zag alternate pattern I discussed. I still want to see some impulsive action to the downside before I get aggressive.
That’s what I’m doing,
h
Market Signals for
11-08-2022
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 04 Nov 2022 |
NASDAQ | NEG | 02 Nov 2022 |
GOLD | NEU | 04 Nov 2022 |
U.S. DOLLAR | POS | 27 Oct 2022 |
BONDS | NEU | 27 Oct 2022 |
CRUDE OIL | POS | 20 Oct 2022 |
CRYPTO | POS | 26 Oct 2022 |
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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Category: Professor's Comments