Professor’s Comments October 28, 2021
Posted by OMS at October 28th, 2021
The Dow and S&P fell hard yesterday, but technology stocks on the NASDAQ finished slightly higher after having a nice intraday gain. The Dow finished with a loss of 266 points, closing at 35,490. The loss wiped put all the gain of the previous five days of trading. The S&P lost 23 points; the NASDAQ gained 0.13 cents. Volume on the NYSE was moderate. coming in at 111 percent of its 10-day moving average. There were 92 new highs and 49 new lows.
The intraday rise and pullback on the NASDAQ formed a Shooting Star Pattern which is often seen at important tops. I found it interesting that only a few stocks took part in the rally, mostly Microsoft and Google. The majority, about 76 percent, closed lower. Downside volume came in at 75 percent. With this massive downside volume and breadth, one would have thought yesterday’s decline would have been a lot larger.
Anyhow, given that all the indexes appear to have started final Wave five up, after breaking out of a lengthy sideways triangle pattern for Wave 4, yesterday’s decline was likely the start of sub-wave ‘b’ down within what is starting to look like a Rising Wedge or Ending Diagonal Pattern. Wedges or ED’s are relatively common in the fifth wave of a major advance, so it MUST be my first choice of potential patterns. If yesterday’s decline was the start of sub-wave 2 down, I would expect the Dow to decline to the 35, 800 level. The decline should NOT be straight down, but instead be more of a choppy a-b-c like decline. If this is the case, the Dow could rally today, and then pullback into tomorrow. The good part about this, if it happens, is that it will tell us a lot about the pattern that is developing so we’ll be better able to predict a top. The bad part is that we’re probably going to be in for some EXTREMELY choppy trading for the next 2 weeks or so.
The other good part is that after last night’s Update Class where I introduced the “Arrows’, you now have these new indicators to identify the key reversal points in any triangle. The next few weeks should give students many opportunities to become comfortable trading with the ‘Arrows’, so when the markets do complete all five waves of Wave 5 up, they will be ready to trade the Bear Market decline aggressively.
BTW, I wouldn’t get too comfortable at this point with yesterday’s decline being the end of sub-wave ‘a’ up and the start of sub-wave 2 down within Wave 5 up. That’s because the decline since the 26 October high of 35,892, could also have market the top of the Bull Market. If you look at a 30 min chart of the Dow, you can clearly see that the decline from the 35,892 high took place in five distinct waves. So, yesterday’s decline could also be the end of Wave 1 down in the new Bear Market. If that’s the case, we’ll have to watch any rally today and into tomorrow to see if does so in a series of a-b-c moves to the upside. If that happens, then the Dow has seen its all-time high, and the next rally will likely fall short of 35,892 before it starts to break down. What I’m saying is that the next few weeks will be critical as to what happens during the next few months or years. So, we’ll need to pay close attention to the developing patterns, ‘Arrows’, and the indicators.
The Market Timing Indicators for the Dow (DIA), S&P (SPY), and NASDAQ (QQQ) are Positive.
The Scalp Trading Indicators for the Dow (DIA), S&P (SPY), and NASDAQ (QQQ) are also Positive.
The Dean’s List is still Positive. The Tide has turned Neutral.
The Sector Ratio weakened slightly to 18-6 Positive after yesterday’s session. The top five strong sectors were Energy (6), Semiconductors (4), Service (3), Healthcare (2), and Autos (2).
The five weakest sectors were Media (-2), Technology (-2), PharmaBio (-1), Foods (-1), and Consumer Products (0).
Top Stocks: The crypto miners pulled back yesterday along with the rest of the market, with MARA being the biggest loser, dropping 2.86 points. I wouldn’t worry too much about MARA and the rest of the gang, mostly because the indicators still are positive AND yesterday’s decline was checked by the 48.90 level on a 60 min chart where I had drawn an inverse parallel trend-line that could mark the lower support line of a sideways triangle. Here’s the deal: IF MARA rallies today and holds this support line in the days ahead, the sideways triangle will become the springboard for even higher prices. If I’m correct about Bitcoin moving significantly higher, the miners will have to pause the advance they’ve made during the past few weeks and rest. Forming a sideways triangle is exactly what I want to see develop now. Same comments apply to GBTC and ETHE. They need to form triangles and rest.
Student should note that yesterday’s decline on the Dow started after a Red Arrow appeared on the final bar of Tuesday’s 60 min chart. In other words, the confirmed Red Arrow warned of yesterday’s 266-point decline. Pay attention to that Red Arrow today and look for any changes on the 120 min bars as well. Also, IF you’re going to trade crypto today, watch for the next confirmed Green Arrow. The upper boundary line of MARA’s potential triangle comes in just over the 54 level, so the trade could be good for about 4 points from last nights close. I will be using the 15 min bars to trade MARA.
Watching the arrows for short-term trading opportunities.
That’s what I’m doing.
h
If you didn’t attend last nights Class, you’re missing out. Don’t let this happen to you. Tell Dave the email he sent you got lost in your spam folder and maybe he will give you the Class at the old rate. No guarantees, but you could try. Kind of like ‘the dog ate my homework’ :>) Don’t miss out.
Market Signals for
10-28-2021
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 15 Oct 2021 |
NASDAQ | POS | 19 Oct 2021 |
GOLD | POS | 15 Oct 2021 |
U.S. DOLLAR | POS | 17 Sep 2021 |
BONDS | NEG | 19 Oct 2021 |
CRUDE OIL | POS | 15 Sep 2021 |
CRYPTO | NEU | 04 Oct 2021 |
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