Professor’s Comments October 6, 2022
Posted by OMS at October 6th, 2022
Stocks were mostly lower yesterday on decreasing volume and breadth. The Dow finished with a loss of 43 points, closing at 30,273. The NASDAQ and S&P were down 28 and 8 points, respectively. Volume on the NYSE came in at 91 percent of its 10-day average. There were 32 new highs and 122 new lows.
Yesterday’s early decline and late rally appeared to be the completion of wave ‘C’ of corrective Wave 2 up. The Wave ‘C’ rally from Monday’s low was a complex a-b-c structure, just what one might expect after last Wednesday’s simple Wave ‘A’. Once this wave completes, possibly today, the markets should begin its next set of declining waves as impulsive Wave 3 down begins to take hold.
Last week, I talked about how the 6-7 October period could be an important turn date for the markets. I originally thought the date would support some type of low. However, after the recent Wave 2 retracement rally, it now appears that an important high is occurring. So, students should start watching for Red Arrows on the intermediate term bars, like the 30s, 60s and 120s. These bars will be the first to announce that Wave 3 down is underway.
The key levels to confirm that Wave 3 down is underway are still last Friday’s low of 28,715 on the Dow and 3,584 on the S&P.
I added to my inverse index ETFs positions near yesterday’s top. I also bought a few more of the 18 November DIA Puts with a 260 strike price.
The Dean’s List is still negative. However, several energy and gold ETFs are starting to appear. The Tide has turned neutral.
The Market Timing Indicators on all the major indexes are still negative.
The Sector Ratio strengthened to 3-21 negative after Monday’s session. The three strong sectors were Energy (4), Cap Goods (2) and Insurance ((0). The top five weak sectors were Consumer Products (-5), Media (-4), Household Products (-4), Telecoms (-3) and Semiconductors (-3).
The Market Timing Signal for gold has turned positive. However, after yesterday’s pullback, I’m more convinced than ever that the recent rally in gold is part of a corrective Wave ‘C’ up. This wave could still have another 1,000 points of upside, probably to the 1,800 level, before it completes. But given the choice between trading a corrective wave, like golds, or an impulsive wave, like the inverse index ETFs, I’ll take the impulsive wave every time.
I’m still avoiding Bonds and Crypto. I’m also watching for a change in signals on crude oil.
Bottom Line: Continue to focus on inverse index ETFs from the Dean’s List, now that corrective Wave 2 appears to be nearing completion. I still believe that inverse index ETFs are the Best Bet.
That’s what I’m doing,
h
P.S. Dave sent out the log on information for tonight’s Class to students who registered. If you did not receive the information, please send Dave an email at support@themarket101.com.
Also, last month marked the 160th anniversary of one of the bloodiest battles of the American Civil War. Some 24,000 soldiers died or were wounded in the clash between Union and Confederate forces at Antietam Creek, near Sharpsburg, MD. Now some of you might be wondering what this has to do with trading stocks and why I’m mentioning it today. Hmmm? Well, you know me and my love of cigars. Yesterday was a cigar moment for me. During yesterday’s session, I saw something that reminded me of how one of Robert E. Lee’s generals lost his copy of Lee’s plan for battle that was wrapped around several cigars. A Union soldier found the cigars and gave the plan to his superiors. Too bad that McClellan wasn’t the kind of general to take advantage of the information. His excessive caution led to a tactical draw instead of gaining a certain victory. Anyhow, I’ll show you what I saw in tonight’s combo Update Class / Class About Nothing and how it revealed the market’s battle plan for the next few weeks to me. I think you’ll find it interesting. When the market shows me its battle plan, I know how to take advantage of it. I plan to smoke a lot of cigars in the days ahead.
See ya tonight.
Market Signals for
10-06-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 15 Sep 2022 |
NASDAQ | NEG | 15 Sep 2022 |
GOLD | POS | 04 Oct 2022 |
U.S. DOLLAR | NEU | 03 Oct 2022 |
BONDS | NEG | 11 Aug 2022 |
CRUDE OIL | POS | 05 Oct 2022 |
CRYPTO | NEU | 03 Oct 2022 |
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