Professor’s Comments September 10, 2020
Posted by OMS at September 10th, 2020
The markets rallied hard yesterday after three days of impulsive decline that saw the Dow lose almost 1,700 points. The Dow finished with a gain of 440 points at 27,940. The NASDAQ and SPX were up 294 and 67 points, respectively. Volume on the NYSE was moderate, coming in at 94 percent of its 10-day average. There were 37 new highs and 16 new lows.
Yesterday’s rally from EXTREME oversold conditions filled the gap from the close on 4 September. It appeared to be wave ‘c’ up of retracement wave 2 up within Major Wave 3 down. If this is the case, the indexes should begin to decline soon as Major Wave 3 down begins to unfold. My initial target for the Dow is the 26,600 level. After that should be the 25,000 level, which is the prior wave 4 low, with 23,000 after that. These targets assume Major Wave 3 down is starting.
If the 3 September high of 29,199 is NOT the end of corrective rally since 23 March, and the Dow is forming a double zig-zag or a complex flat pattern, the Dow could rally above the 3 September high before the major decline I see coming begins. I mention this scenario today because the Sector Ratio remains positive. However, given all the other indicators I monitor, this scenario appears less likely.
One of the reasons I say this is because of yesterday’s breadth. During the decline from 3 September, the average the A-D ratio on the NYSE was slightly over 3.1. During yesterday’s strong rally, there were only 2.9 advancers for every decliner. In other words, yesterday’s rally was a slightly weaker than the 3-day decline in terms of breadth. Also, the A-D oscillator continues to remain negative. This important indicator turned negative on 18 September and has been negative since. Yesterday, it had a reading of -109.47 which was up from Tuesday’s EXTREME reading of -205.48. (A-D oscillator readings below -200 usually result in a rally the day after the EXTREME reading). All this suggests is the rally was NOT part of a new leg up, but rather a correction (retracement) within a developing decline.
The Market Timing Indicators for the Major Indexes remain Negative. However, the DMI on the Dow turned Positive after yesterday’s rally.
The Dean’s List remains Negative, but The Tide has turned Neutral. The cause for the Tide change was the Up-Down oscillator which turned slightly positive after yesterday’s session.
The one indicator that did NOT buy into yesterday’s rally was the Sector Ratio. It fell slightly to 21-3 Positive. So, while the Ratio remains positive overall, yesterday’s slight might be telling. Energy, Semiconductors, and Banks are the three weak sectors. If the market declines today, I would expect the Sector Ratio to continue to weaken.
There were NO CHANGES to the Model after yesterday’s session. The Model continues to hold trial positions of 1,200 shares of TWM, 1,600 shares of DXD, 400 shares of DUST, and $43,379 in cash. The Model continues to look for opportunities to buy shares of inverse index ETFs.
Gold (GLG) rose 1.76 points yesterday to 183.05. Gold remains on a Neutral Signal. The past month of basically sideways trading has caused a triangle to form on gold. This means that gold is now at a critical juncture as triangles are usually found in a wave 5. If this is the case, gold could be ready to explode higher. The alternative is that the triangle could also be the middle wave of an a-b-c move for gold with wave ‘c’ down next. Either scenario is possible with equal odds. Right now, gold and the miners have reached the upper boundary lines of their triangle patterns. If the boundary lines (resistance) holds, gold will start to fall sharply. If they break above the lines, gold and the miners should begin to move sharply higher. We should know which scenario is taking place within the next few days.
I continue to watch the Dollar for clues as to how the triangle in gold will be resolved. Right now, the Dollar appears to have bottomed after declining to its 1 September low of 91.7. If the Dollar has indeed bottomed, then its next move should be a rally to the 94.5 to 95 level as wave 3 up unfolds. Yesterday, the Dollar closed at 93.236. A decline below the 93 level would negate the short-term Bullish bottoming pattern and suggest a larger decline is in the cards. This would be positive for gold.
That’s what I’m doing.
h
The 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
09-10-2020
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 04 Sep 2020 |
NASDAQ | NEG | 04 Sep 2020 |
GOLD | NEU | 26 Aug 2020 |
U.S. DOLLAR | NEG | 25 Aug 2020 |
BONDS | NEU | 09 Sep 2020 |
CRUDE OIL | NEG | 04 Sep 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