Professor’s Comments September 14, 2021

Posted by OMS  at September 14th, 2021

Last Friday’s opening Tick was one of the strongest of the year. Yesterday’s Tick was even stronger with an opening reading of 1,487. But while the strong Tick led to a higher opening, the markets were down by mid-afternoon, then staged a strong rally into the close. The action was a classic a-b-c retracement, just like I discussed in the WSR.

I said, “If the Dow does start a rally on Monday, and BTW, it’s a Big IF, it should be an a-b-c affair that could push back to the 35,300 level.”  Yesterday the Dow gained 262 points, closing at 34,896. The intraday high was 34,939. At this point, I’m not sure if the a-b-c retracement to 34,939 was wave ‘a’ up of the retracement or if it was the complete retracement. We should know during the next day or so. The important thing was that it WAS a retracement and coming after a five wave decline to 34,600…. that’s especially IMPORTANT. Seeing five waves down and three (a-b-c) up tells me the market is changing direction and is now beginning to move down. A break of 34 600 in the days ahead will confirm the new trend change and increase the odds that the 16 August high of 35,631 was the end of the major Bull Market that started in March 2009.

Could the market rally from here? Sure. But I believe any rally will be limited. If yesterday’s rally was only wave ‘a’ of the retracement, the Dow could still move higher toward the 35,200 level.  After watching yesterday’s action, and considering Friday’s low of 34,665, I no longer believe the Dow will make it back to the 35,300 level, the level I used mentioned as a potential target in the WSR. Now, any ‘c’ wave rally will should not be higher than 35,050 to 35,200. Those are the levels I will be watching and using to establish my short positions. BTW, if a miracle happens and the Dow does manage to rally above the levels mentioned, it will have to move above 35,500 for me to change my short-term bearish perspective.

OK, so what’s likely going to happen next? Hmm? Well, after the current retracement completes, probably somewhere between current levels and 35,200, the Dow should start its next leg down. That should be an impulsive wave 3 down.  It should start with a break of the 34,600 level. A break of 34,900 should lead to a decline near or below the 34,200 level, which is my first target. After that, my target is 32,271, which is the June low where final wave 5 of the Ending Diagonal Pattern began There could be a small rally after that, but prices should continue to decline for months, if not years.

Both the NASDAQ and S&P should follow the Dow lower. My initial target for the NASDAQ is near the 15,250 level. After that it’s the early July low of 14,773. Beyond that, the targets are less clear, but the 12 May low of 13,003 appears to be a realistic intermediate-term possibility as it is where the NASDAQ’s ED started. Yesterday the NASDAQ closed at 15,434. Like I said this weekend, now is the time for EXTREME caution. 

The Market Timing Indicators for the Dow and S&P remain Negative. The same indicators on NASDAQ remain Neutral. (Another day or so of decline could turn the indicators negative.)

The Scalp Trading Indicators for the Dow (DIA) remain Negative. The ST Indicators on the S&P (SPY) and NASDAQ (QQQ) remain Neutral.

The Dean’s List is Negative. The Tide is Neutral.

The Sector Ratio strengthened to 12 -12 Neutral after yesterday’s session. The top five strong sectors were Semiconductors (2), Insurance (1), Telecoms (1), Healthcare (1) and Food Drug (1). Students should note the low RS ratings that are now associated with the top sectors. The five weakest sectors are Retail (-3), Autos (-2), Consumer Products (-2), Service (-1) and Transportation (-1).

Model Update:   There were NO Changes to the Model. It is still 100 percent in cash.

Top Stocks:  After gaining 1.48 points on Friday, Cameco (CCJ), the Top Stock from Friday’s MWL, gained another 0.83 cents yesterday. The two natural gas producers, TGP and UNG, in the #2 and #3 spots were also up. But it was the #4 stock, First Solar (FSLR), that really caught my eye as it popped 6.76 points on the day. Dillard’s (DDS) also had a nice day, gaining 5.74 points. So once again we see that on a day when the market rises, the Top Stocks lead the way higher. All five Top Stocks were winners!

I still believe that it’s best to forget the Top Stocks for now (at least for me). Yeah, it’s fun to scalp trade Top Stocks, but once the Dow starts to break down, I think it’s going to be a lot easier to trade the outgoing tide.  Last night, the top five stocks from the Weak List with their RS rankings were RIOT (-9), ROKU (-8), SAM (-6), ZM (-6), and BBBY (-5).

My Trend Algorithm also identified RGR and ROKU as potential shorts.

Gold:  Gold (GLD) rose 0.56 cents yesterday to 167.74.  The Timing Indicators remain Neutral. I still believe that gold (the metal) is undergoing an a-b-c retracement for corrective wave 2. If this is the case, the next wave down should take gold (the metal) down to the 1,720 level or lower. IF this happened, GLD could fall to the 160 level or lower. BTW, because prices have traded sideways for the past 4 days on gold, I drew a small trend line drawn on my chart for GLD. A break of yesterday’s low of 167.4 would break ‘Blade’ support of the downside pattern. So, watch yesterday’s low.

Bonds:  I still don’t have anything new to say about Bonds. I’m still waiting for the indicators to turn negative before buying TBT. If Bonds start to break down, the next wave down could drop them to the 18 March low or lower. Because of this, I’m looking at adding TBT to our IRA’s. Be patient and wait for a signal change

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

09-14-2021

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.