Professor’s Comments September 16, 2021

Posted by OMS  at September 16th, 2021

The indexes staged a strong retracement rally yesterday on decent volume. The Dow finished with a gain of 237 points, closing at 34,814. It got as high as 34,889. The NASDAQ and S&P were up 124 and 38 points, respectively. Volume on the NYSE was moderate, coming in at 108 percent of its 10-day moving average. There were 74 new highs and 48 new lows.

After yesterday’s rally, it appears that Tuesday’s low of 34,510 was the completion of Wave 1 down of the new Bear Market. The current rally, which appeared to be wave ‘a’ of Wave 2 up, could continue to the 34,900+ level. Then once this wave completes, wave ‘b’ down should drop the Dow back down near current levels (34,700 to 34,800) before wave ‘c’ up completes the retracement sequence somewhere above 35,000, probably closer to 35,200. I do not expect the rally to go much higher than 35,200. So, as I said in previous Comments, I will start looking to get aggressive with my short position above the 35,000 level. IF the Dow rallies above 35,000, I’ll start looking to buy inverse index ETFs when the Scalp Trading Indicators on the 15 minute bars turn negative.

From the looks of yesterday’s action, the Wave 2 retracement rally should be complete within the next 2-4 days. After that, the Wave 3 decline should begin and last well into October. Once all five waves of Major Wave 1 down are complete, the Dow should be trading near of below the 32,271 level, which is the June low where final wave 5 of the Ending Diagonal Pattern began. 

One reason I believe that Wave 2 up will complete within the next week or so is because there is a significant Fibonacci cluster window between 15 and 23 September. This cluster window consists of seven former tops or bottoms, so the odds of a major turn are high.

BTW, I want to talk a little about Apple (AAPL) this morning. As you know, I follow the stock closely because it is widely held and is also a component of both the Dow and NASDAQ-100. Apple is also one of the FAANG stocks, so it’s technical performance matters. Since its 7 September of 151.04, the stock has made a five wave decline into yesterday’s low of 146.37. So just like the Dow and the other indexes, seeing five waves down on AAPL increased the odds that the trend has changed from up to down. Yesterday’s rally took the stock to 149.03.  If the a-b-c rally continues, the shares could trade back to the 150 to 152 level. After that, a significant decline should begin. The main reason I wanted to discuss APPL this morning is because I also use the stock as a barometer for the other FAANG stocks or tech stocks like TESLA, NVIDA, Twitter, and Baidu. So, IF after AAPL completes its wave 2 a-b-c retracement and starts a wave 3 decline, the odds are high that it will take the other tech stocks down with it.

The Market Timing Indicators for the Dow and S&P remain Negative. The same indicators on NASDAQ remain Neutral.

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 and The Tide are Neutral.

The Sector Ratio strengthened to 18 -6 Positive after yesterday’s session. The top five strong sectors were Semiconductors (2), Material (2), Energy (2), Insurance (2), and Media (1). The five weakest sectors are Consumer Products (-1), Retail (-1), Transportation (0), Service (0), and PharmaBio (0).

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

Top Stocks:  The three Top Stocks on the MWL were up yesterday, with Cameco (CCJ) and the two natural gas producers / distributors remaining strong. Cameco is the world’s largest publicly traded uranium company, based in Saskatoon, Saskatchewan, Canada. A few years ago, it was the world’s second largest uranium producer, accounting for 18% of world production. Uranium and rare earth / strategic metal stocks, like CCJ and REMX, have been hot lately now that sources in Afghanistan have dried up. Both stocks have consistently been at or near the top of the MWL for the past month.

Last night, my Trend Algorithm identified several energy stocks as potential day trades. These include BP, DVN, EQT. HAL, and MRO. Energy is currently ranked as the third strongest sector.

Gold:  Gold (GLD) fell 0.99 cents yesterday to 167.83.  The Timing Indicators remain Neutral. It still appears that gold (the metal) is undergoing an a-b-c retracement for corrective wave 2. A break of this week’s lows would mean that the next wave down is starting. Watch for a signal change.

Bonds:  I’m still neutral on Bonds. Yesterday’s small pop in TMF did nothing to change my longer-term negative bias. I’m just waiting for the indicators to turn negative to short Bonds by buying TBT. 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

09-16-2021

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.