Professor’s Comments September 20, 2022
Posted by OMS at September 20th, 2022
A late afternoon rally caused stocks to close modestly higher. The Dow finished with a gain of 197 points, closing at 31,019. The NASDAQ and S&P were up 87 and 27 points, respectively. Volume on the NYSE was low, coming in at 86 percent of its 10-day average. There were 15 new highs and 229 new lows.
Yesterday’s rally appeared to be sub-wave 2 up of minor wave 3 down within Wave 3 down. This retracement wave should complete in the next day or so. The structure could be a typical a-b-c flat pattern with yesterday’s rally being wave ‘a’ up of the pattern. Once all three waves of the pattern are complete, the next series of down waves should begin. If I’m correct about the pattern, the Dow should experience a waterfall decline that consists of three waves of various degrees. Major Wave 3 down started on 16 August. So far, minor waves 1 down and 2 up of Wave 3 down are complete with minor wave 3 down now underway. The next wave of this decline should test the 17 June low of 29,653. Once this level is broken, the Dow should move toward 26,500 to 28,000 which continues to be my target for Wave 3 down. I’m still giving the 24,000 to 25,000 level a 20-25 percent chance if Wave 3 down extends.
BTW, I want to take a minute here to remind students just what the above discussion about Wave 3 down means from a trading perspective. For example, in the past few weeks I have been talking a lot about the 17 June Wave 1 low as target that MUST be broken before Wave 3 down completes. On an inverse ETF like TZA, the 17 June high is 53.15. So, If I’m right about Wave 3 down, this high on TZA and other inverse index ETFs MUST be exceeded. Yesterday, TZA closed at 36.26. The 17 June high in SPXU was 22.43. Yesterday, the inverse ETF for the S&P closed at 17.56.
Bottom line: If Wave 3 down is underway, the inverse index ETFs still have a lot of room to run. Remember what I said about pulling up the flowers to check the roots.
The Fed starts its meeting on interest rate policy today with an announcement scheduled for 2pm tomorrow. It’s no secret that they will raise rates from the current 2.5 percent. The only question is how much. If I had to guess, I’d say the increase will be between 0.75 to 1 percent. Yesterday the 3-month T-bill was yielding 3.12 percent and the 6-month T-bill was at 3.86 percent. So, at 2.5 percent, the Fed is nowhere near the rates available on the free market. The #1 priority for the Fed now is to stop the rising inflation, which in the U.S. is currently running over 12 percent. this, so don’t be surprised to see them announce sizable increases for the next few months. Last week, countries like the UK, Spain, Netherlands, and Russia announced inflation rates (government numbers, not true numbers) between 9 to 14 percent. Argentina and Turkey are now over 78 percent, with Venezuela still topping the list at over 100 percent. So, inflation is not just a U.S. problem, it’s becoming a world problem. The Fed MUST act.
The Dean’s List and the Tide are negative.
All the indicators for the major indexes are negative.
The Sector Ratio strengthened to 12-12 neutral after yesterday’s session. The top five strongest sectors are Energy (6), Leisure (4), Autos (4), Real Estate (4), and Utilities (2). The top five weak sectors are Telecoms (-3), PharmaBio (-3), Computers (-3), Household Products (-2), and Healthcare (-2).
I’m still not doing anything with Bonds, Gold, Silver, and Cryptos for now. Focus on inverse index ETFs from the Dean’s List.
That’s what I’m doing.
h
Market Signals for
09-20-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 15 Sep 2022 |
NASDAQ | NEG | 15 Sep 2022 |
GOLD | NEG | 26 Aug 2022 |
U.S. DOLLAR | POS | 23 Aug 2022 |
BONDS | NEG | 11 Aug 2022 |
CRUDE OIL | NEG | 15 Sep 2022 |
CRYPTO | NEG | 15 Sep 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