Professor’s Comments September 27, 2022
Posted by OMS at September 27th, 2022
The market fell again yesterday on strong downside volume and breadth. The Dow finished with a loss of 330 points, closing at 29,260. The low was 29,161. The NASDAQ and S&P lost 65 and 38 points, respectively. Yesterday’s A-D Oscillator reading came in at 414.46, the fifth consecutive day the indicator has had readings near or below minus 200. The reading was the largest negative number since 12 February 2020 when the market was crashing because of Covid. My short-term measures of investor sentiment are also showing excessive pessimism, so with the market EXTREMELY oversold and investors fearing the worst, the market should bounce, at least for the short-term.
However, there is still a lot of unfinished business on the downside. Minor wave 3 down of Wave 3 down started on 12 September. This wave should be the strongest decline of the Bear so far. So, if the market starts a counter trend rally today, I will look at it as another opportunity to add to my short positions. The charts suggest the current decline could take another 7 to 10 days to complete. Like I said in earlier comments, there is a Phi Mate turn date scheduled for 6-7 October, so there’s a good chance the Dow could bottom then. The thing we need to keep in mind is that the current decline is part of intermediate Wave 3 down, so once it completes, the next step in the decline would be for some type of consolidation pattern to form, probably a triangle, which could last for several weeks. The consolidation will form the ‘Blade’ of the Hockey Stick. It will help us predict additional targets for the next decline. Then once the consolidation is complete, the next set of down waves will begin to complete all five waves of Wave 3 down.
Again, Wave 3 down is not even close to being over. You know my downside targets. Plan and trade accordingly.
The Dean’s List and The Tide are still negative.
The Market Timing Indicators on all the major indexes are still negative.
The Sector Ratio weakened to 0-24 negative after Monday’s session. There were no strong sectors. The top five weak sectors are Material (-6), Transportation (-5), Telecoms (-5), Consumer Products (-5) and Semiconductors (-5).
I’m still watching Bonds, Gold, Silver, and the inverse Dollar (UDN) for signals. All have positive charts once the current declines complete. The Daily chart on TMF, the inverse Bond ETF, still looks like a Wave 5 down is nearing completion. If this is the case, the Bear Market in Bonds could be getting close to being over. I’m just waiting for a confirmed Green Arrow.
I’m not interested in crypto. The chart suggests GBTC and Bitcoin could still move a lot lower.
Bottom Line: Three levels of Wave 3 down are underway. However, after five consecutive days of hard decline, the market is EXTREMELY oversold, and conditions are ripe for a short-term rally. If the rally happens, I’ll look at it as another opportunity to get short with inverse ETFs from the Dean’s List. Any rally should be brief, just enough to relieve the oversold conditions. (Here’s where a 2-period RSI could be helpful). My next short-term downside target for the Dow is the large gap near 28,320 which is at the 6 November close. Once this window is closed, the Dow should begin to test the 26,500 to 28,000 levels.
That’s what I’m doing,
h
Market Signals for
09-27-2022
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