Weekend Strategy Review August 1, 2021
Posted by OMS at August 1st, 2021
A long time ago, when I was a boy, I remember seeing a comedy routine performed by Abbott and Costello where Costello meets a stranger who relates a story to him about how the love of his life was stolen from him at Niagara Falls. In the skit, whenever the stranger hears the words, Niagara Falls, he goes into a frenzy and clobbers Costello. The ‘clobbering’ stats with the stranger saying, “Slowly I turned, step by step, step by step.” I don’t know what it is about Costello’s routine that makes me remember it all these years later, but while I was watching the market yesterday, I thought about the skit. Maybe it was because the words, slow and turning where at the front of my mind.
In Thursday’s Comments, I discussed how the Dow appears to be rising in final wave five of sub-wave 5 of Wave 5 up. If so, it should be close to finishing. The final top could be delayed until late August – September. However, after watching Friday’s action, the momentum I saw earlier last week is clearly waning. I like to think of the momentum of the market as a large super tanker moving on the ocean. Maybe a better example is the Titanic. Once the captain gave the order to turn the helm, it was already too late to avoid the ice burg. The forward momentum of a large ship (and markets) takes a looong time to stop and then change direction. This is what I believe is starting to happen now. Again, the key words are slow and turning.
The Dow finished with a loss of 149 points on Friday, closing at 34,935. The decline turned the Scalp Trading Volume Indicator on the DIA negative. However, the momentum or what I call bias, is still positive. And as long as the bias stays positive, the Titanic that’s been sailing along for the past few months ain’t about to sink. On the other hand, the momentum indicators are clearly showing a significant divergence since the 10 May high, telling me there are large ice bergs ahead. BTW, momentum usually peaks during the wave 3 high, which is what it did on 10 May. This is another reason why I must believe that the five wave rally off the 12 May low is final wave 5. The momentum usually doesn’t lie. It just takes time to turn the ship.
So, the Market Timing Indicators for the Dow remain Neutral. The same timing indicators for the NASDAQ remain Positive. The S&P is Neutral.
The Scalp Trading Indicators for the Dow (DIA) and S&P have turned Neutral. The same indicators on the NASDAQ-100 (QQQ) remain Positive.
Bottom Line: With the volume indicators now turning negative, its only the momentum that’s keeping the ship afloat.
The Dean’s List and the Tide have turned Neutral. The fact that The Tide, my primary breadth indicator, has been flipping between Neutral and Negative during the market’s wave five rally is a major warning.
The 0-100 Sell Signal from AIQ’s artificial intelligence algorithm on 23 July has been confirmed. The AIQ platform uses a shift in phase to confirm its signals. I don’t use the phase indicator because I believe its unreliable. I prefer to use pure momentum, and right now the momentum is still positive. So as far as I’m concerned, the AIQ Sell Signal is still unconfirmed.
The Sector Ratio weakened to 12-12 Neutral after yesterday’s session. The top five strong sectors were PharmaBio (2), Service (2), Semiconductors (2), Household Products (2) and Healthcare (1). The top five weak sectors were Energy (-3), Banks (-3), Transportation (-2), Autos (-2) and Leisure (-2). Students should note that the RS ratings of the top weak sectors are now greater than the ratings of the strong sectors. This is another sign that the market could be turning.
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
Top Stocks: CLF was the top stock on Thursday’s MWL. It finished up on a day when the Dow was dropping 149 points. But the morning after talking about a few technology stocks in my Update presentation, I couldn’t get these stocks out of my head. So, with the Dow falling, and the bias negative, I decided to short RCL…and look for opportunities in the Bitcoin miners. RCL, which has consistently been near the top of the weak list, along with CCL for weeks. So, on a down day, RCL was my go to short. The stock was easy pickings using the ST indicators on the 4 min bars. RCL was one of the stocks I talked about during my Update presentation, and the techniques I used were exactly what I showed students in the Class. The trade was good for about a thousand bucks. But while I was watching RCL fall, I also had my eye on RIOT. But just when the indicators turned positive on the stock, the market was under severe selling pressure, so RIOT never got going. Then later in the Dow, after the Dow hit its low, a divergence in the bias gave me a heads up, and a few minutes I was into the trade. An entry near 32 produced a 90+ cent profit by the close.
Just after the close I called Dave and asked him to put together a ‘Special Offer’ for students who have not bought the Scalp Trading (ST) course. Dave’s offer will include the original Course, the Follow-on Training Video which includes the Decision Matrix AND a link to Thursday night’s Update Class, where I talk about several of my favorite technologies for the future. That’s what Dave’s offer will include. But you know me, I need to make it personal. I want ALL my students to have access to the new methodology and the ST indicators. My usual fee is $150 for a half hour of consulting time. But if you buy Dave’s package, I’ll make sure you have enough phone time with me (free) to get you comfortable with the new trading system. I want you to be successful!
Gold: Gold (GLD) fell on Friday, but the Market Timing Indicators stay positive. I still can’t ignore the incredibly large cup and handle pattern that has developed on GLD since the start of the year. Please take a look at a daily chart of GLD and see if you can find it. The pattern projects significantly higher gold prices. The issue I’m having with gold stocks now is that none of them are high on either the Dean’s or the Member’s Watch List. So right now, I’m trading other things. But IF gold stocks start moving into the top 10, you know I’ll be a buyer.
Bonds: The Timing Indicators on Bonds remain Neutral. So, I’m gonna pass on Bonds for now. I’m still watching, but I can’t get interested with so many other things to trade.
Crypto Currencies and Bitcoin Mining Companies: In my Update Class, I talked a lot about cryptos and Bitcoin miners. These guys mint money! Some of the miners are being rewarded with 10-13 Bitcoins per day for the work they do in verifying transactions made with crypto purchases. Think about it….each Bitcoin is currently worth about $40,000. Twelve of them are worth 12 x 40K or about $480,000 each day. How many businesses do you know that require only a handful of people to run a bunch of computers 24 hours a day, seven days a week to generate about $3.36 Million in revenue each week? The answer is probably…none! That’s why I’m interested in the Bitcoin miners, like RIOT and Marathon (MARA).
I’ll be talking a lot more about some of the new technologies I discussed in the Update Class in the weeks ahead. Like I said in the Class, we are at a point in history where several new technologies are coming together at the same time. This has NEVER occurred in the history of mankind!!! Yeah, we have had many life changing technologies in the past, like the advent of electricity, the internet, and Apple’s iPhone, but not like this. These new technologies WILL change the way you live, travel, and conduct business. So, start becoming familiar with these new, exciting technologies. Don’t be afraid of them. Embrace them…and please, if you haven’t done so yet, you really should think about buying my Scalp Trading Class and get Thursday’s Update Class as a bonus. Just like the new technologies will change your life, the new ST indicators will change the way you trade. Then on a day like yesterday, while others are terrified watching the Dow fall 149 points, you’ll be taking advantage of the decline, and looking forward to Monday to do it again.
Have a great weekend
That’s what I’m doing.,
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
|DOW||NEU||30 Jul 2021|
|NASDAQ||POS||22 Jul 2021|
|GOLD||POS||30 Jul 2021|
|U.S. DOLLAR||NEU||30 Jul 2021|
|BONDS||NEU||26 Jul 2021|
|CRUDE OIL||POS||26 Jul 2021|
As always, the Professor never makes recommendations. The information is provided on an educational basis so you can have informed discussions with your financial advisors and/or accountants about your individual investment decisions.
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.