Weekend Strategy Review August 21, 2022
Posted by OMS at August 21st, 2022
Stocks continued to decline on Friday with all the major indexes finishing the week lower. The Dow finished with a loss of 293 points, closing at 33,706. It was down 55 points for the week. The NASDAQ was down 260 points on Friday and down 342 points for the week. Breadth continued to weaken as the week progressed with Friday’s A/D ratio on the NYSE closing at a negative 6.32 to 1. Down volume was 86 percent of the total volume of stocks traded.
Earlier in the week, I discussed how 16 August was a potential key date for retracement Wave 2 up to top. The date was where two Fibonacci numbers from the 3 January and 19 March tops came together to form a cluster window. As the week progressed, the 16 August high of 34,281 held with the Dow now making lower highs and lower lows. The next major step for the Dow will be to fill and break below the gap from the 11 August close near 33,336. If this happens, supported by a negative turn in the indicators, it will confirm that Wave 3 down is underway.
The same Fibonacci cluster for the 16 August potential top appeared on the S&P and the Russell 2K. And so far, the declines that have occurred since that potential top have been mini- five wave affairs. The small replacements, when they occurred ,have been mini a-b-c affairs. This is another sign that the primary trend has changed from up to down. It’s still early, but as long as the pattern of five waves down, three waves up continues, I must expect lower prices from these indexes as well. My short-term target for the S&P is the gap near the 4120 level. The level also marks an earlier fourth wave low. I talked about how previous forth waves tend to become magnets for prices on the upside. The same tendency exists for prices when they start moving to the downside as well. My next downside target for the Russel 2K is near the 9 August low of 1905. If this level is broken, the odds are high that Wave 3 down is underway. The key level to watch on IWM, the tracking ETF for the RUT, is near 189-190. Any move below this level will cause me to become aggressive with my positions in TZA.
There were no changes to the market timing indicators after yesterday’s session.
The Market Timing Indicators on the NASDAQ remain neutral. The timing indicators for the Dow, S&P (SPY), and Russell 2K (IWM) remain positive. It’s still early.
All four of the major indexes now have Red Arrows on their daily charts in various states of conformation. At this point, the only index with a confirmed Red Arrow is the NASDAQ-100 (QQQ).
BTW, my longer-term weekly Market Timing Indicators for the Dow, S&P and RUT are neutral. The weekly indicators for the NASDAQ are negative. The weekly’s on SARK are positive. This is the reason why I’m mostly focused on shorting technology.
The Dean’s List is still positive. The Tide has turned neutral as two of the four breadth indicators that make up The Tide have turned negative.
Yesterday was another multiple cigar day for me. I had previously purchased a few shares of TZA based on the Green Arrow that appeared at Wednesdays open. I bought some of the shares based on what I was seeing on the shorter-term bars after the potential 16 August top, and some because my new trend indicator gave say so, even though the momentum was still negative on the 4-hour bars. This was another example of my new trend indicator being able to spot a developing trend. I’ll being showing this new indicator on Tuesday, after the market closes.
The Sector Ratio weakened to 17-7 positive after Friday’s session. The top five strong sectors were Real Estate (5), Autos (5), Retail (4), Utilities (3) and Cap Goods (2). The top five weak sectors were Energy (-2), Material (-1), Media (-1), Semiconductors (-1) and Consumer Products (-1).
I’m not doing anything with gold, silver, bonds or crypto now. If Wave 3 down on the indexes is starting, that’s where I wasn’t to be. When you have a choice between unclear patterns, like the patterns on gold and silver, and a potential Wave 3 down, ALWAYS focus on the Wave 3 down. That’s the money wave!
Bottom Line: Confirmed Green Arrows are now present on the 4-hour bars of TZA, SDOW, SQQQ, SPXU and the inverse advanced technology ETF, SARK. I was trading all these inverse ETFs on Friday. I’m only holding / trading small positions now, mostly because the 4-hour Bias, while rising, is still negative. I won’t go all in until the Bias turns positive. BTW, once the Bias turns positive, I’ll be adding to my positions on any Green Arrow, just like I do when I’m trading the shorter-term bars.
Also, now that we have Green Arrows on the 4-hour bars, if you missed the turn and want to establish a position, you can always use the shorter-term bars. Just check the Bias. If the Bias on the 5’s or 12’s is positive on the inverse ETF you want to purchase, a good potential entry point is the next Green Arrow. Then, IF the 4-hour bars of the same ETF are positive and Green Arrow is present, you can hold the position as a Doctor’s Trade. Exit on a Red Arrow.
That’s what I’m doing
h
I’m looking forward to seeing you at Tuesday’s Class after the market closes.
Market Signals for
08-22-2022
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 27 Jul 2022 |
NASDAQ | NEU | 17 Aug 2022 |
GOLD | NEG | 19 Aug 2022 |
U.S. DOLLAR | POS | 16 Aug 2022 |
BONDS | NEG | 11 Aug 2022 |
CRUDE OIL | NEG | 19 Aug 2022 |
CRYPTO | NEG | 19 Aug 2022 |
DISCLAIMER
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.
Category: Professor's Comments, Weekend Strategy Review