Weekend Strategy Review August 8, 2021

Stocks were mixed yesterday, with the Dow continuing to show strength while technology stocks on the NASDAQ were weak.  The Dow finished with a gain of 144 points, closing at 33,208.  The larger cap index was up 273 points for the week, however a strange thing happened on the weekly chart.  The DMI on the Dow turned negative.  The last time the DMI was negative on the Weekly Chart was on 5 March.  

The NASDAQ lost 59 points on Friday.  For the week, the index gained back all the 163 points it lost last week.  So, for the past two weeks, technology stocks have been essentially flat while the momentum continues to wane. With momentum slowing, it still appears that the patterns will complete somewhere in the late August – September period.From a technical perspective, the Ending Diagonal patterns appear to be nearing completion of final sub-wave 5 of Wave 5 up. Technicians often refer to the current rally as the final through over wave.

The Market Timing Indicators for the Dow have turned Positive. The same timing indicators for the NASDAQ and S&P remain Positive.

The Scalp Trading Indicators for the Dow (DIA), NASDAQ (QQQ), and S&P remain Positive.

The Dean’s List remains Neutral. The Tide has turned Positive.

The Sector Ratio weakened to 13-12 Positive after yesterday’s session. The top five strong sectors were PharmaBio (4), Semiconductors (2), Technology (2), Cap Goods (1) and Financials (1). The top five weak sectors were Energy (-2), Real Estate (-2), Autos (-2), Transportation (-2) and Foods (-2).

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

Top Stocks: Fortinet (FTNT), the top stock from Thursday’s MWL was up 3.66 points on Friday. The two other top stocks, UA and CROX saw modest gains just after the open but pulled back into the close. After seeing the Dow gap higher at the open, I couldn’t short RCL, (the indicators were positive), so I decided to trade the crypto miners.  MARA and RIOT both moved higher after the open and produced winning day trades all day long on the 4 min bars. MARA finished 2.78 points higher at 34.25.  RIOT gained 1.38 points at 34.97.  With GBTC, the Bitcoin ETF, moving to the top of the Dean’s List last Monday, and then staying in the top 3 ETFs most of the week, I had to look at the Bitcoin miners. For me, seeing GBTC at the top of the list was like a gold miner finding a nugget in a stream. Once I saw the ETF in the #1 position, I knew there had to be nuggets somewhere. So, I went to the MWL and looked for individual crypto miners to trade, the same way I look for semiconductor stocks to trade when I see semiconductors are strong. Another reason I’m trading the crypto miners is because of the pattern.  While most stocks appear to be completing major topping patters, along with the indexes, Bitcoin appears to be entering a Wave 5 up. If I’m right about this, Bitcoin could challenge and possibly exceed its 15 April high of 63,3467.  Yesterday, Bitcoin closed at 43,709.

Like I said in last week’s Comments, all I’m doing now is scalp trading as I wait for the indicators on the various indexes to roll over.

Gold:  Gold (GLD) got hit hard yesterday dropping 4.22 points after the BLS announced that 943K new jobs were created in July. The drop in gold prices caused the Timing Indicators on gold to turn Negative. Gold is extremely oversold now and could see a short-term pop early next week. But beyond any short -term pop, the pattern suggests gold will continue to decline with the next downside target near the 1,670 level. Gold closed at 1,761 on Friday.

Bonds:  Bonds also fell hard after Friday’s jobs report with TMF dropping 1.49 points to 28.42.  If you have been following my comments on Bonds for the past few weeks, you know that I have been expecting Wave 4 up on Bonds to complete and Wave 5 down to begin so I can start buying TBT, the inverse Bond ETF. Well, while Friday’s decline on TMF only turned the ST Indicators neutral, and NOT negative, it’s a start. All I’m doing now is waiting for the daily indicators on TBT to turn positive.  Wave 5 up in TBT could be a nice rally.  Just remember, IF TBT begins to move higher along with an increase in Bond yields, the resulting increase in yields could put pressure on equity prices. I say ‘could’ because an increase in Bond yields does not always result in lower equity prices. For example, from late 2017 into February 2020, Bonds and equities rose together. But once Covid19 hit, Bonds rallied, and stocks fell. Then after the market bottomed in March, stocks rallied, and Bonds fell. Right now, there doesn’t appear to be any correlation between equities and Bonds, at least for the near term.  Both appear to be in completely different patterns. The reason I’m writing about this today is because a few students have asked if Bonds could be used as a hedge against a general market decline.  Hmmm? All I can say at this point is …. follow the indicators. If the indicators say bonds are rising buy bonds. Right now, the indicators are starting to look like its time to sell Bonds.

Have a great weekend.

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

08-09-2021