Weekend Strategy Review December 4, 2022

Posted by OMS  at December 4th, 2022

Yesterday’s early jobs report caused the Dow to open over 300 points lower.  The small change signal from Thursday’s A-D oscillator had signaled that a Big Move was coming, however by days end, the Dow recovered all of its losses and finished with a gain of 34 points at 34,449.  The intraday down-up move was good for over 700 Dow points, The NASDAQ and S&P were not so fortunate as they finished with losses of 21 and 5 points, respectively.

From a pattern perspective, it still appears that the major indexes are still in the process of completing the final waves of retracement Wave 2 up.  In Thursday’s comments, I mentioned that the Dow would likely have a small pullback before attempting a rally to complete wave ‘c’ up of Wave ‘E’ up. Friday’s afternoon rally may have been the start of that rally.

The market is now in the middle of a Phi Mate turn window that started late last week.  So given the late stages of its Ending Diagonal pattern, it could top at any time now.  Once we get past Monday, where the market could rally to complete wave ‘c’; up, I would expect to see the market start an impulsive decline that would signal the start of Wave 3 down. The Phi Mate turn window actually lasts until 6 December, so the final top could take a few days longer.  Again, the thing I’ll be watching for is impulsive action to the downside.  The market needs to start making a series of five waves down before I will say the final top is in.

The Market Timing Indicators for the Dow and the NASDAQ remain positive after yesterday’s session.

The Dean’s List and the Tide also remain positive.

There was another ‘relatively’ small change signal of 13 points from the A-D oscillator.  I mention this because while 13 points is slightly larger than the 10 points, I usually use for a small change signal, the completing patterns suggest we could see a Big Move at any time now.

The Sector Ratio remained at 24-0 positive after Friday’s session. The top five strong sectors were Cap Goods (6), Energy (6), PharmaBio (5), Transportation (5) and Material (4).  There were no weak sectors.

My Trades:  I have been busy visiting the Christmas Markets in Germany the past few days, so I haven’t been trading. However, I did receive several emails from students who told me they are having cigar days with all the volatility.  Yesterday Phil A. wrote to say that he traded UDOW after the Dow made its first decline.  He said that he doesn’t smoke cigars, but if he did, he would have enjoyed a big one.  Way to go Phil!

BTW, you can see Phil’s trade in UDOW if you pull up a 5 min chart.  The Bias started to rise just after the 11:00 mark and turned positive just before noon.  All the Green Arrow trades taken after that WITH A RISING BIAS were winners. Once again, the RISING BIAS was the key.

Another key to trading a day like yesterday was the small change signal.  When a small change signal is on the Board, you know going in that the odds for a Big Move are higher than normal.  The moves could be up or down, but in a retracement pattern, like a Wave 2, the out sized moves can, and often do go both ways. So don’t close shop just because the Big Move did not go your way at the beginning of the day.  There could always be a larger retracement, like the one we had yesterday.

I’ll be returning from Germany next Tuesday, so depending on how things go that morning, I might have to delay my next Update until Wednesday. On the other hand, if I see signs that Wave 3 down is starting, I’ll let you know.

Have a great weekend,

That’s what I’m doing,

h

12-05-2022

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.