Weekend Strategy Review February 20, 2022
Posted by OMS at February 20th, 2022
About now, many of your friends and neighbors are starting to become worried about the markets. After seeing the Dow plunge over 2,883 points since the beginning of the year, they know something is different about this market, but they can’t put their finger on it. When their brokerage statements come in the mailbox, they ignore them. They don’t want to see how much money they’ve lost. Every night, when they turn on the news, they might even listen to Cramer to see if he has any answers. He doesn’t. Those with financial advisors are thinking about giving them a call, but down deep in their hearts they know what their advisor is going to say. They don’t really want to hear him say stay invested, that everything will be OK. They know better. They remember him saying this in 2001 and 2007.
You know differently. You know what’s going on. You have Arrows and colored bars. You’re making money. They’re not. You can’t wait to see how much money you will make at the end of the trading day. They want to have drink and fuhgeddaboudit. They go to sleep thinking about how much money they will probably lose tomorrow. You can’t wait to wake up and see what opportunities the market has for you. You can’t wait to trade!
Yes Virginia, we’re in a Bear Market. For most indexes, the Bear started in early January when the Dow started falling from its all-time high of 36.952. The Bear in the NASDAQ and Russell started in November. Minor Wave 1 down on the Dow ended on 24 January when the large cap index hit a low of 33,150. From there it rallied to 35,824 on 14 February to complete Minor Wave 2 up. This past week, the Dow started Minor Wave 3 down, with Thursday’s decline of 622 points being the largest one day decline of the year. It was followed by a decline of another 233 points yesterday. That’s what happens at the start of a Bear Market. The declined are impulsive. It means that the strongest portion of the decline since early January is underway. It also means that the downside target I discussed several weeks ago, near 30,000, has high odds of being reached. The folks on CNBC, Cramer, or your financial advisor won’t tell you that. I will.
There’s also something else they won’t say or point out to you. It’s the word Minor. The word scares them. Note how I used the word in the preceding paragraph. That’s because once all five Minor waves of the sequence are complete, the Dow will have completed Major Wave 1 down. I won’t make any projections for where Major Wave 1 will end, because a lot depends on where Minor Wave 3 down completes. But right now, if you put a gun to my head, I’ll say somewhere close to or below the 28,000 level. It’s only the beginning. The Bear will likely last for years.
Earlier in the week, I warned that if the Dow broke below 34,650, it would mean that Wave 3 down was underway, a move that would likely test the 30,000 level. So now that 34,650 has been broken, the only thing that will change my forecast is a move back above 35.050. If this happens, it will cloud the short-term picture, but NOT change the longer term wave count. In other words, I will remain bearish and look to trade inverse index ETFs if the Dow stays below 35,050.
One of the things I look for to confirm major declines and avoid potential rallies is intra market divergence. Right now, there isn’t any. All three of the main indexes appear to be in sync moving to the downside. This means that IF we do get a snap back rally, it should be short lived and faded. BTW, the momentum bias on all three of the major indexes in now negative, so the odds heavily favor trades to the downside. My short-term downside targets for Wave 3 down on the S&P and NASDAQ are near the 3,800 and 12,550 levels.
Please take all necessary precautions to protect yourself now that we have Red Arrows on the intermediate-term bars of the indexes.
After Friday’s action, the Dean’s List is negative. The Tide is negative.
The Market Timing Indicators for the Dow, S&P are NASDAQ remain negative.0The Scalp Trading Indicators for the Dow, S&P, and NASDAQ are also negative.
The Sector Ratio weakened to 10-14 negative on Friday. The top five strong sectors were Energy (4), Banks (3), Media (2), Leisure (2), and Material (2). The top five weak sectors were Semiconductors (-6), Retail (-4), Autos (-3), Computers (-3), and Household Products (-3).
Friday was another cigar day! The seventh in a row. All I did was follow the bias (negative) at the start of the day and traded inverse index ETFs. Easy! Like I said in yesterday’s pre-market Comments, I will be having an Update Class on Wednesday, 24 February at 4:30 pm to discuss all of this in detail. During the Class, I will show you how the current Bear Market is unfolding, what to expect, and how to trade it using the Enhanced Arrows AND my new bias indicator. It’s an absolute bargain at $25. Don’t miss it.
BTW, Dave has given me all sorts of instructions for me to post today on how to unblock your email so you will be notified about the coming Update Class and future classes. It’s way too long for me to post here, so I’m not gonna do it. The instructions are listed in the Frequently Asked Questions on the web-site. So, if you want the notification emails, follow the instructions. That’s all I’m going to say.
My Doctor’s Trade using TZA is doing nicely again. Since the ETF generated a Green Arrow on 17 February, TZA is now up another 2.27 points. This puts the Doctor’s Trade up over 153 percent since we started keeping track less than three months ago. Pretty impressive! Doctors: Just follow the Arrows and tend to your patients!
Same for my trade against Kathy Wood’s New Innovation ARKK Fund by using the inverse SARK. The trade is up over 5 points since the ETF generated a Green Arrow on the 4-hour bars. Sorry Kathy. I still love and respect your ability in picking new technology, but Bear Markets have a way of hammering these stocks. You can’t run to cash in ARKK. I can, or better yet, I can trade inverse ETFs. The bias on SARK is still positive. My target is near 60.
Gold: GLD fell 0.13 cents on Friday after making a big pop on Thursday. The decline caused a Harami Candlestick Pattern to form on the Daily Chart. Harami’s are reversal patterns, so it will be interesting to see if what happens to gold next week. I’m still seeing a large bearish divergence between gold and silver on the daily charts with silver lagging. The overall pattern on both metals is not clear, but whenever I see divergence, I’d usually bet on the weaker metal. But given that GLD is still on a 4-hr Green Arrow, I MUST stick with it until I see a red bar.
Have a great weekend.
That’s what I’m doing,
h
P.S. Don’t wait for Dave’s email announcing next Wednesday’s Update Class. Just go to the web site now and register. Do it now! I really want you to have my new bias indicator.
Please don’t forget to tell your friends, neighbors, and co-workers about our web site. Thanks for your help on this.
Also , the markets will be closed on Monday for the President’s Day Holiday. My next post will be on Wednesday morning, if Putin doesn’t do something crazy before then.
Market Signals for
02-22-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 11 Feb 2022 |
NASDAQ | NEG | 09 Feb 2022 |
GOLD | POS | 07 Feb 2022 |
U.S. DOLLAR | POS | 18 Feb 2022 |
BONDS | NEU | 17 Feb 2022 |
CRUDE OIL | POS | 23 Dec 2021 |
CRYPTO | NEG | 16 Feb 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