Weekend Strategy Review January 15, 2023
Posted by OMS at January 15th, 2023
Stocks closed higher again yesterday on below average volume. The Dow finished with a gain of 113 points, closing at 34,303. The NASDAQ and S&P were up 78 and 16 points, respectively. Volume on the NYSE came in at 89 percent of its 10-day average. There were 104 new highs and 6 new lows.
Yesterday’s up/down volume was significantly lower than it was a week ago, and the A/D ratio was also lower than it was earlier in the week. So, while the market continues to rally, the breadth and volume are weakening.
Also, yesterday, while the market was rallying, the ‘fear index’ from trade-futures.com had a reading of 12. This was the lowest reading since 4 November 2021 when the indicator came in at 9, the day before the Russell 2K peaked.
The ‘fear index’ measures investor complacency. Back in early November 2021, when the market was rallying to new highs, investors should have been worried that the market was extremely overbought. But they weren’t. The market was making new highs, and its easy to see why investors felt so confident. But now, over one year into a major Bear Market, with most indexes still well below their 2021-2022 highs and developing patterns that suggest further downside is imminent, investors are becoming complacent again. As a matter of fact, (as measured by the fear index), they’re more complacent now than they have been all year! This scares me!
From a pattern perspective, the recent rally has not produced any significant change to the overall pattern or wave structure. The pattern still appears to be a Double Zig-Zag with the recent rally being part of sub-wave 2 up within Wave 3 down. Yesterday, the S&P filled the gap from the 14 December close, hitting a high of 4003.95. My upside target for the S&P was just under the 4,000 level, so yesterday’s rally hit and slightly exceeded my projected target. If the S&P continues to rally next week, I will have to re-evaluate my short-term wave count, but otherwise, I’d have to say that sub-wave 2 up appears complete.
The Market Timing Indicators are currently positive on the Dow and NASDAQ.
The Dean’s List is positive. The Tide is also positive.
The Sector Ratio weakened to 21-3 positive after Friday’s session. The top five strong sectors were Consumer Products (7), Media (6), Semiconductors (6), Retail (6), and Material (5). The top three weak sectors were Food Drug (-1), Foods (0) and Energy (0),
My Trades: I didn’t trade yesterday.
Gold: I haven’t talked about gold recently, mostly because of my concern with the overall market. Also, knowing that most of my students do not trade gold, I haven’t been focusing on it. Maybe I should have. The last time I talked about gold was in early December, when I commented that gold appeared to be completing what appeared to be Wave B down of an A-B-C move for Wave 2 up. The Market Timing Indicators for Gold (shown on the cockpit) turned positive on 27 December. Since then, GLD, the ETF for gold, has rallied from 167 to just shy of 179. The rally was an exact 0.618 retracement of Wave B down. At this point, I believe that gold has reached its upper target and should begin to pull back. What happens during the pullback will be the key to golds future. If the current rally is not Wave ‘C’ up, then it is Wave 1 up of a Major rally in gold that will take it to new highs. But for gold to do that it MUST begin to pull back. I’m still not interested in trading gold for now, but if I see a wave 2 structure begin to develop, I’ll let you know.
Same comments apply to silver.
The markets will be closed on Monday, 16 January, for the Martin Luther King, Jr. Day Holiday. My next Update will be on Wednesday, 18 January.
Have a great weekend.
That’s what I’m doing,
h
01-17-2023
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 11 Jan 2023 |
NASDAQ | POS | 11 Jan 2023 |
GOLD | POS | 27 Dec 2022 |
U.S. DOLLAR | NEG | 04 Jan 2023 |
BONDS | POS | 13 Jan 2023 |
CRUDE OIL | POS | 11 Jan 2023 |
CRYPTO | POS | 05 Jan 2023 |
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