Weekend Strategy Review March 26, 2023
Posted by OMS at March 26th, 2023
Stocks were higher yesterday in choppy trading. The Dow finished with a gain of 132 points, closing at 32,227. The large cap index hit a low of 31,808 in the morning before bouncing. The NASDAQ and S&P were up 37 and 22 points, respectively. Volume on the NYSE was the lightest of the week, coming in at 78 percent of its 10-day average. There were 23 new highs and 260 new lows.
Since reaching its sub-wave 2 high on Wednesday (Fed Day), the Dow has fallen 953 points at yesterday’s low. At this point, it’s still not clear if sub-wave 2 up completed as a single zig-zag or will make another run at the 2 February high as it forms a more complex, double zig-zag pattern. The only thing that is clear now is that Wave 3 down is progressing: single or double zig-zag…it doesn’t matter. Once Friday’s counter-trend rally completes, probably sometime on Monday, the next set of declining waves should take over dropping the indexes to fresh lows.
My alternate scenario for a double zig-zag is still possible, but after watching Friday’s action, I must give it low odds. There are two reasons for this. The first is because of Friday’s negative breadth and low volume. Yesterday’s rally was accompanied by an A/D ratio of only1.65 to 1. Total volume was only 11.1 billion shares vs. the 12.3 billion shares traded on Thursday. Both measures are low for an afternoon rally of 429 points.
The second reason is because the rally into Wednesday’s high of 32,762 was almost an exact Fibonacci 0.618 retracement of the five-wave decline from the 6 March high. Second wave retracements usually retrace 62 percent of wave 1s, so the odds are high that sub-wave 2 up is complete.
After Friday’s action, prices on the Dow remain below both the 50 and 200-day moving average. The 50 is at 32,896; the 200 is at 32,892. So the Dow is now only 4 points away from making a ‘Death Cross’. The large institutions will be watching this closely next week as they NEVER like to hold stocks trading below the 50 and 200 moving averages. A ‘Cross’ is one of their primary signals to start dumping stocks. You might be surprised to learn how unsophisticated they are …..using moving averages as opposed to signals like the ‘Arrows’. But most of the institutional money managers I have talked with use this simple indicator to make major decisions with their portfolios.
In other words, protect yourself!
The Dean’s List is neutral. The Tide remains negative.
The Market Timing Indicators for the Dow have turned neutral. The same market timing indicators for the NASDAQ are positive.
The Sector Ratio stayed at 2-22 negative after Friday’s session. The top two strong sectors were Semiconductors (3) and Cap Goods (0). The top five weak sectors were Banks (-10), Retail (-7), Energy (-5), Real Estate (-5), Autos (-5). Students should continue to note how the Banking Sector remains under extreme pressure. Not good!
My Trades: After Thursday’s big day, I didn’t do much yesterday. I had an early trade in TZA using the 5’s, but once I was taken out by the Red Arrow at 9:50, I moved to the sidelines and waited. As I waited, the Bias started to fall below the zero line, precluding me from trading TZA. After 11:40, the Bias turned and stayed negative. I looked at TNA, but I didn’t pull the trigger. However, if you look at the chart, this was clearly a mistake, because with a positive Bias, every Green Arrow on TNA was a winner.
If the market bounces early Monday, I will look to re-establish trading positions in TZA, SDOW, and SQQQ. I will also look to buy a few more of the 350 July SPY Puts. I have been buying and selling these Puts since last Wednesday as the increased volatility has generated some nice profits. I still like the SPY Puts up to about 5.30 per contract.
Have a great weekend.
That’s what I’m doing,
h
Market Signals for
03-27-2023
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 24 Mar 2023 |
NASDAQ | POS | 16 Mar 2023 |
GOLD | POS | 10 Mar 2023 |
U.S. DOLLAR | NEU | 09 Mar 2023 |
BONDS | POS | 10 Mar 2023 |
CRUDE OIL | NEG | 10 Mar 2023 |
CRYPTO | POS | 13 Mar 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