Weekend Strategy Review October 24, 2021

Posted by OMS  at October 24th, 2021

Stocks were mixed yesterday. As the Dow was making a new all-time high, the NASDAQ and S&P were moving lower.  The Dow got as high as 35,765 before closing 74 points higher at 35,677.  The NASDAQ and S&P were off 125 and 5 points, respectively.  Volume on the NYSW was moderate. Coming in at 98 percent of its 10-day moving average.  There were 207 new highs and 22 new lows.

When the Dow moved above 34,800 last week, I said it would likely test or exceed the 16 August high of 35,631.  It did.  That’s because any rally above 34,800 meant that the decline from 2 September into 4 October could no longer be labeled a Wave 2.  It MUST be labeled as a Wave 4 and if this is the case, it MUST be followed by a Wave 5 rally that would likely test or exceed the old Wave 3 high.  Simple Elliott Wave logic.

Anyhow, we now know we’re in Wave 5 up of the old Bull Market. So, the question for this weekend is now that the Dow has made a new all-time high, how much higher can it go?  Hmm?   The simple truth is that nobody knows. 

What we do know is that the rally since 4 October into yesterday’s high was accomplished in five waves.  That much is clear.  So, after five waves up, the rally could be over.  But we don’t know that yet.  Also, if the Dow starts to pullback next week, it could mean that the rally since 4 October is just sub-wave 1 of a five-wave rally for final Wave 5 up.  If this is the case, the Dow could move to the 36,500 -36,700 level before it completes. Again, at this point, nobody knows. The only thing that will prevent this from happening now is a move below the 13 October low of 34,115.  If this happens, it will confirm that the next Bear market has started.  Otherwise, the Bull is still intact, and we MUST pay attention to the indicators and watch for changes.

Is there anything else?  Well one thing that I saw early this week was the low amount of cash on the side lines.  The 10-month average of U.S. cash-to assets ratio fell to 2 percent last week, the lowest it’s been since March 2000 when it was at 4.6 percent.  Most of us remember what happened after that as the S&P dropped over 50 percent. The same is true for funds in Money Markets which are the lowest in history at 0.06 percent. In other words, investors now hate and despise cash and are all in with equities.  This is NEVER a good thing as it’s the available cash that supplies the fuel to move the market higher.  And right now, there just isn’t any. 

Another concern I have has to do with the rapidity of the current rally. The five-wave rally since 4 October has been unusually swift.  Most times, Wave 5s take several weeks or months to develop.  But this one looks different.  So, while I can’t ignore the fact that the current rally could only be a sub-wave 1 in a five-wave sequence, I also can’t ignore the five impulse waves the Dow made in establishing its new high.  In other words, its also possible that the Bull Market ended with Friday’s rally.  One of the things I’ve learned over the years is to be careful when everybody is ‘all-in’ on the market.  When I see celebrities like A-Rod, Shaq, and Serena Williams becoming investment advisors and forming SPACs, ….that’s cause for concern. And then when I see historically low levels of cash in bank accounts , major divergences in A/D ratios, at a time when Bullish sentiment is at record highs, it usually means that a major decline is right around the corner.  Be careful. Nothing I’m seeing now is telling me this market MUST go to 36,500.

The Market Timing Indicators for the Dow (DIA), S&P (SPY), and NASDAQ (QQQ) are Positive.

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

The Dean’s List and The Tide are Positive.

The Sector Ratio weakened slightly to 21-3 Positive after yesterday’s session. The top five strong sectors were Energy (8), Banks (4), Service (4), Autos (4), and Semiconductors (3).

The three weak sectors were PharmaBio (-1), Media (-1), and Consumer Products (0).

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

Top Stocks:  Most of crypto miners started the day with Red Arrows, so I used the day to get a few other things done…like get the refrigerator repaired.  What I thought was a problem with the ice maker turned out to be a compressor failure.  Luckily, the repair was covered under my Homeowners Warranty, so it only cost me a service charge.  BTW, if you don’t have one of these plans, it might be something to look into.  Trading stocks is not the only way to make money.  If you don’t have to pay an $850 repair bill, it’s like having 1,000 shares of MARA go up 0.85 cents.

BTW, MARA has been on a Red Arrow since last Wednesday, one bar after it topped at 56.48.  Yesterday, the stock finished at 49.46.  When I saw how the arrows were working, I called Dave and told him to raise the price of the Update Class. Yeah, the price increase is totally on me.  I’m NOT going to give this away. No way.  Neither would you if you were in my shoes. The ‘Arrows’ are that good. When I compared them to what I see some of my colleagues are offering for thousands of bucks more, there’s no comparison.  So, if you got in early for $99 bucks, you got an unbelievable deal.  The new price is $199 until the day before the Class. After that it will be $399 with no discounts.  It’s still a steal at $399!  One or two trades can pay for the Class.

The other thing I was looking at on Friday while waiting for the technician, was the performance of the Energy and Crypto stocks since their timing indicators turned Positive.  Wow!  Take some time this weekend to go back and look at what happened since the timing indicator for Crude Oil turned Green on 15 September.  Go back and look at a few of the energy stocks that were high on the Member’s Watch List.  A top stock like CVI was trading near 14.  Now it’s over 21.  NBR was in the low 80’s; now it’s in the 120s.  DVN was at 30; now it’s’ over 40.  In mid-September, when the timing indicators on Crude turned Positive, I didn’t have ‘Arrows’.  But when I look back, there it is…a big Green Arrow staring me in the face on the Daily chart.  BTW, it’s still Green, and that’s all you need to know about Crude Oil and Energy for now.  Lots of Green!

So again, when you see the indicators on the cockpit for a particular sector (oil, bonds, oil, crypto) turn positive, go to the MWL or DL and look for highly ranked stocks or ETFs in that sector.  The use the ‘Arrows’ to time the purchase.  It’s that simple.

Let’s say you wanted to trade a crypto currency, like Bitcoin or Ethereum, or one of the crypto miners, like MARA or RIOT.  You saw the timing signal for crypto turn positive on 14 October, so you went to DL and saw GBTC, the ETF for Bitcoin, high on the List.  You bought a few shares near 46.  Five days later, the ETF reached a high of 52.68.  But after reaching its high, it started to pull back and was trading at 48.75 on Friday. So, the pullback cost you almost four points.  If you had the arrows, which you didn’t, you would have seen a big Red Arrow one bar after the high, taking you out at 52.21, saving you over 3.50 points on the trade.  This is why I decided to raise the price.  Remember, my student asked me to develop better entry and EXIT criteria. Now it’s available so you can use it with my Lists.

Let’s do one more…. take MARA.  On 14 October, when the signal for crypto turned positive, MARA was trading near 42.  The stock generated a Green Arrow at 42.72 on the 30 min bars. I’m going to use the 30s now to show you what happens if you wanted to position trade a stock like MARA. Two days after the Green Arrow, it generated a Red Arrow.  It was time to get out at 52.14 for a 10-point profit.  When I saw this, I thought about raising the price of the Class, but I didn’t. Ten points….and I’m only charging 99 bucks.  Hmm?  The next day, MARA generated another Green Arrow, this time at 50.89.  The next day, MARA hit a high of 56.48.  Two bars later, another Red Arrow was generated taking me out of the trade at 55. Profit on this trade as over 5 points.  So, the two trades produced over 15 points of profit just 4 days…just by following the arrows.  That’s why I believe you need to be in Wednesday night’s Class.  You MUST see this!

So that’s the strategy for this weekend.  Pay attention to the market or sector timing indicators.  When they change, go to the Lists and select a few stocks or ETFs to trade.  Decide how you want to trade these stocks, whether they will be scalps, position, or daily trades, based on how much time you want to spend watching your computer. Buy the Update Class to get the ‘Arrows’. Then use the ‘Arrows’ to establish your positions and exit the trades.  Simple.

BTW, Professionals, like doctors and others, who can’t be watching their trading screen all day really need to see this. It will change the way you trade. 

I don’t see anything else worth talking about this weekend in Gold, Bonds, or the Dollar.  The most important thing I can do for you this weekend is to get you to register for the Class.

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

10-25-2021

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.