Weekend Strategy Review October 3, 2021
Posted by OMS at October 3rd, 2021
Friday’s 483-point rally was not enough to keep stocks from having a down week. The Dow closed at 34,326 which was down 472 points for the week. The NASDAQ was up 118 points on Friday but down 472 points on the week. The S&P was up 49 points on Friday bet down 98 points on the week. The decline we have been expecting is starting.
The decline in the Dow is lagging the declines on the S&P and NASDAQ. It should start to begin to catch up next week as wave 3 of Wave 3 down progresses. Yesterday’s early decline to 33,785 appeared to be the completion of sub-wave 1 down of wave 1 of 3 Wave down. The ensuing rally appeared to be sub-wave 2 up. If the rally did not finish at 34,490, it should do it by early next week. Once complete, sub-wave 3 down of wave 3 down of Wave 3 down should wipe away thousands of Dow points.
Today I want to talk about some of the things I have been observing while at home and in my recent travels. They have to do with shortages. Last week, my homeowner’s association sent me an email that discussed how recyclables would no longer be collected. Homeowners would now be required to take their recyclables to a designated site. The reason cited was because the contractor that used to pick up the recyclables couldn’t get enough workers. He would now be using his workers to only pick up the trash and yard waste. The latter has been a real problem in our community as piles of the stuff haven’t been picked up in weeks.
Same thing for our main gate. Several weeks ago, a lightning strike put the gate out of commission. And while some progress has been made, the repair will be delayed for weeks because the contractor can’t get the parts. In the same letter, the management company explained how they are having issues hiring and maintaining quality security guards. The letter said, “Two guards quit last week after only working for a day. The guard who was on duty last night (and did not bother to check any people coming in the gate) was a temp guard and he will not be back.”
Anytime I visit Savannah, I always like to take time to visit the many beautiful squares that the city is famous for. But this time was different. There were so many homeless people living in the squares that it was not a pleasant experience. Marcia pointed out a woman who probably had not bathed for weeks. She had flies all over her body. When we went to down to the waterfront for a walk, we noticed several people asking for a handout. Many of these people did not look homeless…they just wanted money. One man was sitting in front of a store that had a help wanted sign posted in the window. Hmm? Makes you wonder.
My son, who lives in Dallas, Texas, often travels to Houston on business. He tells me that ships are being forced anchor off the port because they can’t get enough workers to unload them. I saw the same thing in Savannah. The port is usually very busy, and you can always see several large container ships as they move up and down the channel. Not this time. The port was empty. There was nothing going on.
The reason I’m writing about this today is because you may also be seeing or experiencing similar issues with labor shortages in your businesses or to get things fixed in your home.
Here’s what you need to know about labor shortages. They lead to product and service shortages, which always drive prices higher. Labor shortages also lead to higher long-term interest rates which drives Bond prices lower. If you’ve been watching, you saw that Bond prices have dropped sharply the past few weeks. And when you have labor shortages occurring at a time when the government printing trillions of dollars out of thin air, inflation can get out of hand quickly. Covid changed a lot of things in America. People no longer visit malls to shop, they go online or use Amazon. Many no longer want to go to an office to work…for whatever reason. Maybe they don’t want to get vaccinated. Maybe they just don’t want to commute. But the lack of workers in a post Covid world is causing a change in thinking in how Americans view work. In all my years, this is not something I have seen before. It could become a major problem for the country in terms of GDP, the economy, and the stock markets.
Bottom Line: When I see labor shortages occurring, I MUST start thinking about how I’m going to protect myself with respect to the stock and bond markets, interest rates, home prices, gold and cryptos. BTW, on the ride home, I stopped at Bass Pro Shops in Savannah. While wandering through the store, I stopped to talk with a salesman sitting in front of a bass boat. He said the boat cost $9,750 last Christmas. It jumped to $14,000 two months ago. Last weekend BPS raised to price to $17,999. Now, that’s probably the best example I can give you about inflation. I’m gonna call it Hank’s Bass Boat inflation indicator.
Remember, I have been warning about the decline I see coming for the past few months, not because I see it as an ordinary Bear Market, something that could last for a year or two. No, this decline could be a lot worse. And for it to be worse, something different MUST occur. That something different could be a combination of an uncontrolled Fed, and a change in the way people view social accountability, police forces, and work ….and INFLATION. So please pay attention to these changes and protect yourself.
Next week, look for sub-wave 2 up to complete and wave 3 of Wave 3 down to start. A break below Friday’s low of 33,785 would be a strong indication that the next series of declining waves in Wave 3 down underway. For now, I’m going to stick with my target of 32,000 on the Dow. My target for the S&P is under the 4,100 level. On Friday, the S&P closed at 4.357.
The Market Timing Indicators for the Dow, S&P, and NASDAQ remain Negative.
The Scalp Trading Indicators for the Dow (DIA) and S&P (SPY) and NASDAQ (QQQ) remain Negative.
The Dean’s List remains Negative. The Tide remains Neutral.
The Sector Ratio weakened to 10-14 Negative after yesterday’s session. The top five strong sectors were Banks (5), Energy (5), Leisure (3), Financial (1) and Service (1).
The five weakest sectors were Retail (-3), Consumer Products (-3), Household Products (-2), Telecoms (-2), and Healthcare (-2).
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
There were no changes to the Market Timing signals on Gold, The Dollar, Bonds, Crude Oil, or Cryptos because of Friday’s trading action. Because of what I said above with respect to inflation, I’m watching gold and the cryptos very closely now. A change in signals now will cause me to get back into both. Right now, I’m still on the side lines.
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
10-04-2021
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 24 Sep 2021 |
NASDAQ | NEG | 28 Sep 2021 |
GOLD | NEG | 22 Sep 2021 |
U.S. DOLLAR | POS | 17 Sep 2021 |
BONDS | NEG | 28 Sep 2021 |
CRUDE OIL | POS | 15 Sep 2021 |
CRYPTO | NEU | 01 Oct 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.
Category: Professor's Comments, Weekend Strategy Review