Weekend Strategy Review September 19, 2021
Posted by OMS at September 19th, 2021
In Thursday’s early Comments I discussed how the Dow would stage an a-b-c rally back to the 35,100 to complete retracement Wave 2 up. It appears that the rally into Thursday’s early high of 34,944 was wave ‘a’ of that rally. The two-wave pullback into yesterday’s low of 34,583 was wave ‘b’ of the move. So now, if the Dow stays above yesterday’s low, the Dow should rally back to the 35,100 level as wave ‘c’ of the retracement unfolds. Once wave ‘c’ of Wave 2 up completes, Wave 3 down should drop the Dow down to the June low of 32,271 which is where final wave 5 of the Ending Diagonal Pattern began.
All this assumes that Friday’s low of 34,583 holds. If not, then Wave 2 up completed with Thursday’s late high of 34,854 and Wave 3 down is currently underway. In other words, Friday’s low of 34,583 is important. If it doesn’t hold on Monday, it’s likely that the Dow is not going to see the 35,000 level for a long time. Remember, when the Dow did not hold the 34, 600 last week and traded down to 34,510, the odds that a new Bear Market is underway increased significantly. So now, IF 34.583 is broken, the odds that Wave 3 down of the new Bear Market also increase significantly.
The above discussion means that there are now two scenarios on the Board for Monday. The first, which is my primary scenario, is for the Dow to rally about 500 points or so back to the 35,100 level. If this happens, I will start looking to short the market using inverse index ETFs. I will start looking to establish these positions on any move close to or above 35,000. That’s because when the Dow traded down to 34,583, it showed EXTREME weakness, so it may not get back to the 35,100 level.
The second scenario is that the Dow begins to break down on Monday. The thing to watch for is an impulsive move lower. If the market starts lower, the move down MUST be impulsive. It will be one of those times when you’ll know it when you see it. If there’s any hesitation or retracement in the down move, it’s probably NOT the start of Wave 3 down. So, IF the market starts down on Monday and looks impulsive, I will start getting short immediately. I will be completely focused on my Scalp Trading indicators on the short-term bars.
Again, an impulsive break of 34,583 means that Wave 3 down is starting. The first stop should be a move down to the 33,2712 level. If this happens, the next major support is 800 to 1,000 points lower between 32,271 and 32,500. BTW, trading action could be EXTREMELY volatile next week so be prepared.
The Market Timing Indicators for the Dow and S&P remain Negative. The same indicators on NASDAQ remain Neutral.
The Scalp Trading Indicators for the Dow (DIA) remain Negative. The ST Indicators on the S&P (SPY) and NASDAQ (QQQ) remain Neutral.
The Dean’s List is Neutral. Students should note how short the Dean’s List has become. The only positive index ETF currently on the Dean’s List are the two for the Russell 2K, IWM and UWM. I don’t expect this will last, as my intermediate target for IWM, the positive ETF for the RUT is near the 193-194 level. IWM closed at 222.48 on Friday.
The Tide is Negative.
The Sector Ratio weakened to 6-18 Negative after yesterday’s session. It’s been a loooong time since the Sector Ratio was this weak. You must go back to the week of 19 February 2020, when the market was starting its crash to see a ratio of 6-18 Negative. The top five strong sectors from Friday’s report were Semiconductors (1), Insurance (1), Telecoms (1), Media (1), and Healthcare (1). The five weakest sectors were Consumer Products (-2), Transportation (-1), Retail (-1), Cap Goods (-1) and Service (-1).
Model Update: There were NO Changes to the Model. It is still 100 percent in cash.
Top Stocks: Not much to say about the top stocks on Thursday’s MWL as the ST indicators were negative on Friday. The indicators kept me out of the market. I did buy a few 15 Oct Calls on DIA with a strike price of 355. Paid 1.56 for the speculation.
Last night, my Trend Algorithm identified DXD as potential day trade. Nice to know, especially if I can get it at a slightly lower price on Monday. DXD closed at 9.18 on Friday. Both DXD (2X inverse leverage) and SDOW (3X inverse leverage) are two of the ETFs I have been trading for the past week or so. I will be looking at them a lot more, especially if the Dow rallies back to the 35,000 level.
Gold: Gold (GLD) fell to 1,747 on Friday, which was slightly below my short-term target of 1,750. This means the short-term a-b-c zig-zag pattern I expected for gold’s retracement could be nearing completion. The Timing Indicators for gold are currently Negative and there are no mining stocks on the MW, so I’m patiently watching for signs that the next major wave up is starting. The recent a-b-c decline is a Bullish sign that the next rally in gold could take it to new highs. Again, watch for a signal change.
BTW, silver is in the same boat with gold. Yesterday’s decline saw silver retrace back to the 9 August low of 22.31. Nobody wants silver (or gold) now. Historically, a good time to buy the metals is when nobody wants them. I want them! I’m just waiting for a buying opportunity on the short-term bars.
Bonds: I’m still neutral on Bonds, but I’m getting more negative with each passing day. A break of yesterday’s low of 28.87 on TMF should turn the Timing Indicators for Bonds negative. If this happens, I’ll start buying TBT, the inverse ETF for Bonds.
Cryptos: Bitcoin still look like it’s in the initial stages of its next major rally wave up. The rally should consist of five waves higher and take Bitcoin well above its all-time high of 64,789. My projection for the completion of sub-wave 5 of Major Wave 5 up is near the 92,000 level. Right now, Bitcoin appears to have completed sub-wave 1 up and is in sub-wave 2 down of the five-wave sequence. It’s hard to tell where any wave 2 will end, so be patient. Yesterday Bitcoin closed at 47,164. It’s possible that it could fall all the way back down to the 28,958 level, the level where Major Wave 4 down ended. Again, be patient and wait for a signal change. When you see MARA and RIOT back near the top of the MWL, that’s the time to start getting excited about Bitcoin and the miners. Not now.
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
09-20-2021
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 08 Sep 2021 |
NASDAQ | NEU | 09 Sep 2021 |
GOLD | NEG | 16 Sep 2021 |
U.S. DOLLAR | POS | 17 Sep 2021 |
BONDS | NEU | 17 Sep 2021 |
CRUDE OIL | POS | 15 Sep 2021 |
CRYPTO | NEU | 15 Sep 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