The State of the Divergences

11/20/2020 10:00 am EST

Focus: MARKETS

Jeff Greenblatt

Director, Lucas Wave International, LLC

There may be a small divergence forming between the Transports, the Dow, and the NDX. I know Dow Theory does not include the NASDAQ-100 (NDX), so I’m going to respect Dow Theory, explains Jeff Greenblatt of Lucas Wave International.

That being said the Dow made a new high on November 9. The Dow closed above it this Monday but couldn’t hold it. The Transports also made the original new high on the 9th but has spent the past three sessions operating mostly above that line. The NDX made a new on September 2 and is currently operating below the high on the 9th. The Russell 2000 is way ahead of the others.

In a healthy market we want to see the Russell 2000 (RUT) lead followed by tech, then the Dow. As far as the Dow is concerned, it would be best to see the Transports leading to the upside because the Dow will catch up. What about our 161-vibration discussed last week? The Transports are ahead of the Dow while the NDX is lagging. This is mostly a decent market. The only cold water I can pour is in an ideal world the NDX would be doing better then the Dow.

What is the only thing that could go wrong technically? As you know, we’ve had good results with the golden spiral vibration getting reactions back in September on the weekly and daily time frames. Now the 161-day high at 29933.83 has been taken out at 29964.29 but it hasn’t been able to hold it.

This is how close we are to breaking free for a bigger move to the upside. Odds increase greatly for a new leg up if they can invalidate the 161-day window. Now we are coming to the holiday season, which in the very least should keep the bear away until January. We may or may not get a real Santa rally this year given all the new lockdowns. Whatever comes in the form of bad news may not manifest in the charts until the new year.

What could possibly go wrong this year? We hear lots of talk and statistics concerning the election and the virus. The business media will have you believe the economy will come roaring back once the vaccine is released, which has accounted for at least two important rally days over the past 10 days.

 If I connect some dots, we can see they may allow people back in the building for concerts and sports if people can prove they’ve been vaccinated. That will help the economy to a degree but on the 17th the New York Post reported nearly 300 US businesses that got Paycheck Protection Program aid to the tune of $228 to $509 million have filed for bankruptcy.

The Small Business Administration has only published loan amounts in ranges. The loans were granted to businesses from almost every state and are scheduled to be forgiven for those who followed the rules and kept employees on the payroll. This is turning out to be a financial tsunami and these loans will now be considered “general unsecured claims” with the SBA getting 5 cents on the dollar if that much. The article also stated many businesses have folded despite the aid as the Feds have only released the names of the companies that got loans larger than $150,000.

Others often liquidate as opposed to filing for bankruptcy and won’t show up in court records. We are never going to have a real recovery under these conditions. Mass crowd psychology is under the kind of unhealthy delusion or hysteria, which will lead to a day of reckoning somewhere down the road when they wake up.

Generally speaking, most retail companies depend on the holidays to make ends meet for the year. Given what is anticipated with the new lockdowns, the bad holiday statistics likely hits after the first of the year. For now, markets are on the cusp of breaking to the upside.

I promised I’d show you an example of my new intraday clock, which works the same way as the Gann daily calendar. Keep in mind, there are different clocks and the one for futures is going to be different than the one for stocks in general because the stock market is open 6.5 hours with a shorter after market. In this case, the 233dg vibration lines up at 7:33 in the morning in Arizona.

Have you seen how many times the market reverses course at or remarkably close to three minutes after it opens? One reason may very well be the intraday vibration where the overall clock lines up with the precise time. Concerning Sydney, its now two weeks, and we are looking at adopting a year-old lab from a young man who is being stationed overseas in the military.

For more information about Jeff Greenblatt, visit Lucaswaveinternational.com.

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