Professor’s Comments April 24, 2019
Posted by OMS at April 24th, 2019
The markets staged a strong rally yesterday on relatively weak breadth. The Dow finished the day up 145 points at 26,656. The NASDAQ and SPX were up 106 and 22 points, respectively. Volume on the NYSE was moderate, coming in at 109 percent of its 10-day moving average. There were 136 new highs and 20 new lows.
It still appears that the markets are approaching some type of short-term top. At this point, it’s not clear whether the top will be wave 1 up of a five wave Ending Diagonal Pattern or the conclusion of the larger pattern. That’s the problem with Ending Diagonals. The negative divergences warn that a top is approaching, but you can’t tell if it’s ‘the’ top or just an interim top where the market pulls back only to rally to new highs after the pullback. The only way to tell is by the strength of the decline which will cause a change in signals.
Here’s the deal: With the Dow at 26,656, the Dow is less than 350 points from its projected target of 27,000. And with a pattern that suggests a large Ending Diagonal is developing, there are NO guarantees that the Dow will reach its target. The odds are probably less than 50-50 that it will…at least without some type of pullback. The odds are much greater that the Dow will pull back at some point during the next week or so, and IF the pullback turns into a Hockey Stick, it will help the Dow challenge the 27,000 level or possibly higher. Remember, IF the Dow is really developing an Ending Diagonal, which is basically a triangle pattern, there must be pullbacks along the way as the market moves higher. So right now, with the 2-period RSI on the Dow overbought at 95.7, I’m not in any hurry to put money at risk under these conditions.
As of last night, there were NO CHANGES to the market timing indicators. The Dow, NASDAQ, and SPX remain on Buy Signals that continue to weaken. The Russell 2K remains on a Sell Signal.
The Tide is neutral. The Dean’s List remains positive.
I continue to see large negative divergences between index prices and my breadth and money flow indicators. These negative divergences usually appear when a top of major significance is approaching.
With mixed signals on my major market timing indicators, I’m going to remain on the sidelines until the signals are resolved. I believe that putting new money to work under the current market conditions is only a 50-50 bet.
The Sector Ratio rose to 21-3 positive after yesterday’s session. The Strong List was led by Real Estate, Semiconductors, Technology, Energy, and Media. The Weak Sector List was led by Healthcare, PharmaBio, and Service. There are still 10 sectors on the Strong List with RS ratings of 1 or zero. So even though the Strong List appears strong at 21-3, with so many sectors with low RS ratings, the List is not as strong as it appears.
Model Portfolio: The Model sold its shares of UCO just after yesterday’s open at 25.72 per share. So now, the only position the Model currently holds is a ‘trial’ position (1,000 shares) of TZA, a 3X inverse leveraged ETF for the Russell 2K. The remainder of the theoretical $100,000 Model Portfolio remains in cash ($95,980).
BTW, the recent pop in Crude Oil prices was caused by news that the White House was ending waivers for Iranian Oil sanctions. These wavers were granted to a few countries so they could continue to buy Iranian oil. But now these waivers will be ending on 2 May, depriving the Iranians of about $50 Billion in annual oil revenue. While the removal of these waivers will take some Crude Oil off the market, students must remember that the U.S. is now producing a whopping 11.8 million barrels per day, which is more than the Russians and Saudis. Further, it’s estimated that U.S. oil production will expand by another 1.1 million barrels per day by the end of this year, putting production close to 13M bpd. So, with a slowing economy, it’s not likely that we’re going to run out of oil anytime soon. I still believe that crude oil is near the top if its trading range and will continue to form a large triangle pattern for the next several months. I don’t feel I’m missing out on anything by not owning oil now.
GLD fell 0.25 cents to 120.12 after yesterday’s session. The current pattern for GLD suggests the ETF is in the process of completing wave ‘c’ down of Wave 2 down. Once Wave 2 down completes, gold (and silver) should begin to rally hard as Wave 3 up unfolds. Gold remains on a Sell Signal. Be patient.
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.
That’s what I’m doing,
h
Market Signals for
04-24-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 01 Apr 2019 |
NASDAQ | POS | 13 Mar 2019 |
GOLD | NEG | 11 Apr 2019 |
U.S. DOLLAR | POS | 23 Apr 2019 |
BONDS | NEG | 22 Apr 2019 |
CRUDE OIL | POS | 18 Apr 2019 |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments