Professor’s Comments August 15, 2017
Posted by OMS at August 15th, 2017
The markets rallied hard yesterday in what appeared to be part or all of a retracement wave 2 up. The Dow finished up 135 points, closing at 21,994 after reaching an intraday high of 22,019. The NASDAQ and SPX rose 84 and 25 points respectively. Volume on the NYSE was low, coming in at 84 percent of its 10-day average. Low volume rallies are usually not sustainable. There were 56 new highs and 55 new lows.
In Friday’s Comments, I mentioned that the decline since the August highs was accomplished in five sub-waves. I also mentioned that after the five wave decline, the markets were EXTREMELY oversold. The A-D oscillator was showing a reading of 245.5, which usually leads to a short-term bounce. I said the Dow could get back to the 22,000 level, and IF it does, that’s where I will start adding to my ‘trial’ positions in inverse index ETFs. I want to start positioning myself for wave 3 down.
That’s exactly what happened yesterday. The Dow bounced back to 22,000 and I added to my positions in inverse index ETFs. I believe yesterday’s bounce was all or part of wave 2 up. Monday’s rally could have been the completion of wave 2 up or it could be wave ‘a’ of an a-b-c sequence. If it’s only wave ‘a’, the Dow should fall slightly in wave ‘b’, then rally back above 22,000 to complete wave ‘c’ up. Shouldn’t matter too much. Once this retracement wave sequence completes, wave 3 down should be next.
My target for the Dow, now that the Ending Diagonal Pattern appears complete, is where the pattern began or near 20,400.
After yesterday’s rally, the A-D oscillator has a neutral reading of 106.4, so the markets are no longer oversold. The 2-period RSI closed with a reading of 71.5, which makes them slightly overbought. So IF the market rallies today, it might be another opportunity to add to or establish positions in inverse index ETFs. Watch the intraday 2-period RSI for overbought conditions.
The Tide remains negative. The VTI-volume indicator on the Dow remains neutral. The same 2 part indicator on the NASDAQ remains on a Sell Signal.
So with a negative Tide, and overall patterns that continue to suggest lower prices, I’m still looking to establish short positions by buying inverse index ETFs as they appear on the Dean’s List.
Monday’s Sector Report improved slightly. The number of strong sectors rose from 5 to 9, with 11 weak sectors showing. Insurance, Financial, Utilities, PharmaBio, and Computers lead the strong sector list, with Service, Telecoms, Healthcare, Autos, and Energy lagging. The relative strength of the higest ranking sectors remains low, with a RS value of only 1. So the strong sector list is still not very strong.
Most gold and mining stocks fell yesterday as equities rallied Gold (GLD) dropped 0.87 cents to 121.92. My two-part VTI-volume indicator on GLD remains positive, so I’m still expecting the ETF to rally to about 125+ before falling to 105 as waves ‘B’ up and ‘C’ down develop to complete Major Wave 2. Gold remains a trade only.
That’s what I’m doing,
h
Market Signals for
08-15-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | POS |
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