Professor’s Comments
Posted by OMS at September 21st, 2017
The markets were mixed yesterday. The Dow was the biggest gainer and finished up 42 points at 22,413. The NASDAQ was down 5 points while the SPX was up 2. Volume on the NYSE was moderate, coming in at 105 percent of its 10-day average. There were 119 new highs and 18 new lows.
The Fed left interest rates unchanged, but announced it would start to unwind (sell) the massive portfolio it had accumulate for the past 8 years as part of the QE stimulus program. The effect will be a tightening of the money supply, as it will remove money from the U.S. economy that would normally be available to consumers. It will likely cause a recession. After watching Wall Street’s reaction to the announcement, nobody seemed to care. But people living on Main Street should care. They will be the ones impacted the most by yesterday’s announcement. A tightening of the money supply will cause the Dollar to rise, making goods imported from China more expensive. It will also result in less money being available for consumers to buy houses and cars, and for businesses to expand.
BTW, I loved how Ms. Yellen explained the new Fed selling program. She called it the “balance sheet normalization program.” I guess she didn’t want to alarm too many people. Just remember, the Dow went from 6,500 to 22,400+ mostly because the Fed bought $4.5 Trillion worth of stocks, bonds and agency securities. They called the program ‘Quantitative Easing.” They just printed money out of thin air and used it to buy stocks. Now under the “balance sheet normalization program” they’re telling you they plan to sell the stocks and bonds they have accumulated. Folks, this is new territory. A program of this magnitude has NEVER been tried before. And we’re letting Janet Yellen, an ivory tower economist, run it!
Yesterday’s intraday move of 98 points in the Dow from low to high after the Fed announcement was likely the Big Move predicted by Monday’s small change signal.
There was another small change in the A-D oscillator yesterday. So once again we need to be on the lookout for a Big Move in the markets within the next 1-2 days.
Yesterday’s late rally in the Dow caused the index to close above the 22,400 level. This level has been my target for the past month or so. But as I have mentioned before, not all the indexes are moving higher like the Dow. Yesterday, the NASDAQ (QQQ) closed lower, and in doing so caused its DMI to turn negative. The volume portion of my VTI-volume indicator on the Q’s is still slightly positive, so as of last night the signal is still neutral. But IF the Q’s continue to decline today, they will likely generate additional Sell Signals. This would be a BIG negative for technology stocks.
Wednesday’s Sector Report was unchanged. The Sector Ratio remained at 15-9 positive. The Strong Sector List continues to be led by the Energy, Semis, Material, PharmaBio, and Utilities. The Weak Sectors are led by Consumer Products, Telecoms, Media, Household Goods, and Service.
BTW, in Class last night, I introduced the new students to the The Tide and the Sector List. When I got home, these indicators were still on my mind, so I decided to look at the performance of the top sectors since The Tide turned positive on 31 August.
Actually, I won’t say much about it. I’ll let you be the judge.
Remember, in the Sector Rotation Strategy webinar I did a few months back, I showed students how beneficial it was to be in the strongest sectors when The Tide turned positive.
So, on 31 August, the top three Strongest Sectors were: PharmaBio, Materials, and Computers. If you have some time, take a look at how some of the stocks and ETFs in these sectors have performed since 31 August. It might get you to pay more attention to the Tide and the Weak Sector List when The Tide turns negative.
Back in August, when The Tide turned positive, with PharmaBio at the top of the Strong Sector Report, you could have bought a PharmaBio ETF from the Dean’s List. If you don’t like ETFs (I do!), you could have selected a PharmaBio stock from the Member’s Watch List. Amgen, my favorite PharmaBio stock went from 177 to 191. A Material stock like Alcoa (a slow moving stock) went from 45 to 48.
Just saying….
Remember, nobody on Wall Street rings a bell to tell you when the market is changing direction. That’s why we use The Tide. So, the next time The Tide changes direction, you might want to look at the Sector Report and use it to select stocks and ETFs that might profit from a down turn.
Also, make sure you consider an index ETF that will profit from any change in the direction of The Tide. Since The Tide turned positive on 31 August, the Dow is now up over 450 points. A 2:1 leveraged ETF, like DDM, is currently showing a handsome profit.
Again, just saying….
Gold continued to fall yesterday. GLD finished down a point at 123.62. I’m still on a Sell Signal for GLD as my VTI-volume indicator remains negative. Now that the Fed has announced its new ‘balance sheet normalization program’, it will likely be a positive for the Dollar and a negative for gold. With negative indicators, I am avoiding the metal for now.
That’s what I’m doing,
h
Market Signals for
09-21-2017
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS |
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
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Category: Professor's Comments