Professor’s Comments April 10, 2018
Posted by OMS at April 10th, 2018
The markets rallied hard early yesterday, then fell into the close. The Dow finished up 46 points, closing at 23,979. The NASDAQ and SPX were up 35 and 9 points, respectively. Volume on the NYSE was low, coming in at 87 percent of its 10-day average. There were 23 new highs and 53 new lows.
Yesterday’s early rally and subsequent decline appeared corrective, so it’s starting to look like the Dow is forming some type zig-zag or complex 3-3-5 flat pattern for Wave 2 up. If this is the case, the Dow could rally towards the 25,500+ level before Wave 2 up completes. This means that even though the Bear Market has started, its major crash wave will be postponed for another month or so, probably until late May. This would be very similar to what happened in the crash of 2007-2008.
On the other hand, if the Dow continues to decline and breaks below 23,500, it would mean that Wave 3 down has started.
Basically, the Dow is trapped within a trading range bound by its 50 and 200-day moving averages. Until it breaks out of this range, the EXTREME volatility we have been seeing will likely continue.
Right now, with mixed indicators on the cockpit, both Bearish Scenarios are possible. In other words, the Dow could rally to about the 25,500+ level in wave ‘c’ up of a complex zig-zag and still be within the Bearish pattern for Wave 2 up. All it means is that the crash wave will be delayed for another 6-7 weeks.
BTW, IF a 5-wave zig-zag pattern is forming for the final wave of Wave 2 up, the strategy of fading rallies will NOT be as easy as it was with waves ‘a’ and ‘b’. This is because the zig-zag will have an upward bias until all five waves of the pattern are complete. So be careful. Remember from class, that whenever a pattern has five waves up, it means the primary trend is up. So even though the larger overall pattern is Bearish, the short-term pattern (the zig-zag) will be Bullish until final wave ‘c’ up completes. This all assumes that the markets are forming a zig-zag for Wave 2. If the markets start to fall and break below 23,500, it would negate the zig-zag scenario.
Another reason I have a slightly bullish bias going into today’s trading is because the 2-period RSI on the Dow finished with an oversold reading of 35.3. So, the market is oversold and still NOT in the Trend Mode. It should rally with these conditions.
There was a small change to the Sector Ratio after yesterday’s trading. The Ratio increased to 22-2 negative as the Utilities joined the Household Products on the Strong List. The Weak Sectors were led by Real Estate, Food Drug, Transportation, Autos, and PharmaBio.
Gold and most mining stocks rose slightly yesterday. GLD rose 0.43 cents to 126.82. It’s 2-period RSI is now slightly overbought with No Trend in place, so it’s likely any break-out from the large triangle developing on its Weekly Chart will be delayed. My combination VTI-volume indicator on GLD remains on a Buy Signal.
I’m still on the sidelines. Remember, there is still NO Trend in place now, so scalps only! No buy and holds…the conditions are still way too dangerous. Expect lots of volatility IF a zig-zag develops for Wave 2 up.
Most of the stocks I looked at last night to scalp the long side still had negative volume indicators. The two with positive volume were INTC and ACHC. I will be looking for good entry points to scalp both stocks. They probably won’t be easy trades.
That’s what I’m doing,
h
Market Signals for
04-10-2018
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
SUM IND | POS |
VTI | NEG |
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Category: Professor's Comments