Professor’s Comments April 18, 2018

Posted by OMS  at April 18th, 2018

The markets rose again yesterday.  The Dow finished the day up 214 points at 24,787.  The NASDAQ and SPX were up 125 and 29 points, respectively.  Volume on the NYSE was heavy, coming in at 110 percent of its 10-day moving average.  There were 110 new highs and 39 new lows.

It appears that Wave ‘c’ up of the zig-zag pattern for Major Wave 2 up has started.  This Wave should take the Dow to the 25,500+ level and complete sometime in late May-early June.  Because the final wave of a zig-zag or 3-3-5 pattern consists of five individual waves, the rally won’t be straight up.  Yesterday’s impulsive follow-on rally was likely part of sub-wave 1 up of the pattern. But I’m not concerned about the sub-wave count now.  As long as my combination VTI-volume indicator, the Tide, and the Sector Ratio remain positive, I will continue to look to trade the long side, especially on pullbacks.

Yesterday the Dean’s List also turned positive.  So now with a positive Tide, I can start buying positive index ETFs from the List.  I’m NOT going to go hog wild buying ETFs now.  It’s still too risky for that.  But I am going to buy a few stocks from the Member’s Watch List using the Strong Sector List to guide my purchases.

That’s what I was doing yesterday.  I bought Intel (INTC) and Micron Technology (MU) right out of the gate.  INTC opened at 52.91 and closed at 53.54 for a gain of 0.63 cents.  Micron finished 0.61 cents higher.  A computer stock, like Microsoft, was up 1.90.  Computers, technology, and semiconductors appeared on the Strong Sector List after Monday’s session.  That’s why I was buying them yesterday.

Again, (1) the Tide and my VTI-volume indicator were positive, (2) the Sector List started to increase, with computers,technology, and semiconductor sectors showing strength, (3) INTC, MU, and MSFT were the strongest big cap technology stocks on the Member’s Watch List.  That’s why I chose them. That’s what we do in the Professor’s Methodology. 

The Sector Ratio strengthened to 21-3 positive after yesterday’s rally.  The Strong List was led by Energy, Semiconductors, Material, Technology, Computers, and Consumer Products.  This is a very positive sign, as the Semis and Technology usually lead sustainable rallies. Their presence at the top of the Strong List is a welcome sign.

The Weak List was led by Real Estate, Autos, and Banks.  Avoid these weak sectors like the plaque.  If Real Estate (REITS) do pop as the rest of the market rallies, I would use the opportunity to lighten up.  I would not want to own REITS during the next 3-4 years.  If I’m right, once Major Wave 2 up completes, the REITS should be among the sectors that will be hit the hardest during the next decline.  

For now, I’ll stick with the Semis, Computers, and Technology. I’ve talked about Intel before and how I view its future as extremely bright.  The small computer chips it makes are millions of times more powerful than the old CP-901 computer I used in the Navy’s P-3C.  These micro-computers will be in every car, refrigerator, TV, and security system within the next 3-5 years.  They will change the way you drive, shop, travel, eat, get treated when you’re sick, and pay for things.  They WILL change your life.  These new micro-chips are not some fantasy that needs to be developed. They’re already here.   And now, the companies that make them are among the leaders on the Strong Sector List.  BTW, now that the VTI-volume indicator is positive on these technology stocks AND the Sector Ratio is also positive, I’m going to hold these stocks.  I’ll add to my Basic Position with Rifle Trades anytime the 2-period RSI becomes oversold.  You know the drill.

Energy is also a candidate for Rifle Trades.  Energy is now the strongest sector, with several energy stocks at the top of the Member’s Watch List.  CVX was up 0.76 cents yesterday.  It’s VTI-volume indicator is positive and has entered the Trend Mode.  Nabors Industries (NBR) and Haliburton (HAL) are also high on the Member’s Watch List with positive VTI-volume indicators and have just entered the Trend Mode.  I’d love to see the 2-period RSI on these stocks pull back slightly.  Like I said, I’m also looking for Rifle Trades in energy.

One caution.  Last night I ran The Professor algorithm.  I usually do this whenever the DMI changes on the Dow or NADDAQ.  (Yesterday the DMI on the Q’s turned positive).  On the positive side, The Professor highlight 26 stocks as longs, so he’s wide awake and starting to talk.  But by only highlighting 26 stocks, he’s telling me that either the current rally is just getting started OR the rally won’t be that strong. Usually, when he highlights more than 50 stocks, it leads to a rally on 750+ Dow points.  Eighty+ stocks usually lead to a rally of 1,200 to 1,400 Dow points.  So, while the pattern suggests a move to about 25,500+ on the Dow, which is about 800 points away from yesterday’s close, the Professor is not all that excited…yet.

Remember, it’s early and there is still No-Trend in place for the major indexes.  So, scalp trading conditions still apply to most stocks and sectors.  But I’m NOT trading most sectors.  I’m looking to establish and hold Basic Positions in stocks in the Strong Sectors only.  This is why I’m NOT looking at ETFs now.  Most of them contain too much junk.  I only want to own strength.

Gold and most mining stocks rose slightly yesterday.  GLD was up 0.12 cents at 127.75.  Gold (the metal) appears to be close to breaking out of a major consolidation triangle that could take it significantly higher.  If GLD can rise above last week’s high of 129.47, it will put its VTI-volume indicator in the Trend Mode.  Watch gold. It could be a nice place to be if things start to turn ugly in another month or so.

That’s what I’m doing.

h

Market Signals for

04-18-2018

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