Professor’s Comments April 21, 2017
Posted by OMS at April 21st, 2017
As expected, the Dow rallied 174 points, closing at 20,579. The large cap index got as high as 20,630. Volume on the NYSE was heavy, coming in at 118 percent of its 10-day average. There were 123 new highs and 23 new lows.
Yesterday’s rally from oversold conditions turned the VTI back to positive. The indicator closed with a reading of 31.7, so it still maintains a negative bias. As long as this indicator stays below 50, I have to consider the Dow to be in corrective wave ‘D’ down of a large Ending Diagonal Pattern. If this is the case, yesterday’s rally was part of minor wave ‘b’ up within Wave ‘D’ down. If the VTI starts to move above 50, and the bias turns positive, I’ll have to assume that final wave ‘E’ up has started. This wave should take the Dow to new highs later this summer.
Meanwhile, with the Dow at 20,579, I believe the market is not at a high enough level to short, and with the VTI only at 31.7, I can’t be sure if yesterday’s rally was the start of Major Wave ‘E’ up. It’s possible that Major Wave ‘D’ down completed on Wednesday at the 20,380 level. In other words, the odds for a rally or a decline are only about 50-50 at this point. I don’t do even money bets. So for today, I’m on the sidelines.
Yesterday the SPX reached a high of 2361, keeping the Head & Shoulders Pattern I have been talking about for the past few days in order. Students should continue to watch the neckline of this pattern near the 2330-2335 level. If broken, it would suggest that Major Wave ‘D’ down on the Dow has not finished and has more downside to go before it completes. A break of the 2330-2350 level on the SPX would project a target near the 2280-2285 level.
Yesterday’s Sector Report was little changed. The report had 16 strong sectors and 8 weak. The Semiconductors, Leisure, Technology, and Food Sectors were the leaders, with Energy, Cap Goods, Banks, and Autos lagging. The number of sectors with positive Trend Scores increased to 15 last night. So right now, the Trend Scores within the Sectors are starting to show a positive bias. It’s still too soon to tell if a new leg up is starting, but we’ll keep an eye on it.
Gold and mining stocks were flat yesterday. The VTI on GLD remains negative with a reading of 85.5. This means that even though GLD remains in a Major Wave 3 uptrend, it’s likely that gold and mining stocks are starting a minor wave 2 correction within Major Wave 3 up.
UDN, the inverse Dollar ETF remains on the Dean’s List near the bottom. The ETF rose 0.01 cents yesterday. The VTI on UDN continues to rise, and is now at 63, meaning the ETF is still NOT in an Up Trend. The 2-period RSI is at 56. So, with a slightly overbought RSI and NO trend in place, UDN could pull back allowing the Dollar to rise. A rising dollar will put pressure on gold.
One of the reasons we need to watch gold carefully now is because of the pattern that is developing on UUP, the positive Dollar ETF. It could be forming the ‘Blade’ of large Bullish Hockey Stick Pattern. I’ll talk more about this pattern and its implications for gold in my WSR this weekend. Right now, the Dollar is just sitting on its 200-day moving average, so it’s not giving us a clue as to its next move. But the large positive Hockey Stick pattern could mean a significant change is in store for the Dollar, so it needs to be watched.
That’s what I’m doing,
h
Market Signals for
04-21-2017
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | POS |
VTI | POS |
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Category: Professor's Comments