Professor’s Comments April 26, 2019
Posted by OMS at April 26th, 2019
The markets were mixed yesterday. The Dow finished down 135 points at 26,462. The NASDAQ was up 17 points while the SPX was down 1 point. The biggest loser of the day was the Trannies as IYT dropped 4.61 points to 194.92. Seeing the transports fall like this is not a good sign for the markets. Volume on the NYSE was moderate, coming in at 103 percent of its 10-day moving average. There were 62 new highs and 42 new lows.
As expected, the market timing indicator for the Dow turned Neutral after yesterday’s session. The NASDAQ, and SPX remain on Buy Signals that continue to weaken. The Russell 2K remains on a Sell Signal.
The Tide has turned Negative again. The markets continue to struggle with breadth that is weakening and becoming extremely narrow. Only a handful of stocks pushed the NASDAQ higher yesterday. The Dean’s List remains positive.
I continue to see large negative divergences between index prices and my breadth and money flow indicators. These negative divergences usually appear when a top of major significance is approaching.
It’s still not clear whether the short-term top that appears to be developing will be wave 1 up of a five wave Ending Diagonal Pattern or the conclusion of the larger pattern. Right now, there are several ways the large Ending Diagonal could complete. As long as the timing indicators remain positive to neutral, the pattern suggests that at least one more rally is needed before the final top is in. On the other hand, the short-term pattern is beginning to develop momentum, so the larger pattern could easily truncate. Either pattern should lead to some type of short-term pullback. The key to trading the decline will come from the market timing indicators. If they turn negative, I’ll begin to add inverse index ETFs to the Model Portfolio.
The Sector Ratio remained at 17-7 after yesterday’s session. The seven weak sectors are Healthcare, PharmaBio, Service, Telecoms, Consumer Products, Food Drugs, and Energy. If the market begins to decline as the pattern suggests, expect the sectors on the Weak List to lead the way lower. The Strong List continues to be led by Real Estate, Semiconductors, Technology, Media, and Leisure. There are now 10 sectors on the Strong List with RS ratings of 1 or zero. So even though the Strong List still appears strong, its internals (RS ratings) continue to weaken.
Model Portfolio: There were NO Changes to the Model after yesterday’s session. The Model continues to hold a ‘trial’ position (1,000 shares) of TZA, a 3X inverse leveraged ETF for the Russell 2K. The remainder of the theoretical $100,000 Model Portfolio remains in cash ($95,980).
So far, the theoretical Model has gained $5,157 or 5.11 percent since it was started on 26 February. Students should realize that these gains were achieved by only putting about half of the Model’s available funds to work. Also, the conditions that the Model was designed to take advantage of (a trending market) have not occurred to date. I’m still watching to see IF the Model can remain profitable under these less than desirable conditions. If it can, it should excel once the market begins to trend. We’ll see.
At this point, with weakening breadth and Money Flow indicators and a falling Sector Ratio, one or two good down days could turn the market timing indicators negative, so I’m not anxious to put new money to work.
GLD rose 0.10 cents to 120.57. The current pattern for GLD suggests the ETF is in the process of completing wave ‘c’ down of Wave 2 down. Once Wave 2 down completes, gold (and silver) should begin to rally hard as Wave 3 up unfolds. Gold remains on a Sell Signal. Be patient.
The Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
That’s what I’m doing,
h
Market Signals for
04-26-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 25 Apr 2019 |
NASDAQ | POS | 13 Mar 2019 |
GOLD | NEG | 11 Apr 2019 |
U.S. DOLLAR | POS | 23 Apr 2019 |
BONDS | NEG | 22 Apr 2019 |
CRUDE OIL | POS | 18 Apr 2019 |
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Category: Professor's Comments