Professor’s Comments April 28, 2017
Posted by OMS at April 28th, 2017
The Dow rose 6 points yesterday, closing at 20,981. Volume was heavy, coming in at 113 percent of its 10-day average. There were 264 new highs and 25 new lows.
Not much changed after yesterday’s trading. The VTI on the Dow continues to head up and now has a reading of 69.1. The 2-period RSI remains overbought with a reading of 86.2. So, with an overbought RSI and the Dow still NOT in an Up Trend, it’s possible that Major Wave ‘D’ down is still not complete. A break above the 1 March high of 21,161 would confirm that Major Wave ‘E” up has started. Until this happens, trying to put a label on the waves is problematic.
Last night Amazon (AMZN) and Alphabet (GOOG) announced blockbuster earnings causing both stocks to increase about 9 and 4 percent respectively in the overnight markets. A few days ago, I talked about the strength in the technology sector and how it would likely lead the market higher. It appears that this is now happening as NASDAQ stocks and technologhy ETFs continue to show strength.
However, I’m not sure if this is the case for the other indexes. I’m still not seeing the strength I need to see in the Money Flow indicators to start a rally in the Dow and larger S&P500. This means I must consider an alternative that a Bullish Triangle could be forming for the Dow and S&P500.
This also means is that IF a triangle is forming, final Wave ‘E’ rally to the top above 22,000 could be delayed until all 5 waves of the triangle are complete. In other words, for the next 2 months, the S&P could trade between 2340 and 2390 until waves c, d, and e of the triangle or wedge pattern complete. After that, the S&P would likely break above 2390 and start its rally toward 2500+ into the fall. The triangle pattern for the Dow is not as developed as it is on the SPX, but I’m going to use 20,500 and 21,100 as my trading range targets.
So, while the final rally to the top could be delayed, it means that we now have a few tradable targets. Right now the VTI on the Dow and SPX are still moving up, so I can’t get too negative. However, IF the VTI changes direction, it will mean that the next down leg of the triangle has started and I could look for a pull back to near 2340-2350 to establish long positions. These positions would be sold on a rally back to 2390+/-, before the next leg down begins, etc.
Bottom line: We could be trading, and not holding for the next month or so. At least for the Dow and SPX. Not so much on the NASDAQ. I still believe shares of technology ETFs, like XLK, will do nicely. Again, a break of 21,161 on the Dow would negate the triangle pattern and mean the Dow and SPX have started their climb higher.
Yesterday’s Sector Report was little changed. The report had 17 strong sectors and 7 weak. The Semiconductors, Leisure, FoodDrug Sectors continue to lead, Energy, Utilities and Transportation lagging. The trannies had a large negative Delta Trend Score yesterday, so IF the Dow and SPX start to head lower, it’s likely that Transportation stocks will lead the way lower.
I didn’t do anything with gold yesterday. GLD fell 0.45 cents to 120.39. The 200-day moving average on GLD is currently near 118. The 50 is near 119. If GLD pulls back to MA support, I’m a buyer. GLD remains in an Uptrend with the 50 above the 200. The VTI on GLD continues to head down, but with a reading of 64.9 is still showing a positive bias. So with GLD in an Uptrend (50>200), Rifle Trading conditions are in place. Students should watch the 2-period RSI on the Daily Chart to identify oversold conditions and then use the PT indicators to trigger the trades.
BTW, the 2-period RSI on GDX fell to 3.6 yesterday. The VTI is at 34.0, so the ETF is EXTREMELY oversold but NOT in a Down Trend. Interesting. I’ll be watching GDX today for a possible bounce.
That’s what I’m doing,
h
Market Signals for
04-28-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS |
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