Professor’s Comments August 13, 2019
Posted by OMS at August 13th, 2019
The equity markets fell hard yesterday as treasury bonds rose and interest rates plunged. TMF, the ETF I use to track Bonds rose 1.8 points yesterday. This tells me the U.S. could be heading toward negative interest rates during the next year, like what is currently happening in Europe. With an inverted yield curve and Bonds on fire, it increases the odds of a deep recession here in the U.S. This is because people are starting to become concerned about their investments and are pulling money out of equities, where it can power the markets and the economy higher and storing it in ‘safer’ places. The Dow finished with a loss of 390 points, closing at 25,890. The NASDAQ and SPX were down 96 and 36 points, respectively. Volume on the NYSE was low, coming in at 73 percent of its 10-day moving average. There were 146 new highs and 210 new lows.
There were NO CHANGES to the market timing signals. The Dow, NASDAQ, SPX and Russell 2K remain on Sell Signals.
The Tide, and Dean’s List remain Negative. The Money Flow indicators on the Dow and NASDAQ are Neutral.
Yesterday’s decline could have been the start of Wave 3 down. However. because the institutions have NOT thrown in the towel, as evidenced by the positive Money Flow indicators, it’s still possible that yesterday’s decline was only wave ‘b’ down within a complex a-b-c pattern for Wave 2 up. If this is the case, the Dow and the other indexes could rally to the targets I showed on yesterday’s Cheat Sheet. (26,600+ for the Dow). This is the reason the Model only bought a ‘trial’ position in DXD yesterday.
Also, yesterday’s volume was EXTREMELY low, and the trading action was NOT impulsive. So, I can’t get too aggressive. Wave 3s are almost always characterized by impulsive action on high volume and that didn’t happen yesterday. It was more of a slow, steady morning decline, followed by a bounce into the close. The ‘bounce’ raises a question in my mind about whether yesterday’s action was the start of Wave 3 down.
Gold rose yesterday, but mining stocks declined. There continues to be a negative divergence between price and volume on mining stocks. This tells me that the miners could see a pullback before following gold higher. Right now, I feel a lot more comfortable owning gold (the metal) than I do the miners.
The trannies (IYT) fell to the 179.91 level during yesterday’s session. The ETF appears to be developing the ‘Bade’ of a small negative Hockey Stick Pattern. If this is the case, the ‘Blade’ development should require a few more days to complete before IYT begins to test the 175 level. A break of 175 would likely mean significantly lower prices for transportation stocks. This would also signal that a severe recession is ahead.
The Sector Ratio weakened to 9-15 Negative after yesterday’s session. The Strong Sector List was led by Household Products, Healthcare, Telecoms, FoodDrugs and Semiconductors. The Weak Sector List was led by Energy, Retail, Autos, Cap Goods, and Transportation. Seeing the Autos, Cap Goods and Transportation on the Weak List is another sign that the economy is slowing.
Model Portfolio: The Model bought a ‘trial’ position, 600 shares, in DXD yesterday, paying 27.44 for the shares. It also bought 325 shares of UGL, a 2X leveraged ETF for gold. Price paid for the UGL was 49.70. The Model is now looking to put some of its cash to work as it anticipates lower prices for equities.
After yesterday’s session, the Model is up 27.43 percent which translates to an annualized gain of 69.3 percent. The Model continues to hold a lot of cash ($94,468) waiting for high probability opportunities to put its cash to work. With the patterns suggesting a decline in the Dow to near the 24,700 level, the Model is looking for a bounce from yesterday’s oversold conditions before adding to its position in inverse index ETFs.
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
08-13-2019
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 31 Jul 2019 |
NASDAQ | NEG | 30 Jul 2019 |
GOLD | POS | 01 Aug 2019 |
U.S. DOLLAR | NEU | 05 Aug 2019 |
BONDS | POS | 30 Jul 2019 |
CRUDE OIL | NEG | 01 Aug 2019 |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments