Professor’s Comments August 23, 2017
Posted by OMS at August 23rd, 2017
The markets rallied hard yesterday. The Dow finished 196 points higher, closing at 21,900. The NASDAQ and SPX were up 84 and 24 points, respectively. Volume on the NYSE was low, coming in at 86 percent of its 10-day average. There were 84 new highs and 47 new lows.
Yesterday’s rally was likely wave 2 within wave 3 down. I expected the rally would take the Dow back to the 21,800+ level. It actually got as high as 20,919. I used the opportunity to establish several short positions on the indexes using inverse ETFs.
Wave 3 of 3 down should be next. But there are no guarantees.
Even though yesterday’s sharp rally appeared to be retracement wave 2 of 3 up, I still can’t eliminate the possibility that it was the initial wave of a Wave 4 triangle. If it was, then we’ll have to wait until the other four waves of the triangle complete before the market starts to fall hard again. The way we’ll know is if we start to see impulsive action on the next decline. Remember, wave 3 of 3 down should be impulsive. If it’s not, then it’s likely a triangle is developing for Wave 4. Shouldn’t matter too much as yesterday’s high will likely be the high of any triangle.
Tuesday’s Sector Report remained weak. The number of strong sectors remained at 4 with the weak sectors staying at 20. The four strong sectors, which are not that strong with RS readings of only 1s and 0s, were Utilities, Computers, PharmaBio, and Material. The Weak Sector List was led by Energy, Telecoms, Service, Consumer Goods and Autos. With the exception of Healthcare, all 20 of the weak sectors are now showing Trend Scores of -63 or lower. Most of the sectors have readings below -95. In other words, most of the sectors are now in pretty significant down trends. Readings like this usually occur when the market is undergoing an impulsive decline. It’s just another reason why I believe wave 3 of 3 down should be starting soon.
Gold pulled back slightly yesterday as the equity markets rallied. GLD fell 0.55 cents to 122.21. My volume indicators on GLD continue to diverge negatively from price, which tells me the pullback will likely continue. I’m still looking for slightly lower prices before I start to buy gold again.
That’s what I’m doing.
h
Market Signals for
08-23-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | POS |
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Category: Professor's Comments