Professor’s Comments August 3, 2018
Posted by OMS at August 3rd, 2018
The markets closed mixed yesterday after reversing an early decline. The Dow finished down 8 points at 25,326. The NASDAQ was up 95 points, mostly on the back of Apple (AAPL), which gained 5.89 points. The SPX finished up 14 points after falling as low as 2796. Volume on the NYSE was moderate, coming in at 103 percent of its 10-day moving average. There were 90 new highs and 63 new lows.
Yesterday’s early decline to 2796 on the SPX could have been completed sub-wave ‘c’ down of Wave 2 down. We’ll see. I was expecting a decline to the 2780 level, but the sharp reversal from 2796 and rally back to 2827 looked impulsive. It was the type of rally one would expect to see at the start of Wave 3 up.
The only thing I didn’t like about the rally was that it stopped short of the 2830 level. This is the level I discussed in Wednesday’s Comments as the upper level for the Bearish Scenario. So, by not breaking through 2830, it’s still possible that the SPX could be developing a more complex Wave 2. If this is the case, the SPX should remain below 2830 and begin to decline during the next few days. A move above 2830 would mean that Wave 3 up has started.
Yesterday’s rally generated a new Buy Signal on my combination VTI-volume indicator on the ETFs for the NASDAQ-100 (QQQ) and the Russell 2K (UWM). The same indicator is neutral on the Dow (DIA) and positive on the SPX. If the VTI-volume indicator on the Dow turns positive now, it would be a good indication that Wave 3 up is underway. Small cap stocks on the RUT and NASDAQ will be important to watch as they are less affected by the Dollar, tariffs and trade wars. Students should note that UUP, the EWF for the Dollar is back on the Dean’s List. A strong Dollar will continue to pressure large cap stocks, like CAY and BA, that do a lot of their business overseas.
Students should also note how the Dean’s List is getting stronger. DDM, QLD, and SSO are now all near the top of the List. Also, IYT, PSI, and PPA, the tracking ETFs for Transportation, Semiconductors, and Aerospace/Defense are moving up on the List. This is another indication that Wave 3 up could be starting. Again, watch the 2830 level on the SPX.
The Sector Ratio increased to 16-8 positive after yesterday’s session. The Strong List continues to be led by the defensive sectors, but Cap Goods and Semiconductors moved up slightly yesterday and now occupy the #7 and 8 positions on the Strong List. If these sectors can move into the top 5 sectors, it would be another indicator that the market is going higher. BTW, the Banks and the Auto Sectors moved to the bottom of the Strong List after yesterday’s session. However, the Technology, Financial, Computer and Material Sectors continue to remain on the Weak List. If the Dow is to re-test the January highs, these sectors need to move off the Weak List. BTW, IF the SPX can move above 2830, the Relative Strengths of these sectors is such that they could easily drop off the Weak List.
The VTI-volume indicator for gold and silver remained on a Sell Signal after yesterday’s session as GLD fell 0.62 cents to 114.52. The indicator generated its first Sell Signal on 15 June with GLD at 121.34. I’m still waiting for the indicator to turn positive before I buy the metals.
That’s what I’m doing,
h
Market Signals for
08-03-2018
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | NEG |
VTI | NEG |
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