Professor’s Comments August 31, 2018
Posted by OMS at August 31st, 2018
The markets fell hard yesterday after approaching important resistance levels on Wednesday. The decline was the Big Move predicted by Wednesday’s small change in the A-D oscillator.
The Dow dropped 138 points, closing at 25,987. The NASDAQ and SPX finished down 21 and 13 points, respectively. Volume on the NYSE was moderate, coming in at 102 percent of its 10-day moving average. There were 114 new highs and 62 new lows. The increase in the number of new lows turned the Hi-Lo indicator negative, making The Tide neutral. I wouldn’t worry about this for now, but if The Tide turns negative, that would be a concern.
There were no changes to The Professor’s VTI-volume indicator signals for the major equity markets after yesterday’s session. The Bond market remains neutral and the U.S. Dollar remains on a Sell Signal.
After yesterday’s pullback, the 2-period RSI on the Dow closed with a reading of 35. The VTI-volume indicator on the Dow remains on a Buy Signal and in the Trend Mode. This means that Rifle Trading conditions are now in place. Recall that we look for Rifle Trades whenever a stock or ETF is in the Trend Mode and the 2-period RSI becomes oversold.
So, if the Dow continues to pull back today, I’ll simply look for an entry point on the 60 minute bars of DIA or the more aggressive DDM (2X leverage) and then manage the trade. Aggressive students might want to consider something like UDOW, which is leveraged at 3X the daily performance of the Dow. Just remember that when you’re dealing with a leveraged ETF, always consider it as a trade only. Because of the way leveraged ETFs are structured, they are not good vehicles to hold for long periods of time.
BTW, the 2-period RSI on the NASDAQ and SPX was NOT oversold after yesterday’s session, so unless these indexes pull back hard today, I’ll be I’ll be looking at the Dow for my Rifle Trade.
Yesterday, the SPX got as low as 2,895 which brought its 2-period RSI down to 48.7. If the 2-period RSI becomes oversold today (<30), and the index stays above 2,850, I’ll look for Rifle Trades on that index too. A break of 2,850 would project significantly lower prices for the SPX and I would not want to be trading it to the long side if this happens. A break of 2,850 could start a decline to the 2,580 level.
The Sector Ratio fell 15-9 positive after yesterday’s session. The Strong Sector List was led by Household Products, PharmaBio, FoodDrugs, Telecoms, Transportation, and Cap Goods. The Weak List continues to be led by Service, Autos, Retail, Healthcare and Materials. Most stocks in these sectors got pounded yesterday. To give you an example of how important it was to be in the right sectors yesterday, you only have to look at two stocks. GM, in the weak Auto Sector, dropped 0.76 cents to 36.36. It’s VTI volume indicator has been negative (on a Sell Signal) for the past three months as its price has fallen from the mid-40s to the mid-30s. On the other hand, a stock like Biogen (BIIB) in the strong PharmaBio Sector gained 2.75 points yesterday. Again, being in the right sector matters.
BTW, most gold stocks showed an increased in Relative Strength yesterday, even though gold was down for the day. This caused the Materials Sector to show a slight increase in RS. Gold remains on a VTI-volume Buy Signal, so I’m still holding my ‘trial’ positions. I’ll buy more IF/when the Materials Sector moves to the Strong List.
That’s what I’m doing,
h
Market Signals for
08-31-2018
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Professors Major Market
Timing Signals for
08-31-2018
DOW | POS-T |
NASDAQ | POS-T |
GOLD | POS |
U.S. DOLLAR | NEG |
BONDS | NEU |
CRUDE OIL | POS |
DATE of SIGNAL |
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