Professor’s Comments December 17, 2019
Posted by OMS at December 17th, 2019
The markets staged a strong rally early Monday, but by late afternoon Boeing started to weigh on the index and pulled prices off their highs. Shares of Boeing (BA) dropped over 14 points and caused the stock to enter a downtrend mode on the VTI. It will be interesting to see how the Dow will fair during the next few weeks with one of its more important components now in a down trend.
Despite the big loss in Boeing, the Dow finished with a gain of 101 points, closing at 28,236. The NASDAQ and SPX were up 79 and 23 points, respectively. Volume on the NYSE was moderate, coming in at 109 percent of its 10-day moving average. There were 223 new highs and 20 new lows.
The Dow appears to be rising within a narrow channel with a lower trend line at the 28,175 level. A break of this trend line should mark the beginning of a long-term down trend in equities. For the past few weeks, I’ve been using a decline below 27,550 as the level that would confirm the top is in. Now, because of the slope of the rising trend line, I’m raising that level to 28,175.
The Dow, NASDAQ, SPY, and Russell 2K remain on Buy Signals. However, final wave five of Wave 5 up is in the final stages of completing the Major Pattern we have been trading for months (an Ending Diagonal Pattern), so the signals could change to negative anytime now.
The markets remain at a critical point in their patterns, showing negative divergences and sentiment readings that suggest they could begin to change direction in the days ahead.
The Dean’s List and Tide remain Positive.
The Sector Ratio remained at 22-2 positive after Monday’s session. The Strongest Sectors were Healthcare, Retail, Service, PharmaBio, and Semiconductors. The two weak sectors were Media and Foods.
Gold remains on a weak Buy Signal after GLD closed flat at 139.04. GLD continues to trade in a very narrow range suggesting a Big Move is coming. Because the pattern is not clear on gold, the Big Move could be up or down. At this point, I’m just waiting for the pattern to resolve itself as to gold’s next major directional move.
Same for Bonds. Bonds (TMF) fell 0.74 cents to 27.19. Bonds remain on a Sell Signal, but the pattern suggests the next move could go either way. Bond futures are currently flirting with major trend line support at the 155 level. A break of this level today could send bond prices reeling as it would confirm the start of wave 3 down. On the other hand, TMF is still above its 200-day moving average currently at 26.1, and as long as this support holds, Bonds could begin to rally IF…and it’s a Big IF equity prices begin to weaken. With an unclear pattern and a Negative Timing Signal, I’m still on the sidelines with Bonds
Crude Oil. The big news in crude oil these days is Aramco, the Saudi national oil and gas company. The company went public recently with an IPO valued at over 2 trillion dollars. That makes Aramco the largest IPO in history. Hmmm? Remember what I always say about IPO’s…nobody sells something if they believe it’s going higher. So, with crude oil hitting a high of 60.48 last week, I believe we need to start paying attention to our shares UCO. The recent rally in crude appears to be part of a small retracement wave 2 up within a larger triangle. If this is the case, the next wave down should be a wave 3 down that sees crude prices decline to the 50 level. Crude and UCO could still push another 1-2 points higher from current levels, however students should understand the downside risk now and pay attention to the indicators.
BTW, IF the timing signals on Crude Oil turn negative, the Model will sell its shares of UCO and buy shares of SCO, the inverse ETF for Crude Oil. Shares of SCO are currently selling near their low for the year.
There were NO CHANGES to the Model after yesterday’s session. The Model continues to hold 1,000 shares of DXD, 300 shares of SQQQ, 1,500 shares of UCO, 500 shares of GDX with a cash balance of $56.202. The Model is currently up 29.64 percent after yesterday’s session.
I continue to believe that positions established in inverse index ETFs from current or higher levels on the Dow will prove to be big winners in the months ahead once Wave ‘D’ up completes. My initial target for the next Wave down remains at the 26,600 level once the trendline at 28,175 is broken. Beyond that, prices should move significantly lower after all five waves are complete, probably back down to the December 2018 low of 21,713.
That’s what I’m doing.
h
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.
Market Signals for
12-17-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 11 Dec 2019 |
NASDAQ | POS | 12 Dec 2019 |
GOLD | POS | 13 Dec 2019 |
U.S. DOLLAR | NEG | 09 Dec 2019 |
BONDS | NEG | 12 Dec 2019 |
CRUDE OIL | POS | 04 Dec 2019 |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
Category: Professor's Comments