Professor’s Comments December 19, 2017

Posted by OMS  at December 19th, 2017

The markets continued their Santa rally yesterday.  The Dow rose 140 points, closing at 24,792.  The NASDAQ and SPX rose 58 and 14 points, respectively.  Volume on the NYSE was moderate, coming in at 106 percent of its 10-day average.  There were 263 new highs and 19 new lows.

Yesterday’s strong rally appeared to be a continuation of sub-wave 3 of wave 5 up of final Wave 5 up.  If this wave count is correct, the markets should continue to rally into Christmas as sub-waves 3, 4, and 5 continue to develop. Once these sub-waves complete, it’s likely the Major Bull Market that started in March 2009 will be over.

Yesterday’s rally was enough to turn the Hi-Lo indicator positive, so now all the breadth indicators that make up The Tide are positive.  All my other key indicators, except for the Money Flow on the DIA and SPY, also remain strong.  Because of this, I would expect the markets to continue to rally into late December.

Gold also rallied yesterday, turning the VTI-volume indicator on GLD positive.  So now GLD is on a short-term Buy Signal.  At this point, with GLD trading below its 50 and 200 day moving averages, the recent rally appears corrective, rather than the start of a new major Up Trend.  However, IF GLD starts to move above its moving averages, its possible that wave ‘C’ of Wave 2 down is over and a new rally leg in the metals is starting.  The PT indicators are still negative on GLD, so I’m still only watching at this point.  BTW, the VTI-volume indicator generated a Sell Signal on 4 December, with GLD trading at 121.8.  The ETF fell to a low of 117.4 after the signal.  

Also, the negative divergence I mentioned last week between the Hi-Lo indicator and the Summation Index continued yesterday.  Even with yesterday’s strong rally, the Summation Index barely moved.  Given that these breadth indicators warned the start of the 2007 crash, I continue to watch for any negative changes.  Right now, I’m expecting them to roll over later this month, once the Santa rally completes.

Monday’s Sector Ratio was unchanged, staying at 21-3 positive.  Students should note how the markets continue to rally with the strong Sector Ratio. The strong Sector Ratio continues to suggest the current rally will continue. 

The Strong Sector List continues to be led by Food Drugs, Transportation, and Cap Equipment. However, Household Products and Transportation have replaced the Financials and Banks in the top 5 sectors.  The VTI-volume indicator for the top 5 Sectors remains positive, and even though the Banks and Financials have droppd out of the top 5, their VTI-volume indicators are still very strong.  I don’t see any need to act on them.

The Weak Sector List was led by Utilities, Insurance, and Service Sectors.  Of the three weak sectors, only the Utes and Insurance Sectors are on VTI-volume Sell Signals.  So overall, 22 of 24 Sectors are on VTI-volume Buy Signals.  In other words, the current market is still very strong from a sector perspective.

That’s what I’m doing,

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Market Signals for

12-19-2017

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