Professor’s Comments December 21, 2016
Posted by OMS at December 21st, 2016
The Dow rose another 91 points, closing at 19,975. Volume was low, coming in at 82 percent of its 10-day average. There were 192 new highs and 21 new lows.
Yesterday’s rally didn’t change the cockpit indicators much. The Dean’s List remains positive, but The Tide changed back to positive. The Money Flow indicators (the Coaches) stayed negative. The VTI on the Dow turned positive on 7 November and remains positive and in Trend territory.
With positive indicators on the cockpit, and a positive seasonality bias associated with the Christmas Holiday, it’s likely the Dow will continue its push toward 20,000.
However, it should be noted that as the markets continue to push higher, significant negative divergences are developing in the breadth and Money Flow indicators. As mentioned above, the two Money Flow indicators on the cockpit have turned negative, which means that smart money is now leaving the market.
The Money Flow breadth indicators are always the first sign that a top is near. The momentum of the trend carries prices higher as participation dwindles. This is what happened yesterday.
While putting the final touches on my new sector rotation strategy, I found it interesting that on 7 November, the day BEFORE the election when the VTI turned positive, the strongest sectors were the Semiconductors, Banks, Transports and Computers. Yesterday, with the VTI on the Dow still positive, the Banks, Semis, Financials, and Transports were still the top sectors.
Just as interesting was that on 7 November, two of the weakest sectors were Healthcare and PharmaBio. Both sectors did NOT participate in the current rally and remain weak.
Healthcare and PharmaBio are two big sectors in the Dow and S&P500. So even though the Dow and S&P have rallied since 7 November, the rally could have been even greater if it weren’t for Healthcare and PharmaBio. This is the reason I’m very excited about sharing this new strategy with you.
Right now, it looks like the Select Sector SPDRs are the best fit ETFs for matching the performance of the individual sectors of the S&P500. If these sector ETFs continue to show good correlation with S&P sectors, I will be adding them to the data base of the Dean’s List. That way, students will be able to see how these positive sector ETFs stack up against the ETFs for the indexes, like the DIA, SPY, and QQQ.
However, in down markets, at least for now, I’m just going to tell you which sectors are the weakest. That’s because there aren’t many inverse sector ETFs available. And before I add them to the List, I want to ensure that there is good correlation between the ETF and the S&P sector.
Also, if the algorithm starts to show that there is broad market participation in the decline, like it did with the rally on 12 February, students could always choose one of the inverse index ETFs.
Watching the markets and working on the new strategy.
That’s what I’m doing,
h
Market Signals for
12-21-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS-T |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
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The Hockey Stick Pattern
The Creation of Waves and Trends
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Category: Professor's Comments