Professor’s Comments February 22, 2018

Posted by OMS  at February 22nd, 2018

The markets were mixed again yesterday.  The Dow fell another 167points, closing at 24,798.  The NASDAQ was only down 16 points; the small cap Russell 2K was up 1.85.   Volume on the NYSE was moderate, coming in at 90 percent of its 10-day average.  There were 81 new highs and 73 new lows.

Yesterday’s decline appeared to be a part of a corrective sub-wave 2 within the rally wave that started on 9 February.  If this is the case, the correction could go on for another day or so before the Dow starts another impulse wave higher.  If not, and the Dow starts to break below 24,000, it’s likely the Bull market ended on 26 January and a new Bear Market is starting.

At this point, my key indicators are mixed, so it’s hard to tell which scenario is taking place.  The Tide and the Dean’s List are neutral, as is my combination VTI-volume indicator on the Dow and NASDAQ.  Another day or so should help resolve the confusion.

The A-D oscillator remains positive even after two days of decline, which means that most stocks on the NYSE are still in up trends.  So, with an oversold reading (18.9) on the 2-period RSI and the VTI portion of my VTI-volume indicator showing a reading of 39.6, which is NOT in the Trend Mode, the Dow should be approaching a point where it should bounce.  If it doesn’t and the indicators start to turn negative, it would be a significant negative for the overall market.  

The Sector Ratio dropped to 6-18 negative after yesterday’s trading.   Computers, Consumer Products, Banks, Materials, and Healthcare led the Strong List.  The Weak Sectors were the Autos, Energy, Real Estate, Autos, Transportation and Utilities.

Continue to stay in stocks and ETFs in the Strong Sectors and avoid those on the Weak List.

Gold and most mining stocks were flat yesterday.  GLD dropped 1.72 points to 125.66.  I’m still on Buy Signal for gold (the metal) but my VTI-volume indicator is still neutral on most mining ETFs, like GDX. 

BTW, one of the reasons I’m watching gold and GDX now is because of the pattern.  GDX has either completed or is near completing a year long, five wave sideways correction for Major Wave 2 down. If my analysis is correct, gold and GDX should start a Major Wave 3 rally that could take these issues to significantly higher levels.  The appearance of the Materials Sector on the Strong List argues favorably for the rally.  Watch gold.

With March approaching, I continue to watch energy.  But with DUG, the inverse ETF for energy, still high on the Dean’s List, it’s hard for me to get excited about energy right now.  I thought a stock like Exon Mobil (XOM) would at least see a dead cat bounce after its decline from 89 to current levels near 75.  But so far…nothing.  Energy stocks like XOM are fairly priced (P/E of 16) at current levels and pay a dividend of 4%.  With March approaching, they should start to attract some institutional interest.  And that interest could possibly spark a rally in the Dow.  Watching.

That’s what I’m doing,

h

Market Signals for

02-22-2018

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