Professor’s Comments February 26, 2019
Posted by OMS at February 26th, 2019
The markets continued to rally yesterday. The Dow started off strong, moving over 200 points higher, then pulled back in the afternoon session finishing only 60 points higher at 26,092. The NASDAQ and SPX were up 27 and 3 points, respectively. Volume on the NYSE was moderate, coming in at 104 percent of its 10-day moving average. There were 149 new highs and 10 new lows.
Yesterday’s early rally and late pullback formed a small ‘Shooting Star’ Candlestick pattern on the Daily Chart. Shooting Stars are often seen at short term tops. With the market extremely overbought at this point, the markets look like they want to start an A-B-C pullback. This pullback, if it occurs, would be wave 2 down within final Wave ‘C’ up. It could last 2-3 weeks before the next major rally wave develops. The reason I have changed the wave count for the current rally from sub-wave 2 up within Wave 3 down to Wave 1 up of Wave ‘C’ up is because it now appears the October – December decline was Wave ‘B’ of an A-B- C pattern for final Wave 5 up. If I’m right about this new wave count, the Dow should rally to new highs and then some before Wave ‘C’ up of final Wave 5 up completes.
BTW, IF the Dow does begin a wave 2 pullback, it could fall to the 24,500-24,800 level before it completes. The choppy nature of an A-B-C wave 2 pullback will not make it an easy wave to trade.
There were no changes to my market timing signals for equities. All major equity indexes remain on Buy Signals.
The Tide and Dean’s List remain positive.
While most of my indicators remain positive at this point, I continue to see negative divergence in the Split Volume Moving Average (SVMA) and On-Balance Volume (OBV) indicators. This non-confirmation is usually an early warning that an important market top is approaching. They are telling me to pay close attention to the market timing indicators.
The Sector Ratio increased to 23-1 positive after yesterday’s session. The Strong List was led by Semiconductors, Technology, Service, Household Products, and CapGoods. The only Weak Sector was Food.
Gold pulled back slightly yesterday with DLD dropping 0.13 cents to 125.13. Gold remains on a Buy Signal with a short-term pattern that suggests a small wave 2 pullback could be approaching. If gold does pull back, I continue to view it as a buying opportunity.
Crude Oil (UCO) also pulled back yesterday to the point that the 2-period RSI on the Daily Chart is now oversold (14.65). With Crude Oil still on a Buy Signal, the oversold conditions present us with an opportunity to buy crude for the Model Portfolio using a ‘Rifle Trade’. So, this morning I will watching my VTI-volume indicator on the shorter term bars to trigger the trade.
Model Portfolio: The Model is currently 100 percent invested in cash. If the short-term bars give say so today, I’ll be buying UCO, the Crude Oil ETF with 25 percent of the $100K cash in the Model.
During the weekend, I received an email from a student commenting on the difficulty of identifying the wave count during the recent rally. If you recall, when the current rally started, I originally thought it was a corrective rally within a Bear Market. The 50 was below the 200, so like most technicians, I had to label the rally as a corrective wave 2 up within a Wave 3 down. However, once my market timing indicators turned positive on 7/8 January, I had to begin trading the long side even though the wave count suggested it was a corrective Wave 2. This is an important concept for students to understand because in the Professor’s Methodology, we trade indicators and NOT Elliott wave counts. We only use the wave counts as a potential road map. As I’ve said many times before, patterns based on Elliott wave counts can and do morph into other wave counts. Wave counts are NOT reliable! This is why I continue to say almost every day….follow the indicators. The indicators are based on the actual price-volume movement of the market. Elliott wave counts are not. They are only possible scenarios for identifying what might happen in the market. Students should understand that for almost every wave count, there is an alternative wave count. This is not the case for indicators. Most of the time they’re either positive or negative. When a positive indicator turns neutral, it’s a warning. It’s not a sell signal. So, we stay invested based on the underlying signal. Anyhow, because of the strength of my signals, I decided to post a Model Portfolio on the web site. Hopefully this will do a better job of helping students understand what the signals are showing and where the Model is invested.
On the other hand, I still feel it’s my responsibility to point out things like potential wave counts, overbought and oversold conditions, and divergences when I see them. Divergences and overbought/ oversold levels are warnings. Markers can continue to push higher when these conditions are in place and that’s why I follow the indicators.
That’s what I’m doing,
h
Market Signals for
02-26-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 15 Feb 2019 |
NASDAQ | POS | 07 Jan 2019 |
GOLD | POS | 25 Jan 2019 |
U.S. DOLLAR | POS | 21 Feb 2019 |
BONDS | NEU | 22 Feb 2019 |
CRUDE OIL | POS | 13 Feb 2019 |
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
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
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Category: Professor's Comments