Professor’s Comments January 23, 2018
Posted by OMS at January 23rd, 2018
The markets rallied to new highs after news that a compromise agreement had been reached to re-open the government. The Dow rose 143 points, closing at 26,215. The NASDAQ and SPX rose 72 and 23 points, respectively. The strong rally continued into the close which suggests even more upside today. Volume on the NYSE was moderate, coming in at 94 percent of its 10-day average. There were 282 new highs and 52 new lows.
Let’s face it. We all knew the rally would happen. The one day (Monday) shut down was making both political parties look bad, so everybody knew it would end soon. And once news of an agreement hit the street, stocks soared higher. The positive cockpit indicators and the EXTREMELY positive Sector Ratio told you to stay in stocks. And after looking at the results of yesterday’s session, I don’t see anything to change this. Like I said a few years back when analyzing the market, the current rally is like riding Secretariat in the 1972 Belmont Stakes. Just don’t fall off the horse and you’ll win the race by 30 lengths! Yesterday’s Sector Ratio increased to 22-2 positive. This is still an EXTREMELY strong ratio. The two strongest sectors are Retail and Healthcare, followed by FoodDrugs, Transportation, Media, Specialty Banks, Energy and Leisure. In other words, there are a lot of strong sectors. The two weak sectors are Utilities and Telecoms. Continue to stay in stocks and ETFs in the strong sectors and avoid those in weak sectors. One thing I found interesting during yesterday’s session was that Apple received its second down grade in less than a week. The downgrade caused the stock to drop 1.46 points when other stocks were rallying hard. Slowing iPhone sales were cited as the reason for the downgrade. The decline caused the volume portion of my VTI-volume indicator on AAPL to turn negative, which means the stock is now on a neutral signal. Most of the other computer stocks in the Technology Sector remain on Buy Signals, so the weakness I’m starting to see in AAPL does not appear to be spreading…at least for now. Gold and most mining stocks rose moderately yesterday. GLD rose 0.23 cents to 126.65. The 2-period RSI rose to a slightly overbought reading of 74.24, but GLD is in an Up Trend, so it can continue to push higher. My VTI-volume indicator on GLD remains on a Buy Signal, but the momentum is starting to show negative divergence. This could mean that a short-term top is approaching. I still believe that GLD will approach the 135 level on this leg up, but the move will not likely be straight up. The indicators suggest that it will chop higher. GDX rose 0.06 cents yesterday to 23.71. My combination VTI-volume indicator on the ETF remains on a Buy Signal. My target for GDX remains near the 28 level, but again, I don’t expect the move to be straight up. The 2-period RSI on GDX closed with a reading of 47.61. If the indicator becomes overbought, I’ll exit the Rifle Trade and continue to hold my Basic Position. That’s what I’m doing, h Market Signals for 01-23-2018
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