Professor’s Comments January 27, 2017

Posted by OMS  at January 27th, 2017

Yesterday was another day of mixed markets.  The Dow finished up 32 points, at 20,101.  The NASDAQ, S&P and Russell 2K were off 1, 2 and 7 points respectively.   Volume on the NYSE was moderate, coming in at 109 percent of its 10-day average.  There were 265 new highs and only 9 new lows.

The patterns still suggest a top is near.  And even though the Dow managed to finish higher, the internals continued to weaken.  There were more declining issues than advancers (1,559 to 1,441), and more downside volume than upside, 60 vs. 40 percent.

The VTI on the Dow remains in the Up Trend Mode, but now it too is showing negative divergence.  The rest of the cockpit indicators remain positive.  With one day of end-of-month positive bias remaining, it’s likely the rally in large cap stocks will continue.

Yesterday’s Sector Report was little changed.  The report showed 15 strong and 9 weak sectors. The Semiconductors, Banks, and Transports continue to lead, with Foods, Retail, PharmaBio, and Service lagging.  Most Banking and Financial stocks had a nice day after both sectors showed large positive Delta Trend Scores.  This large change in Trend Scores is something you might want to watch when I mention it in the future, especially if you’re looking for stocks or sectors to day trade.

Gold continued to develop its wave 2 pullback ‘Blade’.  I re-purchased about half of the shares in GDX I sold last Monday after seeing the ETF put in a second low.  I’m comfortable holding these shares while the ‘Blade’ continues to develop, but I’m going to wait a bit before buying more.  Crazy things can and do happen in a wave 2, so I’m in no hurry to load the boat.

The 2-period RSI on GLD closed with an oversold reading of 6.9, and a neutral VTI. So gold should be close to bouncing, although the RSI still allows for a bit more decline.  Again, wave 2’s seem to have a mind of their own, so be patient with them.

BTW, I’m assuming the current correction in gold is a minor wave 2 within Major Wave 5 up.  Major Wave 5 up should consist of 5 waves and complete near the 1,700 -17,500 level.  But this might not be the case.  The current correction could also be wave ‘b’ of Wave A of an A-B-C pattern.  It really doesn’t matter for the short term, as gold should move considerably higher once the current correction completes, probably in a few days.  But it does matter for the longer term.  If the current correction is wave ‘b’ of Wave A instead of wave 2 of Wave 5 up, gold (the metal) should trade to the 1,300 level on the next leg higher, then pullback in Wave B before Wave C completes near the 1,400 to 1,450 level.  After that, gold could go into a significant Bear Market decline.  Right now, I’m not too concerned about the alternate wave count or what happens after gold reaches the 1,400 level. For now, I’d just like to see it get there.

That’s what I’m doing,

h

Market Signals for

01-27-2017

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