Professor’s Comments January 4, 2017
Posted by OMS at January 4th, 2017
The Dow rose 119 points, closing at 19,882. Intraday, the Dow got as high as 19,939, as it attempted to make one more run at 20,000. Last week I mentioned that even though the VTI on the Dow had turned negative, it was still above the 70 level, keeping it in the trend mode. One of the things I’ve learned about the VTI is that if its’ still in the Trend Mode, (above 70), the potential for the rally continues to exist. And that’s what happened yesterday.
Volume was moderate, coming in at 98 percent of its 10-day moving average. There were 143 new highs and only 9 new lows.
Yesterday’s rally caused all of the breadth indicators that make up The Tide to turn positive. The Dean’s List remains neutral and the Money Flow indicators remain negative. So overall, the cockpit indicators remain mixed. With mixed signals, I continue to wait for clarification before looking to trade the downside.
My first trade with the new Sector Rotation Strategy got off to a good start yesterday as GDX rose 0.84 cents to 21.76. GLD also had a nice day rising 0.86 cents to 110.47.
One of the reasons that I wanted to establish the trade in GDX last week was because of the tax selling in gold that took place last week. This is something that often happens toward the end of the year in stocks that have declined. But now that this selling is likely behind us, it should enable wave 3 up to start the New Year with a bang.
Looking at the other Sectors, the Banks, Semis, and Financials continue to remain strong, with HealthCare, Semis, and PharmaBio being the weakest. At this point, with a positive VTI on the Dow and weak Money Flow indicators, I am holding off on purchases of any Sector ETFs besides gold. Gold is leading the Dean’s List for a reason! It has a positive VTI and positive Money Flow indicators.
Right now, there are 17 strong sectors and only 7 weak sectors. So it’s possible that the market can continue to test the 20,000 level. However the number of weak sectors is increasing daily. This is what tends to happen as the market approaches an important top. I strongly believe that it is too late to be establishing long positions in index ETFs, and a bit too early to start shorting. Be patient.
Today is the final day of my cruise. The ship returns to Ft. Lauderdale on Thursday morning and I should be back in Jacksonville on Thursday afternoon. If something changes between now and then, I’ll let you know with a quick update. Otherwise, the next Update will be on Friday morning.
That’s what I’m doing,
h
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