Professor’s Comments July 10, 2018
Posted by OMS at July 10th, 2018
The market finally has its impulsive rally yesterday. The Dow closed just off its high of the day, finishing up 320 points at 24,779. The NASDAQ and SPX were up 68 and 24 points, respectively. Volume on the NYSE was moderate, coming in at 96 percent of its 10-day moving average. I would have liked to see more volume on the rally, but 96 percent is still OK to start a post Holiday week. There were 132 new highs and 14 new lows.
By moving above the 24,600 level, it appears that Major Wave 5 up on the Dow has started. Major Wave 5 up should re-test the 26 January high of 26,617. If the final wave of Major Wave 5 up has a ‘through-over wave, the Dow could approach the 28,000 level.
But that’s a few weeks away. For now, my current target on the Dow is the 26,000 level. The reason I’m using 26,000 now instead of 26,617 is because Major Wave 5 will likely unfold as a typical five- wave sequence. And 26,000 is probably close to where Wave 3 up of the five-wave sequence will end. After that we will likely have to deal with a frustrating Wave 4, and then the possibility of Wave 5 truncating, so trading above the 26,000 level will start to get tricky. But like I said, that’s still several weeks, possibly months, away.
Students should remember that Major Wave 5 is likely the termination wave of the Major Bull Market that started in March 2009. So as Major Wave 5 up nears completion, we need to be mindful that the next Major Bear Market could start from levels near or above 26,000.
Right now, with positive indicators on the cockpit and my combination VTI-volume indicator on a Buy Signal, its time to get long and enjoy the ride up. Students should pay close attention to the Sector Ratio and the sectors that are starting to move up on the Strong Sector List. These sectors will be the ones that will lead the market higher.
BTW, I also ran The Professor algorithm last night and he highlighted 51 stocks to the upside. In the past, whenever the Professor highlighted more than 50 stocks as longs, it led to a rally of at least 750 points. Most of the time the rally was between 750 -1,000 Dow points. So, The Professor is awake and confirming what I’m seeing from the other indicators.
After yesterday’s session, the Sector Ratio improved to 19-5 positive. Last week, the Ratio started to turn slightly positive, closing at 13-11 positive on Friday. This was one of our first clues that that Major Wave 4 was nearing completion and Major Wave 5 up was about to begin.
The Strong Sector List is still being led by defensive sectors like Energy, Consumer Products, and Food Drugs. However as of last night, the Semiconductors and PharmaBio sectors have moved into the top five. More importantly, the sectors that I would expect to lead the market higher, like Cap Goods and Financials are back on the Strong List near the bottom. I would expect these sectors to start moving higher on the List, replacing Consumer Products and Food Drugs, as the Wave 3 rally continues to unfold.
BTW, seeing a Sector Ratio of 19-5 positive is a very positive sign. It tells me that the current rally is not just being caused by money moving out of the defensive sectors. When the Sector Ratio to turns 19-5 positive, it tells me that new money is coming into the market. This is what MUST happen if Wave 5 up is to reach the 26,000+ level.
Gold and the miners rose slightly yesterday. GLD finished up 0.29 cents at 119.15. However, even after yesterday’s strong rally in equities, my combination VTI-volume indicator for GLD and SLV remains on a Sell Signal. The indicator is getting close to generating a Buy Signal, but it’s NOT there yet.
As the Strong Sector List is changing from defensive issues like Utilities and Consumer Products to offensive issues like Semiconductors, PharmaBio, and Technology, focus on those sectors that are moving up on the List. Then use the Dean’s List and the Member’s Watch List to select stocks and ETFs in the strongest sectors. If you see sectors like Cap Equipment, Financials, and Energy moving up, consider purchasing a broad based index fund for the Dow or S&P500. Remember, the Dow contains a lot of Banks, Financial, Energy, and Cap Equipment stocks. So IF you see a broad based rally starting that includes these sectors, you might want to consider one of the positive index ETFs on the Dean’s List.
That’s what I’m doing,
h
Market Signals for
07-10-2018
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS |
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Category: Professor's Comments