Professor’s Comments July 16, 2019

Posted by OMS  at July 16th, 2019

The markets were relatively flat yesterday. The Dow finished with a gain of 27 points, at 27,359. The NASDAQ and SPX were up 14 and 1 point, respectively.  Volume on the NYSE was moderate, coming in at 98 percent of its 10-day moving average. There were 193 new highs and 327 new lows.

There were NO CHANGES to the market timing signals for equities after yesterday’s session.  The Dow, NASDAQ, SPX and Russell 2K remain on Buy Signals.

The Tide and Dean’s List remain positive.  The Money Flow indicators on both the Dow and NASDAQ remain positive.  Overall, the indicators remain positive, with the markets slightly above target highs.

Yesterday the Volatility Index, VIX, closed at 12.68. The pattern suggests a rise to the 22-23 level will be next.  If the VIX begins to rise, equities will start to decline.  I would not be surprised to see this decline begin within the next 5 to 7 trading sessions.

The Sector Ratio weakened slightly to 17-7 Positive after yesterday’s session. The Strong Sector List was led by Household Products, Telecoms Insurance, Computers and Media. The Weak Sector List was led by Service, Retail, Energy, PharmaBio, and Foods.  

Gold still appears to be working its wave through a small corrective wave 2.  I would expect gold to break out of this corrective wave 2 and begin to rally toward the 1600 + level once the equity markets begin to decline.  I continue to view any pullback in gold as a buying opportunity.

Bonds rallied yesterday with TMF gaining 0.42 cents to 23.97. With Bonds now on a Sell Signal, the Model bought a ‘trial’ position in TBT.  The purchase may have been a bit early, as Bonds could continue to rally for the next 4-5 days.  However, because of the negative timing signal on Bonds and the fact that the chart suggests much lower prices, I thought the ‘trial’ position was warranted.  TMF is currently trading slightly above its 50 day moving average at 23.47.  If it begins to break below the 50, it should fall to the 200 at 20.8.  If this happens, it would likely trigger a Sell Signal on the Weekly chart of TMF setting up a much longer term decline in Bonds.

Students should look at a Weekly Chart of TMF and notice that when the CCI and VZO change, they usually stay that way for several months.  Eight to ten months is not uncommon. The last weekly Buy Signal for TMF occurred on 14 December 2018. Before that Bonds were on a Sell Signal for almost all of 2018. So, seeing Bonds approaching a Sell Signal on a Weekly Chart is significant. It means that the equity markets could be dealing with a rising interest rate environment for many months.  This would put immediate pressure on the housing and auto markets and cause an overall slowing of the economy.  Continue to watch Bonds.

Crude Oil (UO) fell 0.67 cents yesterday as Hurricane Barry came ashore in Louisiana.  Crude appears to be at the upper price range of its triangle pattern and should begin a decline from current levels near 60 to about the 48 level. Even though the timing signal for crude oil remains on a Buy Signal, the Model bought a trial’ position in SCO, the inverse ETF for crude when the signal on the 15 minute bars turned positive. Crude prices, at least for WTI, usually decline once the Hurricane makes landfall. The Model will be looking to add to these shares IF the Daily chart turns positive.

Model Portfolio:  The Model bought trial positions in TBT (500 shares) and SCO (750 shares) yesterday.  Price paid for the shares was 29.79 and 15.68 respectively. The Model still owns 500 shares of UGL.

NUGT is currently overbought and trading about 6 points above its 50 day moving average at 22.77.  After yesterday’s session, it is no longer in a trend.  Because of this, the ETF is vulnerable to a pullback to support near its 50.  If this happens, the Model will look to add a few shares of NUGT to its current position in gold.  Any price near 24 that creates an oversold condition on the 60s or Daily’s would be OK.  I’m not going to split hairs with NUGT.

After Monday’s session, the Model is up 19.5 percent, a new high.  This translates to an annualized gain of about 59 percent. A good portion of the Model’s assets remain in cash, waiting for high probability opportunities to put the cash to work.  Right now, with the equity markets overbought and at target highs, the Model is just waiting for a change in the timing signals.

The Model Portfolio is being shown for educational purposed only.  The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio.  Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.

That’s what I’m doing,

h

Market Signals for

07-16-2019

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
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FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.