Professor’s Comments July 18, 2019
Posted by OMS at July 18th, 2019
The markets pulled back yesterday with the transportation index getting hammered. The transports dropped a whopping 387 points! The market decline was the Big Move predicted by the small change in the A-D oscillator. The Dow finished with a loss of 116 points, at 27,220. The NASDAQ and SPX were down 38 and 20 points, respectively. Volume on the NYSE was heavy, coming in at 114 percent of its 10-day moving average. There were 172 new highs and 62 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. However, the volume portion of the timing signal is getting close to turning negative, so we could see a signal change within the next few days.
The Tide turned Neutral, but the Dean’s List remained positive. The Money Flow indicators on both the Dow and NASDAQ remain positive but are very close to turning negative.
The Sector Ratio weakened slightly to 16-8 Positive after yesterday’s session. However, 10 of the 16 positive sectors on the Strong List have RS Ratings of 1 or zero. In other words, the Strong List is really not that strong. One good down day now could turn it negative. The Strong Sector List was led by Household Products, Telecoms, Insurance, Material (includes gold), and Media. The Weak Sector List was led by Service, Energy, Retail, Foods and Transportation. Students should note that the trannies are now on the Weak List. This is not a good sign for the economy.
Gold rose sharply yesterday with GLD gaining 2.18 points at 134.58. At this point, it’s not clear if yesterday’s rise was the breakout from corrective wave 2 and the start of wave 3 up. A move above the 25 June high of 135.55 would confirm that wave 3 up is underway. Once the breakout is confirmed, gold should continue to rally with only minor pullbacks along the way. I continue to view any pullback in gold as a buying opportunity.
BTW, if you asked me which investment I feel best about now, it would be gold. With the Federal deficit now over $1.4 Trillion / year and the debt over $22.4 trillion, I believe everyone should own some gold. When I say gold, I’m talking about the actual metal…gold out of the ground. Right now, I’m seeing a significant negative divergence developing between price and volume in most mining stocks. So, they could pull back a bit while gold continues to rise. Students should always remember that mining stocks are NOT gold. There is no pile of gold out back behind a gold mine. They sell their gold as soon as its mined. When you own a gold mine, you own picks, shovels, dynamite, digging equipment and employ a bunch of men with lights on their hard hats. You don’t own any gold! Gold mines should never be considered as a replacement for physical gold. Mining companies can be mis-managed just like any other company and their shares could decline or they could go bankrupt while the price of gold is going up. Always consider gold miners as trading vehicles with many risks in addition to the price of physical gold.
Bonds rallied yesterday with TMF gaining 0.76 cents to 24.50. Yesterday’s rally turned my VTI-volume indicator Neutral, so we’ll need to watch the ‘trial’ inverse position in TBT in the Model. When the Model bought the ‘trial’ position, I said it might have been a bit early, and that Bonds could continue to rally for the next 4-5 days. At this point, the rally still appears to be part of a small wave 2 up correction. However, if the timing signal on Bonds turns positive, the Model will sell its ‘trial’ position.
Crude Oil continued to fall yesterday with UCO dropping 0.98 cents to 18.32. The Model’s ‘trial’ position in SCO gained 0.86 cents to 17.62. Right now, the timing indicators on Crude are still Neutral. Once they turn Negative, the Model will look to add to its position in SCO.
Model Portfolio: There were NO Changes to the Model Portfolio after yesterday’s session. The Model continues to own trial positions of 500 shares of TBT and 750 shares of SCO. It also owns 500 shares of UGL, a 2X leveraged ETF for gold.
After Wednesday’s session, the Model is up 20.73 percent, a new high. This translates to an annualized gain of 62.3 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 at target highs and looking like they want to roll over, the Model is just waiting for the timing signals in the Dow and NASDAQ to turn Negative before establishing positions in DXD and QID. These purchases could occur within the next few days.
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
07-18-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 10 Jul 2019 |
NASDAQ | POS | 13 Jun 2019 |
GOLD | POS | 03 Jun 2019 |
U.S. DOLLAR | NEU | 15 Jul 2019 |
BONDS | NEU | 17 Jul 2019 |
CRUDE OIL | NEU | 16 Jul 2019 |
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Category: Professor's Comments