Professor’s Comments July 20, 2017
Posted by OMS at July 20th, 2017
The Dow rose 66 points, closing at 21,641. The NASDAQ finished up 41 points. Volume on the NYSE was moderate, coming in at 103 percent of its 10-day average. There were 251 new highs and 19 new lows.
The markets continue to trend higher as final Wave ‘E’ up approaches a final top. With a projected target near the 22,000+ level on the Dow, and a pattern that high probability of truncating, a strong decline could begin at any time now. As of last night, all the cockpit indicators remain positive. The VTI on the Dow and NASDAQ is in the Trend Mode. As long as this indicator remains positive, the markets will likely continue to move higher. I’m estimating another one percent or so. Then once the rally completes, the strength of the two Ending Diagonal Patterns should take over. Both patterns suggest lower prices. The smaller Ending Diagonal Pattern that started from the 19 April low of 20,380 is the final wave up of a larger Ending Diagonal that after the November election. The target on an Ending Diagonal is always where the pattern began. So, in the case of the smaller pattern, the target is near the 19 April low of approximately 20,400. That’s about 1,300 Dow points from current levels. This is the reason I’m paying close attention to the indicators. If the indicators turn negative, I’ll start to trade the market to the downside. But until this happens, it’s likely the markets will chop higher to complete final wave ‘E’ up. Oil continues to rise. Since I mentioned the Bullish pattern in OIL, it has moved up and is now right at its 50 -day moving average. The VTI on OIL is only 53.9, so it hasn’t entered the Trend Mode yet. And with a 2-period RSI showing slightly overbought conditions (82.7), it’s likely that OIL will pull back before attempting to retest the 50. Students should watch this possible pullback and re-test closely, because IF crude starts to break above the 50, the next target will be the 200 near 5.50. Then IF crude breaks above to 200, performing a ‘Rope Jump’, it would confirm that a new Bullish trend is starting in crude. I continue to look for higher prices in crude and energy into the fall. I believe that once the overpriced technology stocks complete their patterns, money will start to leave these issues and seek better value in the lower priced commodity issues which are currently out of favor. The fact that DIG is now back on the Dean’s List and moving up is why I’m interested in energy now. The fact that DBC, the commodity tracking ETF, is also on the List is another reason. The appearance of both issues tells me that commodities are getting stronger. Remember, DUG, the inverse energy ETF, has been on the Dean’s List since the beginning of the year. It kept us out of energy as most energy stocks got hammered. But things have changed. Now DUG is no longer on the List and has been replaced by DIG. The pattern for DIG is a TLB pattern, and right now the ETF is testing its 50-day moving average, just like OIL. Today I’ll be watching both OIL and DIG for entry points to establish a ‘trial’ position. I’ll also be watching XLE, the energy sector ETF. Last night, the DMI on all three energy ETFs turned positive after months of being negative. In other words, the three conditions required for a Buy Signal have been satisfied for energy. There is a pattern (TLB), the ETFs are on the Dean’s List, and the DMI is now positive. Gold remains on a Buy Signal, but it too is currently testing moving average resistance. The 2-period RSI on GLD is overbought at 93.2 with a VTI of 42.4. If gold pulls back from these overbought conditions, I’ll look to establish a small ‘trial’ position in the miners. Looking to buy small ‘trial’ positions in energy and gold on any pullback. That’s what I’m doing. h BTW, I will be traveling to the west coast early tomorrow morning, so I’ll post tomorrow’s comments later tonight. And while I’m looking forward to this visit with my son, the time change is always problematic for me. I’m telling you this ahead of time because there might be more irregular posts next week. We’ll see. Market Signals for 07-20-2017
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