Professor’s Comments July 23, 2020

Posted by OMS  at July 23rd, 2020

Yesterday, the markets continued to trace out what appears to be the final waves of their major retracement patterns. The Dow finished with a gain of 165 points, closing at 27,006.  The NASDAQ and SPX were up 26 and 19 points, respectively.  Volume on the NYSE was 97 percent of its 10-day average.  There were 114 new highs and only 5 new lows.  

Not much changed after yesterday’s trading so today’s comments are pretty much the same as I reported on Tuesday.  I believe the markets are close to topping and one more push in the Dow to slightly above yesterday’s high of 27,035 should do it.  If the Dow gets aggressive, it could trade to the 27,250 -27,300 level, but much above that appears problematic. The reason I say this is because I’m no longer seeing a lot of breadth or volume behind the current rally.  Yesterday’s rally on the Dow was accomplished by only 58 percent of the shares, which is a sign of a tired rally. I’m also seeing similar deceases in volume and breadth on the other indexes as well, so with completing patterns, EXTREME sentiment readings that haven’t been seen in 20 years, AND lack of volume and breadth, the rally should be nearing its end.

Yesterday I had another follow-on training session in which I showed students a support line on the major indexes that if broken would likely start the next decline. That support line on the Dow (DIA) is just under the 267 level. Right now, the scalp treading indicators on the major indexes are all still positive, so its still too early for shorts or inverse index ETFs.  But IF the 267 level is broken, we should begin to see a series of declines that would drop the DIA initially to 263 and then 250.  A break of 250 would confirm that Wave 3 down is underway.  Once all five waves of Major Wave C down is complete, the Dow should be trading below the 18,000 level with even lower prices possible.

BTW, the support lines I’m using for the NDX and SPY are 10,500 and 320, respectively.  Anything below these levels should start things rolling to the downside.

The Market Timing Indicators for the Major Indexes remain Positive.

The Dean’s List and Tide are Positive.  

The Sector Ratio was 24-0 Positive after yesterday’s session.  Continue to watch this indicator closely in the days ahead.  Again, IF it starts to weaken, pay attention.  My 14-period Velocity indicator for the Composite Sectors rose yesterday, but it’s still close to the zero line. 

The top five strong sectors were Autos, Material, Cap Goods, Consumer Products and Healthcare.  There were NO weak sectors.   

There were NO CHANGES to the Model on Monday.  The Model continues to hold trial positions of 1,200 shares of TWM, 1,600 shares of DXD, 400 shares of DUST, and a lot of cash.  It continues to look for opportunities to buy shares of inverse index ETFs.

Gold and the miners rose again yesterday.  GLD was up 2.63 to 175.63. The metal appears to be in a wave 5 rally that could see slightly higher prices. Once this rally completes, the next wave down should take prices significantly lower.  The miners continue to show large negative divergences and should be close to topping.   

That’s what I’m doing,

h

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.

Market Signals for

07-23-2020

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