Professor’s Comments July 26, 2018

Posted by OMS  at July 26th, 2018

Late in yesterday’s session, President Trump and EU Commission President Jean-Claude Juncker announced that they would “hold off on other tariffs” while they negotiate a deal to expand European imports of U.S. liquefied natural gas and soybeans and lower industrial levies, averting for the time being an escalating trade war.  This announcement came on the heels of President Trump calling the EU an enemy last week. Was his comment a wake up call to the Europeans? Hmmm? The markets rallied hard immediately after the announcement.

The Dow broke above resistance at the 25,250 level, gaining 172 points to close at 25,414.  The breakout is a good indication that Major Wave 5 up is underway.  The NASDAQ and SPX also finished higher, gaining 91 and 11 points respectively.  Volume on the NYSE was heavy, coming in at 117 percent of its 10-day moving average.  There were 91 new highs and 57 new lows.

My combination VTI-volume indicator on the Dow moved above 70, (74.8) and is now in the Trend Zone.  As long as this indicator remains above 70, its likely the Dow will continue to trend higher.  My target for the Dow in Major Wave 5 up remains at the 26,600+ level.

The VTI-volume indicator on the NASDAQ remains neutral.  The volume portion of the indicator continues to warn that there could be a potential problem with tech stocks.  It’s interesting to me that even though the VTI portion of the indicator remains in the Trend Zone, the volume is clearly warning that something isn’t right with technology.  BTW, the A-D oscillator on the NASDAQ closed with a reading on -46.4 after yesterday’s 91-point rally.  This was the ninth consecutive day the oscillator has been below the zero level while tech stocks have rallied to a new all-time high.  This oscillator along with the low volume from the VTI-volume indicator is telling me that even though the NASDAQ is making new highs, not all tech stocks are participating.  This is the type of indicator action that is often seen near tops.  Be extremely careful with tech stocks now.

My combination VTI-volume indicator on the SPX (SPY) remains on a Buy Signal and in the Trend Mode. 

TBT, the inverse ETF for Bonds, pulled back yesterday but closed slightly higher. It appears to be forming a ‘Blade’ as it trades just above its 50 and 200-day moving averages.  I continue to look for opportunities to Buy a few shares of TBT, as I believe interest rates are going higher.  The 2-period RSI on TBT is still overbought with a reading of 77.5.  If the ETF is really forming the ‘Blade’ of a Hockey Stick Pattern, it should continue to trade near its moving averages, with an occasional dip(s).  This ‘dip’ is what I’ll be looking for to trigger my purchase.  The VTI on TBT is 63.2, so right now it’s still not in the Trend Zone.  The ETF continues hold its own on the Dean’s List.

The Sector Ratio increased to 18-6 positive after yesterday’s session.  However, the Strong List continues to be dominated by the defensive sectors.  Last night, the Strong Sector List was led by PharmaBio, Computers, Consumer Products, Food Drugs, and Retail.  Cap Goods, Financials, and Banks are still on the Strong List near the bottom.  The Semis remain on the Weak List.

The Weak Sector List was led by Household Products, Autos, Leisure, Energy and Materials.  I continue to avoid these sectors, however it will be interesting to see IF the  Autos will move to the Strong List after yesterday’s announcement on tariffs.

Gold and the miners rose slightly yesterday.   The small move caused a large positive move in my VTI-volume indicator.  It’s possible that a significant bottom is at hand.  If the indicator turns positive, I’m a buyer.  With a positive VTI-volume indicator, the Metals should move off the Weak List. 

That’s what I’m doing,

h

Market Signals for

07-27-2018

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