Professor’s Comments June 11, 2020
Posted by OMS at June 11th, 2020
The markets pulled back moderately yesterday after Fed Chairman Powell said interest rates would likely be held at zero for the next three years. Bonds rallied on the news. The Dow finished with a loss of 282 points, closing at 26,990. The NASDAQ and SPX lost 67 and 17 points, respectively. Volume on the NYSE was moderate coming in at 105 percent of its 10-day average. There were 40 new highs and only one new low.
Yesterday’s pullback was likely part of corrective wave 4 down within a five wave sequence for Wave C up of Major Wave B up. Once wave 4 down completes, the markets should rally to new highs. It’s also possible that Monday’s high of 27,580 was the completion of Wave C of Major Wave B up. If this is the case, the markets should begin a sharp, impulsive decline. Either scenario is possible as this point, as the indexes remain EXTREMELY overbought with Put/Call Ratios at historically low levels.
One of the things students should be watching now is how the market declines. If the decline is impulsive, it’s like NOT likely a wave 4. The initial decline in a Wave 4 can be sharp, but so far it has not been impulsive. It’s possible that the Dow can drop to the 26,000 level and still be a wave 4. But the decline should still show the a-b-c characteristics a retracement. This is the key to determining whether the decline is a wave 4 or something else. Once all five waves of Major Wave B up are complete, the Dow should begin to decline to the 18,000 level, with significantly lower levels possible.
The Market Timing Indicators for the Major Indexes remain Positive.
The Dean’s List and The Tide also remain Positive.
The Sector Ratio stayed at 24-0 Positive after Monday’s session. The top 5 strongest Sectors were Energy, Material, Autos, Leisure, and Service. BTW, the Relative Strength of the sectors remains strong, as the top 14 sectors are showing RS readings above 10. This is one reason I believe yesterday’s pullback was part of a wave 4 correction and not the beginning of a major move down. If the Sector Ratio starts to weaken significantly during the current decline, it would increase the odds that the move is more than a correction.
Gold and the miners rose yesterday with GLD gaining 2.31 points to 163.57. Gold (the metal) appears to be in a wave 2 retracement. Once complete, gold should resume its upward course. A move above the 1,800 level would suggest that wave 3 up in gold has started. This wave has the potential to take gold to the 1,920 -1,940 level
HUI, the gold miners index, rose 11.7 points yesterday to 278.9. The 2-period RSI on the HUI finished with a reading of 94.3 with a VTI at 48.2, so the miners are overbought with no trend in place. They should begin to pull back. My target for the mining index remains near the 220 level. However, IF the equity markets begin crash, the HUI might not achieve this level.
The Model sold its shares of DXD yesterday when the Dow was down 260 points. So now the Model is 100 percent in cash.
Depending on what happens during the next day or so, the Model will look to establish new positions in the indexes and gold. At this point, the market remains overbought with historically low sentiment readings suggesting EXTREME investor optimism. The conditions are ripe for a pullback, but whether the pullback is just a wave 4 correction or the start of something more significant remains to be seen. In either case, this is not the time for aggressive action.
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
06-11-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 18 May 2020 |
NASDAQ | POS | 18 May 2020 |
GOLD | NEU | 03 Jun 2020 |
U.S. DOLLAR | NEG | 03 Jun 2020 |
BONDS | NEG | 01 Jun 2020 |
CRUDE OIL | NEU | 19 May 2020 |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
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.
Category: Professor's Comments