Professor’s Comments June 18, 2019
Posted by OMS at June 18th, 2019
The markets rose slightly yesterday on low volume. The Fed begins its two-day meeting on interest rate policy today, and the markets appeared to be waiting for what they will say. After an extremely poor Jobs Report, the markets expect the Fed to lower interest rates. If the Fed disappoints, it could cause a pullback in equity prices.
The Dow finished with a gain of 23 points, closing at 26,113. The NASDAQ and SPX were up 48 and 13 points, respectively. Volume on the NYSE was low, coming in at 86 percent of its 10-day moving average. There were 153 new highs and 73 new lows.
There were NO Changes to the market timing indicators for equities after yesterday’s session. The Dow, NASDAQ, SPX, and Russell 2K remain on Buy Signals.
The volume portion of my VTI-volume indicator on the Weekly Chart of the Dow remains negative. This Weekly indicator is a very good indicator for determining longer-term trends. It’s one of the reasons I remain cautious about the long side.
Yesterday’s decline DID NOT do anything to change the overall patterns. The Head Shoulders Pattern that has been developing on the Dow for the past several weeks is still very much in play. A decline below the 3 June low of 24,680 would confirm the pattern. IF the pattern is confirmed, the target for the Dow is the 26 Dec 2018 low of 21,713. Otherwise, IF the market timing indicators remain positive, the Dow should continue to push higher. Just remember, that the markets are in termination patterns that can end at any time. This is NOT the time to be aggressive!
The Tide, Dean’s List, and DMIs remain positive. The Money Flow indicator on the Dow remains negative, while the same indicator on the NASDAQ remains slightly positive.
The Sector Ratio stayed at 12-12 Neutral after Friday’s session. Six of the sectors on the Strong List still have RS Ratings of zero or 1, so the Strong List is still not very strong. If the market starts to decline, all these sectors will likely drop off the Strong List turning the Sector Ratio negative again. The Strong Sector List was led by Household Products, Real Estate, Insurance, Food Drugs, and Telecoms,… all defensive sectors. The Weak Sector List was led by Energy, Service, Retail, Semiconductors, and Utilities.
Model Portfolio: There were NO Changes to the Model after yesterday’s session. The Model continues to hold 500 shares of GDX, an ETF for the gold miners. It also holds 500 shares of UGL and 250 shares of NUGT, both aggressive gold related ETFs. The Model is currently over weighted in gold related shares.
After yesterday’s session, the Model has gained $16,044 since inception or 16.0 percent which translates to an annualized IRR of 61.5 percent. The Model currently holds a cash position of $79,132.
As I mentioned in my WSR, one of the things I was doing yesterday was Rifle Trading shares of NUGT. This is a strategy that I employ in my trading accounts when I believe a security is entering a Major Uptrend. Basically, I buy a basic position and then trade a half position whenever the 2-period RSI becomes oversold and then sell this half position when the RSI becomes overbought. It’s an extremely effective way to generate additional profits. Yesterday, when gold pulled back after the open, I started buying and selling shares of NUGT, a very aggressive (3X) gold ETF. With ‘High Cover’ (CCI positive) on the Daily and Hourly bars and NO TREND on the 15s, I simply bought NUGT every time the short-term RSI became oversold and sold it when it became overbought. I figured that with the Fed announcement on Wednesday, gold would trade in a narrow range, which is did. At the end of the day, the strategy produced a nice profit.
BTW, even though the Model did not add to its gold position yesterday, I added a few more shares of gold related shares to my personal accounts. I also sold another put option on NUGT collecting over a buck when gold pulled back after the open. This technique (selling Puts on stocks in an Uptrend) is another technique I often uses when I believe a stock or ETF is moving higher. Yesterday, I sold the 26 July Weekly Puts with a strike price of 19. So, if NUGT remains above 19 by 26 July, I’ll keep the buck. If NUGT falls below 19, I’ll be put the shares at 19. My actual cost for the shares will be below 18 because I received a buck for selling the option. With gold looking like it wants to move higher, 18 or less seems like a pretty attractive price for the shares.
FYI, I’m also short a few 12 July Puts on NUGT with a strike price of 18.5 that I sold about two weeks ago. I got a little over a buck for them and now they’re worth about 0.48 cents. Selling Puts in an Uptrend is a nice way to generate additional income, assuming that you’re comfortable owning the stock if it gets put to you.
I also shorted a few shares of Intel (INTC) yesterday as a day trade. With the semiconductors back on the Weak List, I’m starting to watch shares of INTC and Texas Instruments, TXN, for trades to the short side. Both stocks appear to be forming patterns that could take them significantly lower. INTC’s pattern is an inverse Hockey Stick; TXN’s is a H&S. If the overall market begins to decline, semis could lead the way down now that they are on the Weak List. The pattern suggests that INTC could fall from where it is now, near 46, to the 34 level. Right now, the indicators are still positive to neutral on INTC, so I’m NOT holding the position overnight. However, IF the indicators turn negative, INTC will become one of my longer-term shorts.
The Model continues to watch Bonds. TMF and TLT remain on the Dean’s List, so I’m not doing anything with Bonds now. But with the Fed announcement less than 2-days away, we need to watch Bonds, especially if TBT replaces TMF and TLT on the Dean’s List.
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
06-18-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 05 Jun 2019 |
NASDAQ | POS | 13 Jun 2019 |
GOLD | POS | 03 Jun 2019 |
U.S. DOLLAR | NEU | 14 Jun 2019 |
BONDS | NEU | 10 Jun 2019 |
CRUDE OIL | NEU | 14 Jun 2019 |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments