Professor’s Comments June 19, 2018
Posted by OMS at June 19th, 2018
Late last night, President Trump escalated the trade war China, asking his administration to identify more than $200 billion in Chinese goods that could be penalized with tariffs. The move followed last week’s $50 Billion in tariffs, designed to punish China for unfair trade practices. China immediately responded by applying new tariffs on a similar amount on U.S. goods. Last night’s announcement sent the overnight futures market reeling, with the Dow futures down over 350 points this morning.
The markets were mixed yesterday. The Dow fell over 260 points early then spent the rest of the day climbing back to finish down 103 points at 24,987. The tech heavy NASDAQ finished up one point while the SPX was down 6 points. Small cap stocks on the Russell 2K were up 6 points. Volume on the NYSE was low, coming in at 89 percent of its 10-day moving average. There were 106 new highs and 78 new lows. Yesterday’s trading produced another ‘Hammer’ Candlestick Pattern, the second in two days. This pattern is often seen at market bottoms. IF the President didn’t announce the new tariffs last night, I would have thought that the markets were set to rally today. But last night’s announcement changed all that. So, we’ll have to see what happens after today. Students should understand that the market is being driven by news, not indicators, and as a result will likely be subject to extreme whip-saw moves. Last week, day, I reported that VXO was at its lowest level in 3 months, which was a short-term negative. This low volatility played out by producing two consecutive days of sizable down moves in the market. However, after yesterday’s session, the VXO produced a ‘Star’ Pattern which is often seen at tops, suggesting that the volatility could fall, producing a market rally. However, with the futures down sharply this morning, any rally from the ‘Star’ will likely have to wait. The pattern still suggests the Dow is either in wave 2 down within Wave 3 up or Wave 2 down within Major Wave 5 up. Either way, the markets should resume their rally once the current correction completes. The reason I say this is because The Tide and The Dean’s List continue to maintain a neutral to slightly positive bias. If this starts to change after today’s trading, all positive bets are off. The Sector Ratio fell slightly to 19-4 positive after yesterday’s session. The Strong Sector List continues to be led Retail, Healthcare, Computers, Consumer Products, Food Drugs, Energy, and Transportation. The Weak Sector List was led by Household Products, Leisure, CapGoods, Food, and Telecoms. BTW, the Relative Strength of the top four strongest sectors is 3 or better, which is still pretty strong. When I look at the RS of the weak sectors, they’re NOT all that week, mostly 1s and 0s. So, the current weakness that we’re seeing in the markets is NOT being reflected in the Lists …yet. As long as the Sector Ratio maintains its positive bias, Buying and HOLDING stocks remains my primary strategy. Gold, silver, and the miners were down slightly yesterday. GLD finished down 0.23 cents at 121.11. SLV was down 0.09 cents at 15.53. The VTI-volume indicators for both GLD and SLV are currently on neutral signals. That’s what I’m doing, h Market Signals for 06-19-2018
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