Professor’s Comments June 21, 2017

The Dow fell 62 points, closing at 21,467.  Volume was moderate, coming in at 95 percent of its 10-day moving average.  There were 120 new highs and 93 new lows. BTW, students should note that the number of new highs and new lows are getting closer together. This is NOT a good sign for the market. The fact that they are so close now on day when the A-D oscillator turned negative is not something you want to see if you are Bullish.

Yesterday’s decline caused all four breadth indicators that make up The Tide to turn negative.  So now the Tide is negative, joining the NASDAQ 100 (QQQ) on a Sell Signal.

With a negative Tide, I usually start looking for inverse index ETFs to buy as soon as they start to appear on the Dean’s List. But right now, there aren’t any on the List.

As I mentioned in Tuesday’s Comments, it appears the final rally wave (Wave ‘E’ up) in the Ending Diagonal Pattern that started after the November election is nearing completion. Once all of the cockpit indicators turn negative, they will confirm that the Bull Market that started in March 2009 is complete.

Yesterday was a Bradley turn date and markets often make important turns on or near these dates.  The fact that all of the major indexes declined yesterday is something that should be noted.  If the cockpit indicators continue to turn negative, they will give added significance to the Bradley turn date.

I continue to watch the QQQ for a break of the 50-day moving average. Yesterday QQQ fell 1.1 points to 139.36 as it continued to develop the ‘Blade’ of a negative Hockey Stick Pattern. The 50 is currently located at 137.88. If this level is broken, there’s a good chance the Q’s will trade down to support at the the 200-day moving average near 128. Remember, the reason we’re watching the Q’s and the ‘FANG’ stocks now is because a break of the 200 will be a ‘Rope Jump’. If this happens, it woud mean that the current wave down is Major Wave 1 down of the new Bear Market.

Yesterday’s Sector Report weakened considerably. The report showed 15 strong, down from 20 the previous day, and 9 weak sectors.  Leisure, Computer, PharmaBio, Financial and Healthcare lead the strong sector list, with Energy, Autos, Retail, Materials, and Telecoms lagging. The Materials Sector is the one that contains gold and the miners.

Last week I mentioned that Dollar appeared to be strengthening after a TLB Pattern.  Yesterday I noticed that UUP, the ETF for the Dollar, appeared on the Dean’s List replacing UDN.  With gold looking like it’s about to start wave ‘c’ down of an a-b-c pattern for Wave 2 down, the appearance of UUP on the Dean’s List would tend to confirm this wave count.

The VTI on the UUP is currently rising with a reading of 41.0, so it still does not have a positive bias (above 50).  However the 2-period RSI is showing an oversold reading of 81.9, so it’s likely that the Dollar will run into some resistance at current levels.  This should produce a small rally in gold.  Students trading gold might want to use this rally to lighten up on their gold positions, until the conditions become more favorable.

BTW, I have been scalping GDX and GDXJ to the short side with good results. If you look at GDXJ on the 30 min bars, you will see a five wave down pattern that started last Wednesday at the 35.05 level, and completed at yesterday’s low of 32.13. This should be sub-wave ‘a’ down of wave ‘c’ of ‘2’ down. If this wave count is correct, GDXJ should continue to move up off the 32.13 low as sub-wave ‘b’ up develops during the next 1-2 days. Then once this wave completes, wave ‘c’ down of 2 down should take GDXJ down to the 27-30 level.

If GDXJ breaks below 32.13, this pattern has a high probability of occurring.

BTW, even though most equities fell yesterday, Bonds rallied. TMF, the Bond ETF was up 0.57 cents to 21.1. Since last Wednesday, when the Fed announced an increase in short-term rates , the VTI on TMF has continued to rise and is now in the Trend Mode. This is something students should be watching now because if Bonds continue to rise, they will put pressure on the economy. Students also need to watch the relationship between short-term and long-term rates, because of the possibility that the yield curve could become inverted. An inverted yield curve would be a reliable sign that the economy is headed for recession.

That’s what I’m doing,

h

Market Signals for

06-21-2017