Professor’s Comments June 21, 2019
Posted by OMS at June 21st, 2019
The markets rallied hard yesterday after the Fed decided to leave interest rates unchanged. The rally was also helped by news from Europe that the Bank of England would not raise rates anytime soon after threatening to raise rates. So, with both central banks taking a dovish stance because of the slowing economies in both countries, investors are thinking the next rate move might be lower. This optimism is causing investors to push money into riskier assets because they believe the dividends will be more than the interest they receive by keeping money in the bank. This thinking is what causes investors to push equity prices higher in the months before a crash when the yield curve is inverted.
The Dow finished with a gain of 294 points, closing at 26,753. The Dow got as high as 26,799 during the session, which is a new all-time high. The NASDAQ and SPX were up 64 and 28 points, respectively. Volume on the NYSE was heavy, coming in at 118 percent of its 10-day moving average. There were 323 new highs and only 27 new lows.
Yesterday’s rally was the Big Move predicted by Wednesday’s small change in the A-D oscillator.
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 Tide, Dean’s List, and DMIs remain positive. The Money Flow indicators on the Dow and NASDAQ remain positive.
The Dow appears to be in Wave ‘C’ up that has a target near or slightly above the 27,000 level. The upside target for the NASDAQ is near the 8,100 – 8,200 level. Yesterday, the NASDAQ closed at 8,051 after reaching a high of 8,089. So now the NASDAQ is within 100 points or so from its upper target. Students should understand that Wave ‘C’ up is the final wave of a termination pattern that can end at any time. The markets DO NOT have to reach their projected targets.
The Sector Ratio weakened to 18-6 positive after yesterday’s session. However, 9 of the sectors on the Strong List still have RS Ratings of zero or 1, so the Strong List is still not very strong. The Strong Sector List continues to be led by Household Products, Real Estate, Insurance, Media and Telecoms…. all defensive sectors. The aggressive sectors, like the Semis, Technology, and Cap Goods are on the Strong List, but still near the bottom with low RS ratings. The six weak sectors were Service, Energy, Retail, Utilities, Banks and Autos.
Model Portfolio: The Model was stopped out of its shares of UGL yesterday at 42.03.
After yesterday’s session, the Model has gained $17,394 since inception or 17.39 percent which translates to an annualized IRR of 65.6 percent. The Model’s cash balance is currently $117,394.
Gold spiked higher yesterday on news that Iran shot down a U.S. military drone in the Strait of Hormuz. The ‘spike’ added to gold’s overbought condition, as gold appears to be nearing completion of wave 1 up within Wave 3 up. Once wave 1 up completes, gold should pull back before it resumes its climb toward 1,600. Students should realize the rally in gold will NOT be straight up. There will be pullbacks along the way giving us several opportunities to buy and trade gold.
BTW, even though tensions are high in the Persian Gulf region now, I do not believe a war between the U.S. and Iran is coming. A war would be disastrous for both sides! The U.S. might increase sanctions on Iran, or it might even lob a few missiles in their direction in retaliation for downing the drone. But a full war…No! With an election coming next year, starting a costly war is not something any sane person would do. The country is not in the mood to make war, and one of the Presidents pre-election promises was to get us out of mid-East wars, not start another. So, at least for now, I don’t see a full war happening. This should cause oil prices to continue to trade in a narrow range for the foreseeable future, and cause gold to pullback once the tensions ease.
Right now, I don’t see any opportunities that can be taken advantage of, so I’m comfortable to be on the sidelines. I really like the fact that the Model is safely invested in cash, waiting to seize the next opportunity. Remember, in the Professor’s Methodology, safety comes first! We always want to protect our money before we do anything else. If we protect our money, we’ll have funds to invest when opportunities arise. So, we NEVER leave our money on the table (at risk) when the odds are not in our favor. Right now, the odds are not favorable for any short-term trades. Be patient. Opportunities for profit will come…they always do ;>)
The Model continues to watch Bonds. TMF rose 0.19 cents to 25.12 after reaching a high of 25.47. So now TMF is not only at its Upper Bollinger Band, it is very close to its target. Bond prices could continue to push slightly higher, but with wide Bands, it’s not likely. It’s far easier to push the Bands when they are narrow then when they are wide like they are now. So, we need to start watching for a pullback. The extent of the pullback in Bonds will determine the next major direction of the equity markets. If Bond prices begin to fall, it will mean longer-term interest rates are rising…this despite what the Fed may or may not do. And IF long term interest rates remain high or push even higher, we’re going to have an inverted yield curve for a lot longer than investors expect. The key to the economy, and the equity markets, is the yield curve. It’s why I want my students to watch Bonds.
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
06-21-2019
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 | POS | 19 Jun 2019 |
CRUDE OIL | POS | 20 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