Professor’s Comments June 22, 2018
Posted by OMS at June 22nd, 2018
The markets fell hard yesterday as trade war jitters continue to impact stocks. The Dow finished down 196 points at 24,462. The NASDAQ and SPX were down 69 and 18 points, respectively. Volume on the NYSE was moderate, coming in at 96 percent of its 10-day moving average. There were 83 new highs and 82 new lows.
Yesterday’s decline was accomplished on relatively light volume, which is generally a good sign for where we are in the patterns. For the Dow and SPX, it suggests that the decline was likely part of Wave ‘e’ down within the larger Wave 4 triangle pattern. If this is the case, we should expect a small rally, maybe 100-200 points on the Dow over the next day or so for sub-wave ‘b’ up within Wave ‘e’ down. Once this rally completes, it should be followed by an additional leg down (sub-wave ‘c’ down) which should drop the Dow lower than yesterday’s low of 24,406.
In yesterday’s Comments I mentioned that the Dow could fall to the 23,750 level before Wave ‘e’ down completes. Students should understand that this level would be an extreme, as the final wave ‘e’ of a major triangle pattern usually does not decline to the lower support line of the triangle. The decline tends to be shallower. So, I would expect Wave ‘e’ down to complete somewhere between 24,400 and 23,750. Once Wave ‘e’ down completes, the Dow should rally to new highs as Major Wave 5 up unfolds.
In yesterday’s Comments, I warned that that my combination VTI-volume indicator was close to generating a Sell Signal. Yesterday’s decline turned the indicator negative. So now, the VTI-volume indicator is on a Sell Signal for the Dow and SPX. The NASDAQ and RUT remain on a Buy Signal. So, the strength of this market is still in technology and small cap stocks. It will be interesting to see if this changes once Wave ‘e’ down on the Dow completes and stocks start to move higher.
The reason why I say this is because the large cap stocks on the Dow and SPX appear to be in the final wave of a Major Wave 4 triangle, while technology and small cap stocks on the NASDAQ and RUT appear to be in Wave 2 down within Major Wave 5 up. So once the current correction completes, technology and small cap stocks should be starting an impulse wave up (Wave 3 up within Major Wave 5 up), while the Dow will only be starting Wave 1 up within Major Wave 5 up. Impulse waves are usually much stronger than other up waves within a pattern, so I would expect technology and small cap socks to continue to lead the way higher. Watch for these sectors and stocks to appear on the Strong Sector List and the Member’s Watch List. I will be looking to buy them once the Tide and my combination VTI-volume indicator turns positive again.
Last night the Sector Ratio fell to 14-10 positive. The Strong Sector List continues to be led FoodDrugs, Retail, Healthcare, Media, and Consumer Products. The technology sectors sector has fallen out of the top 5. The Computer Sector is to only technology sector on the Strong List now, near the bottom. This will likely change once the correction completes, so when we see technology to re-appear, it would be a major sign that the next wave up is starting. The Weak Sector List was led by Household Products, Leisure, CapGoods, Materials, and Telecoms. Students should note that the Materials Sector, which includes gold, continues to move up on the Weak List. This is another thing to watch because when gold is weak, it means the Dollar is strong, which will preclude any rally in large cap international stocks.
My combination VTI-volume indicator for GLD and SLV remain on Sell Signals.
That’s what I’m doing,
h
Market Signals for
06-22-2018
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG |
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