Professor’s Comments June 27, 2019

Posted by OMS  at June 27th, 2019

The markets were mixed yesterday. The Dow finished with a loss of 11 points, closing at 26,537. The NASDAQ was up 25 points while the SPX was down 4 points.   Volume on the NYSE was moderate, coming in at 104 percent of its 10-day moving average. There were 78 new highs and 54 new lows.

There was a small change on the A-D oscillator yesterday, so we need to be on the lookout for a Big Move within the next 1-2 days.

The market timing signal for the Dow turned neutral after yesterday’s session.  A Neutral Signal is only a warning of a potential signal change.  It is NOT a Sell.  The NASDAQ and SPX remain on Buy Signals. The Russell 2K remains on a Sell Signal.

The Tide remains negative and the Dean’s List remains neutral. The DMIs for the Dow and NASDAQ remain positive while the Money Flow indicators on the same indexes are negative.  So overall, the indicators remain mixed.

The Dow still appears to be in the process of completing the final waves of Wave ‘C’ up.  The target for the Dow remains near or slightly above the 27,000 level.  However, students should realize that the final wave of a termination pattern does not have to reach its projected target. It can truncate and end at any time.  The odds for a truncation are NOT high, probably less than 50 percent, so it would be an unusual event.  But IF it happens, it would mean that the markets are a lot weaker than they currently appear to be.  The only take away from the pattern is that the ‘end’ is fast approaching.  The top could already be in or the Dow could make one more push toward 27,000+.  At this stage in the rally, the pattern is no longer reliable. This is why I’m watching the timing indicators so closely now.  

The Sector Ratio strengthened to 15-9 Negative after yesterday’s session. The Strong Sector List was led by Household Products, Insurance, Real Estate, Telecoms, and Healthcare. The Weak Sector List was led by Service, Energy, Retail, Transportation, and Utilities.

One of my algorithms produced a Sell Signal in the Home Builders Group after yesterday’s session. The reason I mention this today is because the home builders are a very important part of the economy.  When new home sales begin to slow, it not only impacts the price of home building stocks, it also impacts the sales of appliance markets, wood products, carpets, furniture…everything that goes into a new home. So yesterday I established a small ‘trial’ position in Pulte Homes, PHM.  BTW, DH. Horton (DHI) and Lennar (LEN) also have similar patterns to PHM, which is a Three Highs to a Top.  When ever I see several stocks in a group with the same pattern, it increases the odds that a decline is in the cards. 

Right now, the home builders and PHM are EXTREMELY oversold with an RSI of 3.31.  IF PHM pops a bit during the next day or so, I’ll be looking to add more shares to my ‘trial’ short position.  The Money Flow indicators on all the builders are looking horrible!  Again, IF the builders are beginning to slow down, it’s usually a reflection of the health of the overall economy.

The transports rose slightly yesterday from EXTREME oversold conditions.  Going into yesterday’s session, the 2-period RSI on IYT, the Transportation ETF had an oversold reading of 7.74 with a CCI of 57.9.  In other words, the ETF was oversold with NO Trend in place.  So, the ETF bounced.  The bounce didn’t change anything within the overall pattern as the trannies continue to develop the right shoulder of their potential H&S pattern.  Again, students should continue to watch the trannies during the next few weeks, because IF they start to break down, they should start testing the ‘neckline’ of IYT near the 176 level. Anything below 176 would spell trouble for the transports…and the overall market.

Gold began its wave 2 pullback yesterday after being EXTREMELY overbought. Wave 2 should drop GLD to the 129-130 level. This is the level I’ll be looking to re-enter my gold positions. 

Model Portfolio:  There were NO CHANGES to the Model after yesterday’s session.  The Model holds 1500 shares of TWM, the Ultra Short (3X) inverse ETF for the Russel 2K.  The Model is holding these shares to trade a potential decline in the Russell 2K during the next few weeks.

The Model has now gained 18.23 percent since inception on 26 February which translates to an annualized gain of about 65 percent. The Model continues to hold most of its assets in cash, waiting for high probability opportunities to put the cash to work.  Right now, with mixed signals on the cockpit, the odds are not favorable to have a lot of money on the table.

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

06-27-2019

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

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The Hockey Stick Pattern
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