Professor’s Comments June 28, 2018
Posted by OMS at June 28th, 2018
The markets rose early yesterday, then fell into the close giving back all its intraday gains and then some. The Dow finished down 166 points at 24,117. The NASDAQ and SPX were down 117 and 23 points, respectively. Volume on the NYSE was moderate, coming in at 108 percent of its 10-day moving average. There were 61 new highs and 120 new lows. New lows continue to outnumber the new highs.
Yesterday’s up-down action appeared corrective. It was likely part of wave ‘c’ down within Wave ‘e’ down of the large triangle that has been forming on the Dow since 26 January. So, given that yesterday’s action appeared corrective, it’s likely the Dow has not completed corrective wave ‘c’ of Wave ‘e’ down. The Dow will need to stabilize and start holding its intraday gains before I can say that Wave ‘e’ down is complete. This is not happening yet.
The thing we need to watch for now is impulsive action to the upside. Remember, Wave ‘e’s of a triangle do not usually fall to the lower support line of the triangle. Their decline is usually much shallower than the declines of the previous waves. So, IF this is the case with the current Wave ‘e’, the decline should terminate somewhere near current levels. The only technical requirement is that it make a second lower low, which it has by exceeding the 21 June low of 24,406. As long as the Dow does not drop below the 23,750 level, the scenario for Wave ‘e’ down of the triangle will remain in tack.
Currently, most of the indicators I follow are negative. My combination VTI-volume indicator on the Dow, NASDAQ-100 (QQQ), and SPX (SPY) remains negative and on a Sell Signal. Since the indicator turned negative on 21 June, the Dow is down almost 1,000 points. BTW, yesterday’s decline did not produce much of a change to the volume portion of the indicator. So, it’s still in a position where it could turn positive IF the market starts to rally.
Yesterday’s trading caused the Up-Down oscillator to turn negative again, making The Tide negative. This is another thing that I will be watching closely in the days ahead. Remember, IF the Tide turns positive now, I will start looking for positive index ETFs to appear on the Dean’s List. I will also be watching to see if technology sectors, like semiconductors, computers, and cap equipment start to appear on the Strong Sector List. These are the Sectors that usually lead the market higher. Right now, there are too many defensive sectors on the Strong List. Defensive sectors like FoodDrugs, Utilities, and Consumer Products never lead. People buy food, toilet paper, diapers, and electricity because they need them to exist. When you see them on the List, it’s always a sign that people are becoming cautious about their money.
After yesterday’s session, the Sector Ratio fell to 8-16 negative. The Strong Sector List continues to be led by the defensive sectors like FoodDrugs, Utilities, Healthcare, Retail, and Consumer Products. Students should continue to watch this List closely in the days ahead. If the market is going to stage a rally, sectors like Technology, Cap Equipment, Computers, Banks and Financials should start to appear. Right now, these Sectors remain on the Weak List, near the bottom. Students should also watch for the Materials Sector, which includes gold, to move to the Strong List. As long as gold is weak, it means the Dollar is strong, which will preclude any significant rally in large cap international stocks. Students should watch for UUP to drop off the Dean’s List and be replaced by UDN, the INVERSE ETF for the Dollar. When/ IF this happens, I will be looking to buy the large cap equipment makers like CAT and Boeing (BA). These stocks are being hammered now because of the strong Dollar and the issues with trade. But once the sky clears and the threat of a trade war is over, the sun will come out for the cap equipment makers. You’ll know the storm is over when you see UDN back on the Dean’s List.
The Weak Sector List was led by Leisure, Service, Cap Goods, Technology, and Material.
My combination VTI-volume indicator for GLD and SLV remains on a Sell Signal.
That’s what I’m doing,
h
Market Signals for
06-28-2018
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG |
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