Professor’s Comments March 1, 2017
Posted by OMS at March 1st, 2017
The Dow fell 25 points, closing at 20,812. Volume was moderate, coming in at 106 percent of its 10-day average. There were 134 new highs and 17 new lows.
Yesterday’s trading action caused the Up-Down indicator to turn negative, making The Tide negative. With a negative Tide, I usually start looking to trade inverse ETFs as they appear on the Dean’s List. But as of last night, there aren’t any. The Dean’s List remains positive.
Yesterday’s action also caused a significant decline in one of my key Money Flow indicators. It had its largest one day drop since the beginning of December. The indicator is still very positive, however if the indicator continues to decline, it could generate another Sell Signal joining the negative Tide. But right now, with a rising VTI that remains in the Trend Mode, the momentum still favors more upside.
So, the signals are mixed. Mixed signals from the cockpit usually mean that either the market could be in the process of turning, or it could be correcting in some type of Wave 2 or Wave 4. The pattern, Dean’s List and the Sector Report all suggest a Wave 4, mostly because so many ETFs and sectors remain positive. So, once the current minor correction completes, the market should start its final Wave 5 rally to a top. The Wave count suggests the Dow could top between 20-24 March near the 21,000 level. We’ll see.
Another reason why 24 March is important is because it is the date the current debt-ceiling expires. Under President Obama, Republicans used debt-ceiling deadline to compel the administration to accept budget changes that would limit federal spending. Now, even though the Republicans control the Presidency and both houses of Congress, there could be some political maneuvering between President Trump and House Speaker Ryan on spending priorities. This political maneuvering will likely take place behind closed doors, as I don’t expect the Republicans to be foolish enough to play politics with something as critical as a potential default on the national debt. But ya never know. The President made a lot of promises during his campaign, all of which require tons of new money. But Speaker Ryan holds the nation’s purse and knows this new money is not available. So, either President Trump’s spending plans will have to be curbed, or the debt ceiling must be raised so more money can be printed. In other words, there’s plenty of material here for a potential fight, and fights over the budget are never a good thing for the market.
Remember, with the Shiller P/E ratio now at 29.12, the current market is priced for absolute perfection. Investors are assuming the new President will deliver on all his campaign promises, including tax cuts. If the battle over spending and the debt ceiling starts to turn ugly, watch out. Like I said, the market has priced in a rosy scenario based on President Trump’s campaign promises. If these promises are delayed or deferred by the reality of the nation’s finances, the scenario will start to look a lot less rosy.
Yesterday’s Sector Report showed 23 strong sectors and only one weak sector. The Semiconductors, Transports, and Banks continue to lead. The Service sector continues to lag.
Gold rose slightly, but most mining stocks were flat. GLD finished up 0.11 cents to 119.23. The VTI on GLD continues to head up and remains in the Trend Mode at 86.9. GDX rose 0.01 point to 22.85. The VTI on GDX is now at 42.2, so it is now showing a negative bias. However, it’s 2-period RSI is also EXTREMELY oversold with a reading of 2.3. With no trend in place, and an oversold RSI, the ETF could be ready to bounce. Continue to watch the shorter-term bars for Rifle Trades in gold stocks.
That’s what I’m doing,
h
Market Signals for
03-01-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEG |
SUM IND | NEG |
VTI | POS-T |
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