Professor’s Comments March 1, 2018

Yesterday’s decline appeared to be the start of Wave ‘c’ down in the large triangle I mentioned in yesterday’s Comments.  If this is the case, the Dow could fall to the 24,000 level before waves ‘d’ up and ‘e’ down complete the pattern.

Yesterday I received an email from a subscriber asking if I made a typo mistake when I talked about 24,000 as the lower level of the triangle.  He wondered if the number should have been the 25,000 level.  I told him that 24,000 was NOT a typo.  The reason I’m using 24,000 is because wave 1 down was exceptionally large.  Again, this is IF we’re developing a triangle for wave 4 in the Bullish Scenario.  If we’re not and the Dow starts to break significantly below 24,000, it’s likely that the Dow topped on 26 January, and that Wave 3 down is occurring in the Bearish Scenario.    

Last week I talked about two Scenarios; one Bullish and one Bearish.  If you recall, I said that both Scenarios called for a rally close to the 26,000 level before pulling back.  On Tuesday, the Dow got as high as 25,800 before the pullback started.  So now that the rally appears complete, BOTH scenarios call for a decline.  If the Bullish Scenario is occurring, the Dow should decline to about 24,000 before wave ‘d’ up begins.  In the Bearish scenario, the Dow should continue to decline, breaking below 23,300 as the Major Wave 3 down (the Crash Wave) develops.  Remember, the Fed is now working against you “unwinding’ (selling ) their $4 Trillion balance sheet of securities. Investors will now have to fight the Fed to push equity prices higher. This could prove to be a difficult fight.

Another thing to remember is that IF a large triangle is developing for Major Wave 4 in the Bullish Scenario, wave ‘c’ down should NOT be straight down.  It should develop as choppy a-b-c affair, with a hefty ‘b’ wave rally.  If this rally does occur, it will help identify the current decline as wave ‘c’ down in the Bullish Scenario.  If the Dow doesn’t rally, then its likely that Major Wave 3 down is underway.

Several of my indicators turned negative after yesterday’s trading.  The Tide turned negative. My VTI-volume indicator on the NASDAQ generated a Sell Signal.  The same indicator on the Dow remains neutral, but is very close generating a Sell Signal.

The Sector Ratio moved to 16-8 positive after yesterday’s session.  However, except for the Semis and Computers, the Relative Strength of most sectors are very weak.  Another down day could easily flip 10 of the positive sectors back to the Weak List.  Semiconductors, Computers, Healthcare, Banks, Technology and Material were the strongest sectors.  The Weakest Sectors were the Autos, Transportation, Food, Food Drug, and Real Estate.  All of the Weak Sectors were hit extremely hard yesterday.  I expect they will continue to get pounded as the decline continues.

Continue to stay in stocks and ETFs in the Strong Sectors and avoid those on the Weak List.

Gold and mining stocks were relatively flat yesterday.  GLD fell 0.13 cents to 125.  GDX dropped 0.124 cents to 21.35.  My combination VTI-volume indicator remains on a neutral signal for gold.

Because of all the volatility we’ve been seeing, all I’m doing now is scalping.  Remember, whenever you see large up-down-up-dome moves, you MUST first think that a triangle is developing. So, IF the market is developing a large triangle, this is not the time to be buying and holding large positions. When I trade triangles, I ‘trade’ small positions, take profits quickly, and never hold positions overnight.

That’s what I’m doing,

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Market Signals for

03-01-2018