Professor’s Comments March 13, 2018
Posted by OMS at March 13th, 2018
The markets were mixed yesterday. The Dow was down 157 points, closing at 25,179. The NASDAQ was up 28 points, while the SPX finished down 4 points. Volume on the NYSE was low, coming in at 87 percent of its 10-day average. There were 147 new highs and 25 new lows.
Yesterday’s early 105 point rally and subsequent 270 point decline was another indication that a triangle is developing for Wave 4 in the Bullish Scenario. It also raised the possibility that the triangle could be over sooner than expected, as yesterday’s rally approached the 24,450 level where I would expect wave ‘d’ up to complete, not sub-wave ‘b’ up of wave ‘c’ down. So, while the probability of a Bullish triangle increased after yesterday’s action, it complicated things by giving us another slightly different triangle pattern to deal with. The Bottom Line question is do we have one or two more waves to go before the triangle completes.
Yesterday’s action DID NOT change my VTI-volume indicator on the Dow. It remains on a Buy Signal, as does the same indicator on the NASDAQ. However, the VTI is still only showing a reading of 49.1, so there is NO TREND in the market. No Trend means we continue to scalp trade. And that’s what I was doing yesterday, shorting the Dow from overbought levels. It was another great day for scalpers.
Remember, we went into yesterday with NO TREND conditions and the 2-period RSI overbought at 93.8. So, we were looking for the Dow to pull back. The fact that the Dow rallied early gave us a beautiful entry point. All you had to do was watch the short-term bars for the trigger.
Today’s scalping conditions are NOT as clear as they were yesterday. While the VTI is still showing NO TREND, the 2-period RSI has a reading of 59.5, so it’s no longer overbought. The other thing I noticed last night was that the Bollinger Bands on the Dow are really starting to narrow. So once the final legs of the triangle complete, it’s likely that we’re going to have a Big Move.
BTW, speaking of Big Moves, the A-D oscillator had a relatively small change (10.2 points), so we could see another Big Move within the next 1-2 days. The Big Move could still be up or down, as the Bearish Scenario (Major Wave 2 up is completing) allows for the market to rise to about the 25,750 level before falling. On the other hand, we now have two possibilities that the Dow could decline, because IF yesterday’s rally and subsequent decline was part of wave ‘d’ or sub-wave ‘b’ up of c’ down, both scenarios call for another wave down before the triangle completes. Another reason for scalp trading.
Last night’s Sector Ratio finished with a score of 14-10 positive. Semiconductors, Healthcare, Computers, Technology, and Banks were the leading sectors. The weak sectors were Autos, Food Drug, Transportation, Media, and Utilities. Energy moved back on the Weak List after being on the Strong List, near the bottom.
BTW, yesterday, when the market was rising, I did some research on energy that you might find interesting. The question had to do with the generally positive March-April period for the commodity. I wanted to know if the Trend Indicators on energy were any help in forecasting the movement in price. The answer is YES!
For the past five years, Chevron Texaco (CVX) has made money every year in the March – April period…except one. Last year.
In 2013, CVX rose from 111 to 121.
In 2014, CVX rose from 108 to 112.
In 2015, CVX rose from 108 to 112.
In 2016, CVX rose from 89 to 103.
But in 2017, CVX fell from 113 to 104.
What was the difference? Hmmm?
If we look at the 35 period CCI, we can see that in every case, the stock entered the Up Trend Mode (>+100) sometime between January and early April. Except for 2017. During that year, CVX entered the Down Trend Mode in late January. The stock dropped from 113 to 107 during that period. So, watching the CCI to determine Trend vs. No-Trend matters.
Right now, CVX is in the No-Trend Mode with a CCI reading of -3.46. The 2-period RSI is showing a slightly overbought reading of 78.2. So, without a trend in place, the stock should pull back. And IF it pulls back, it raises the question as to whether there will be a rally in energy this year.
It’s still early, but like I said above, the Energy Sector is back on the Weak Sector List, near the bottom. If the market rallies from current levels, there’s a good chance that the energy sector will move back to the Strong List. BTW, DIG has replaced DUG on the Dean’s List, so that’s another positive. My VTI-volume indicator on CVX moved to a Buy Signal on 5 March with CVX trading at 113.5. Yesterday the stock reached a high of 118.35 before pulling back to close at 116.79. But again, with the Dow ad SPX looking like they want to form a Bullish triangle, I’d really like to see the stock enter the Trend Mode before becoming aggressive.
Continue to trade stocks and ETFs in the Strong Sectors and avoid the weak ones.
Gold was unchanged yesterday. I’m still watching gold for signs of a bottom. IF I’m right about the wave count, Major Wave 2 down could be nearing completion, with impulsive Wave 3 up about to start.
Watching and scalping. Remember, we’re still NOT in the Trend Mode, so be careful.
That’s what I’m doing.
h
Market Signals for
03-13-2018
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS |
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