Professor’s Comments March 15, 2018
Posted by OMS at March 15th, 2018
The markets fell hard yesterday. The Dow finished down another 249 points, closing at 25,758. It got as low as 24,669 which was very close to the lower trend line of the sideways triangle. The NASDAQ and SPX were down 14 and 16 points, respectively. Volume on the NYSE was moderate, coming in at 95 percent of its 10-day average. There were 51 new highs and 85 new lows.
When I go to a race course and watch the horses warming up before the race, the thing I always look for is which ones are ‘on their toes’. They’re the ones that are alert. They’re the ones that are ready to run. We need to be on our toes now.
Yesterday’s decline appeared to be a continuation of wave ‘e’ down within Wave 4 down. IF I’m correct about this, the rally toward 28,000+ should start soon. A breakout above 25,600 would tend to confirm that wave 4 down is complete and wave 5 up is underway. And based on the size of the triangle, I would expect wave 5 up to approach the 28,000 level, with 30,000 a possibility.
The Dow remains in the NO TREND zone. Last night, the 35 period CCI on the Dow had a reading of -42.9, so scalping conditions still apply. The 2-period RSI closed with a reading of 14.5, so the Dow is oversold with No Trend in place. It should start to rally. If the rally continues into next week, watch the trend indicators. If they start to move into the Trend Zone, the odds are high that Wave 5 up is underway. That’s when we will start holding stocks.
Last night in the Repeat Class About Nothing, I had several questions about the Strong Sector List. Students wanted to know why I only talked about the top 5 Strong and Weak Sectors. Why not list all of the sectors? Hmmm? Well, the simple answer is …you don’t need them. It’s only if you have mountains of money that there might be a chance, because of diversification, you might need them. But for most students…forget about them. Concentrate on the top one or two. That’s where the action is.
For example, for the past month or so, Semiconductors and Computers have been leading the Strong Sector List. Yesterday, even though the Dow was down almost 250 points, Intel was up 0.3 cents. Micron was up 0.35 cents. Why? Well the Dow is still developing its triangle. A triangle is a consolidation pattern. There is NO Trend in a triangle. On the other hand, Intel, Micron, and most other semiconductor stocks are in Up Trends. Stocks in Up Trends ignore what the overall market is doing. They continue to go up until the trend is over.
Also, once the overall market starts to break out of its triangle, stocks in an UP Trend will LEAD the market higher. Why? Because they already have a running start out of the gate. They have momentum. The rest of the field must play catch up. They have to develop momentum while the strong runners are ‘on their toes and running. It’s almost unfair! But who says the market must be fair? No, it’s NOT fair. And that’s why on a day like yesterday, where most stocks were getting hammered, the strong stocks stayed positive. Their momentum only slowed. The rest of the field had negative momentum. They got clobbered! The take away from yesterday’s action: STAY in strong stocks. It matters!!!
On the other hand, if you focused on stocks like INTC and MU, when both stocks dipped lower during the day, you looked at them as Buying Opportunities. You didn’t panic. You weren’t worried. You knew both stocks were in Up Trends, so when the 2-period RSI because oversold on the short-term bars, you pulled the trigger and bought a few shares. Remember, stocks in an Up Trend are Rifle Trades when the 2-period RSI becomes oversold. Yesterday was a Big Day for students who were scalping strong stocks on the short-term bars. A BIG DAY!
As long as the Dow stays above the 24,000 level, I’m not worried about the Bearish Scenario. Period! If it starts to fall below 24,000, that’s another story. But right now, I’m seeing what appears to be the fifth wave of a Bullish Triangle develop on the Dow. Again, if I’m right about this, the Dow should start to break out of its consolidation pattern (the triangle) and start to move higher.
So, IF this starts to happen, I’ll simply go to the Strong Sector List and pick stocks and ETFs in the top Sectors from the Dean’s List and Member’s Watch List. That’s what I do! (BTW, you won’t find this ‘List’ posted on the web site like the Dean’s List and the Member’s Watch List. The ‘List’ is simply the the top 5 Strong and Weak Sectors that I talk about every day in my Comments, near the bottom.)
Here’s today’s ‘List’. The Strong Sectors are Semiconductors, Computers, Healthcare, Technology, and Leisure. Look at this ‘List’ carefully. What do you see? Hmmm? What I see is technology, technology and more technology. It’s pretty obvious that the semis and computers are technology. And after last week’s CAN, I explained how healthcare is technology. So, right now, 4 out of the 5 top sectors are related to technology. Hmmm? So where might a good place to be IF the market starts to move higher? My answer would be…..technology!
On the other hand, IF the Dow starts to break below 24,000, where would I go to look for shorts? Hmmm? Yup, the Weak Sector List. Yesterday’s Weak Sectors were the Autos, Food Drug, Energy, Utilities, and Transportation. These sectors have been on the Weak List for weeks. Most of these sectors are in Down Trends. So, on a down day like yesterday, stocks in these sectors got hammered. Again, avoid stocks in these sectors like the plaque! If the market starts to move higher, do you really think that stocks in these weak sectors are going to lead the way higher? Hmmm? Heck, once the starting gate opens, these stocks, which have been loaded in the gate backwards, will have to turn around before they can even start moving in a positive direction. By the time they start moving forward, the strong stocks will be out in front by two furlongs. Most stocks in the Weak Sectors don’t have a chance of winning! I hope you understand this analogy.
So, unless you like betting on long shots (I don’t), don’t pick stocks from the Weak Sectors. If you do, just realize that you’re betting on runners with 99-1 odds. BTW, if you go to the track and see odds of 99-1, that’s probably NOT the real odds. They’re probably much higher, maybe 500-1! But the board can only display the odds to 2 places. The thing you should know about long shots is that they do not win enough to overcome their long odds. If you continue to bet on long shots over and over and over, you’re gonna go broke. No, avoid the long shots and pick winners from the Strong Sectors.
Wow! I’m so excited after writing today’s Comments, I can’t wait for the race to begin. I have my tip sheet in hand (the strong Sector List), I’ve picked my runners (stocks in the strong sectors from the Dean’s List and Member’s Watch List), and now I’m just waiting for the starting gate to open.
The next few days should be interesting. Be ‘on your toes’.
That’s what I’m doing,
h
Market Signals for
03-15-2018
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | POS |
VTI | NEG |
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