Professor’s Comments March 19, 2019
Posted by OMS at March 19th, 2019
The markets rose modestly during yesterday’s session. The Dow closed with a gain of 65 points at 25,914. The NASDAQ and SPX were up 26 and 10 points, respectively. Volume on the NYSE was moderate, coming in at 92 percent of its 10-day moving average. There were 108 new highs and 19 new lows.
There were no changes to any of the market timing signals after yesterday’s session. The Dow (DIA), NASDAQ-100 (QQQ), S&P500 (SPY), and Russell 2K all remain on Buy Signals.
Friday’s positive change to the market timing indicators for equities adds weight to the Bullish Scenario I have been writing about for the past week where the rally is Wave 1 up within final Wave 5 up. If this is what’s happening, the market could be on its way to new highs.
On the other hand, the Fed will be announcing its latest policy on interest rates on Wednesday, so even though my market timing signals are positive, I’m still somewhat cautious going into the Fed meeting. Fed meeting are high probability places where the markets can change direction, so it usually pays to be cautious. Also, Fed meetings in March have a history of producing negative turns, so for now, I’d rather error on the cautious side.
Another reason for my caution is the fact that the pattern is still unclear. I hate trading without a pattern in place and right now I wouldn’t give you odds for either a Bullish or Bearish case over the short-term. It’s still not clear to me that Wave 2 down is complete. It’s still possible that yesterday’s rally was a continuation of wave ‘b’ up within Wave 2 down, which means wave ‘c’ down could be next. This is the problem with corrective waves. When I look at how the correction has developed so far, I can only count two waves; wave ‘a’ down and the recent wave ‘b’ up. So, for the short term, it’s still possible that wave ‘c’ down needs to occur.
The Dean’s List and The Tide are positive.
The Sector Ratio remains strong at 22-2 positive with Household Products, Semiconductors, Computers, Technology, and Healthcare leading the Strong List. The fact that the three ‘technology’ sectors are still on the Strong List lends weight to the Bullish scenario. The only Weak Sectors are FoodDrugs and Autos. The Materials Sector, which includes gold, dropped slightly from its #7 position on the List to #10. This tells me that gold could be completing its wave ‘b’ up of corrective Wave 2 down with wave ‘c’ down to come.
Gold and mining stocks were flat yesterday. GLD rose 0.07 cents to 123.04. Gold (the metal) is still trading below its January high of 1350, and until it breaks that high, it could continue to trade between 1250 and 1350. In other words, the recent buy signal on gold could be a fake out. My non-breakout scenario for gold would have it move up to about the 1325 -1330 level to complete wave ‘b’ up before falling back to 1250 in wave ‘c’ down.
I still believe the Wave 2 ‘Handle’ on gold may require more time to develop and that’s why the Model Portfolio is only holding a half position in UGL.
Crude Oil (UCO) continued its rise yesterday, with UCO gaining 0.39 cents to 20.94. UCO now appears poised to test its 200 currently located at the 22.7 level. The CCI on UCO remains in the Trend Mode.
Model Portfolio: There were NO CHANGES to the Model Portfolio after yesterday’s session. With the overall pattern on equities still unclear and an EXTREMELY Strong Sector Ratio, the Model is just waiting to see what happens during Wednesday’s Fed Meeting. BTW, the Model continues to reflect the cautious attitude I teach in my Classes at UNF. In other words, when the market or an ETF is trending, it will fully fund the sector. However, when the ETF is not trending (like with GLD), or when there is no clear pattern in place, as it the case now with equities, it will only reflect a partial position. This approach should (hopefully) enable the Model to take advantage of the market timing signals but remain cautious in its use of leveraged ETFs.
The Model remains 25 percent invested in Crude Oil (UCO), 12.5 percent invested in QLD (142 shares), a 2X long ETF for the NASDAQ-100, and holds 500 shares of UGL, a 2X leveraged ETF for gold. The remainder of the theoretical $100,000 portfolio, $42,983, remains in cash.
BTW, yesterday’s rally put the Model’s overall gain at $2,412 without taking commissions into account. The Model was started on 26 February, so its been in effect for about 3 three weeks. During the period, the Model has gained 2.37 percent vs. a gain of 1.32 percent for the S&P.
The Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
That’s what I’m doing,
h
Market Signals for
03-19-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 15 Mar 2019 |
NASDAQ | POS | 13 Mar 2019 |
GOLD | POS | 15 Mar 2019 |
U.S. DOLLAR | NEG | 13 Mar 2019 |
BONDS | NEU | 13 Mar 2019 |
CRUDE OIL | POS | 11 Mar 2019 |
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Category: Professor's Comments