Professor’s Comments March 20, 2018
Posted by OMS at March 20th, 2018
The markets fell hard yesterday. The Dow finished down 336 points, closing at 24,610. The large cap index got as low as 24,453 which tested the lower trend line of the triangle before bouncing into the close. The NASDAQ and SPX were down 138 and 39 points, respectively. Volume on the NYSE was moderate, coming in at 95 percent of its 10-day average. There were 32 new highs and 144 new lows.
Yesterday’s decline appeared to be a continuation of wave ‘e’ down within Wave 4 down. As long as the Dow stays above the lower trend line of the triangle, the odds continue to favor the Bullish Scenario.
However, yesterday’s decline did turn several of my indicators back to the negative side. And given the fact that I have two valid Scenarios on the board, the fact that these indicators have turned negative must be respected, especially since one of the Scenarios is a Bearish ‘Crash’ Scenario.
The indicator I’m most concerned about at this point is my combination VTI-volume indicator. This indicator on the Dow turned negative after yesterday’s decline. The same indicator on the NASDAQ turned neutral. If both indicators turn negative, it will increase the possibility of a decline toward 24,000 and increase the odds that Major Wave 3 down of the Bearish Scenario has started.
The other indicator I’m concerned about is The Tide. It is also negative. So, the Bearish Scenario is still very much in play. Be careful.
The Fed will be meeting for the next two days. It will announce its latest policy on interest rates at 2pm tomorrow. Remember, the Fed has already announced its Quantitative Unwinding (selling) program, which continues to be a headwind for the markets. An increase in interest rates will only add to that pressure.
The Dow remains in the NO TREND zone. Last night, the 35 period CCI on the Dow had a reading of 30.36, so scalping conditions still apply. The 2-period RSI closed with an EXTREMELY oversold reading of 2.37, so the Dow is oversold with No Trend in place. It should bounce.
The Sector Ratio is a neutral 12-12. The Strongest Sectors are Semiconductors, Healthcare, Computers, Technology, and Household Products. The Weakest Sectors are the Autos, Food Drug, Energy, Material, Retail, and Media.
BTW, during the weekend I saw an article that talked about the Media. Apparently, the Denver Post announced that it will be cutting another 30 jobs from its newsroom. That’s a massive 30 percent cut of its current staff of 100 journalists. Ten years ago, the Post employed 600 journalists, so the recent cut makes it close to a 90 percent reduction in only a decade. Wow! The Chicago Tribune also announced a second round of layoffs. And five publications owned by the Southern California News Group, including the LA Times, will also face significant layoffs. So, it appears that the reporting of ‘fake news’, the decline in readership and advertising revenue, and the availability of alternative ‘on-line’ news sources, is starting to take its toll. This is probably why the Media Sector continues to appear on the Weak List.
I also found it interesting that yesterday’s decline was led by Facebook (FB) which dropped 12.53 points after allegations surfaced that it misused user data. Just so happens that Facebook’s decline occurred after the stock formed a negative Hockey Stick Pattern. Hmmm? The pattern suggests more decline is likely.
Gold rose slightly on Monday, but the miners were flat. GLD remains on a VTI-volume Sell Signal. I’m still avoiding the miners, waiting for a signal change.
The next few days should be interesting depending on what the Fed does or doesn’t do with interest rates. Their actions will likely determine the direction of the breakout from the large triangle that has been forming for weeks. Stay ‘on your toes’.
That’s what I’m doing,
h
Market Signals for
03-20-2018
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG |
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Category: Professor's Comments