Professor’s Comments March 22, 2019
Posted by OMS at March 22nd, 2019
The markets rallied hard yesterday, but almost all the rally was due to short covering, not new buying. The Dow rose 217 points, closing at 25,913. The NASDAQ and SPX were up 110 and 31 points, respectively. Volume on the NYSE was moderate, coming in at 99 percent of its 10-day moving average. There were 167 new highs and 23 new lows.
There were no changes to any of the market timing indicators after yesterday’s session. The Dow (DIA), NASDAQ-100 (QQQ), S&P500 (SPY), remain on Buy Signals. The Russell 2K remains on a Neutral Signal. The volume portion of my VTI-volume indicator on the Dow only rose slightly after yesterday’s session and remains close to going negative. A down day today could cause a signal change.
I exited most of my positions in equities just before the Fed Meeting because of the above. Like I said before the Fed Meeting, I hate to put my money at risk without a clear pattern in place. Nothing has changed.
A day after the Fed meeting, the pattern is still clouded. The market timing signals are positive but weakening. On a day when the market rallies, it does so on short covering, not new buying. Breadth continues to weaken causing negative divergences in several of the indicators I monitor, and the institutions are selling into the rally. Hmmm?
If I remember correctly, this is exactly what happened just before last October’s decline. It’s the reason I’m not in any rush to get back into the market. I’ve learned that the Bear can be cruel. It loves to produce fake out rallies that squeeze the shorts, while lulling the Bulls into a false sense of security. Yesterday’s rally occurred with a negative A-D oscillator. This means that despite the rally, more stocks are moving down than moving up. It’s one of the reasons I’m still cautious. I’ve learned not to trust a rally that occurs with a negative A-D oscillator.
I’m also suspicious of a weakening Sector Ratio. And after yesterday’s session, the Sector Ratio stayed at 18-5 positive. You would think that a 200+ point rise on the Dow would cause the Ratio to strengthen. But no, it stayed the same in terms of the number of positive/negative sectors. However, in terms of Relative Strength, it weakened. There are now eight strong sectors that have RS Ratings of 1 or less. This means that one or two down days in the market can move a lot of these sectors to the Weak List. This would change the Sector Ratio dramatically.
The Strong List was led by Semiconductors, Technology, Household Products, Healthcare, Computers, and Utilities. Students should ask themselves, why are the Utes on the Strong List? The Weak Sectors are FoodDrugs, Autos, Media, Leisure, and Banks. Students should also note that Banks have moved to the Weak List. Banks loan money to people so they can to buy autos and homes. If the economy is slowing down, as the Fed suggested on Wednesday, the banks will be impacted by the decrease in demand for new homes and cars.
Gold and mining stocks fell slightly yesterday. GLD dropped 0.50 cents to 123.68. The ETF continues to form a pattern that suggests wave ‘b’ up of Wave 2 down is nearing completion. If this is the case, wave ’c’ down could take gold (the metal) back down to the 1250 level before wave ‘c’ down completes. This would mean that GLD could trade back down to the 120 level before Wave 2 down completes. The 120 level is approximately where the 200-day moving average is located.
Crude Oil (UCO) pulled back slightly yesterday. UCO fell 0.23 cents to 21.30. As I mentioned in yesterday’s comments, it will be interesting to see how crude oil reacts to the Fed’s policy statement over the next few days, as a slowing economy should put a damper on crude oil prices.
Model Portfolio: There were No Changes to the Model after yesterday’s session. The Model is currently holding a half position in Crude Oil (UCO). The remainder of the theoretical $100,000 portfolio, $88,936, remains in cash.
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
03-22-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
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 | POS | 20 Mar 2019 |
CRUDE OIL | POS | 11 Mar 2019 |
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Category: Professor's Comments