Professor’s Comments March 27, 2018
Posted by OMS at March 27th, 2018
The markets rallied hard yesterday from EXTREME oversold condition. The Dow finished up 669 points, closing at 24,203. The NASDAQ and SPX were up 228 and 70 points, respectively. Volume on the NYSE was moderate, coming in at 101 percent of its 10-day average. There were 24 new highs and 190 new lows.
Bear market rallies are notoriously violent. They simply erupt from EXTREME oversold conditions as day traders are forced to cover their short positions. And even though the Dow gained back about half of last weeks loss, none of my key indicators turned positive.
From all indications, it appears that yesterday’s rally was started by the President’s Plunge Protection Team (PPT) buying four stocks: Apple, IBM, Microsoft, and Intel. Then once the rally began, short covering did the rest. Notice that the PPT chose four technology stocks to kick things off. I wonder why they decided on them? Maybe they were looking at the Strong Sector List :>) Hmmm?
AAPL was up 7.83 points. IBM up 4.48, MSFT up 6.6, and INTC up 4.48. Notice that all of them are Dow stocks? So now the PPT knows what stocks to choose when they want to rally the Dow. Students should remember this the next time the markets are EXTREMELY oversold.
Yesterday’s rally appeared to be a three-wave corrective move higher. If I’m right about this, the rally will likely continue into today, maybe another 100 points or so, before the market starts to move lower. The reason I say this is because my combination VTI-volume indicator on the Dow remains in the Down Trend Mode. Yesterday’s rally hardly moved the indicator. It’s still very negative and as long as it remains negative, I must favor the downside.
The Sector Ratio increased by one last night. So now the Ratio stands at 21-3 negative, as the Computer Sector joined the Semis and Household Products on the Strong List. The Weak Sectors are led by Real Estate, Autos, Transportation, Retail, and Food Drugs. Avoid these weak sectors like the plaque! Why? Yesterday stocks like Intel from the strong chip sector rose 3.12 points, while GM was only up 0.82 cents. In a Bear Market rally, the strong stocks bounce back. Weak stocks hardly move the needle.
Gold also rose during yesterday’s rally. GLD finished the day up 0.66 cents at 128.28. My VTI-volume indicator on GLD and GDX ( the gold miners ETF) remains on a Buy Signal.
Bottom Line: Given the above conditions, I’ll be watching the market this morning on the short-term bars, looking to fade any rally. BTW, the 2-period RSI on the four tech stocks mentioned above is now overbought, so if you’re heavily into tech now, you might want to do some money management. If I’m right about yesterday ‘s rally being a corrective bounce, even the strongest stocks will have a tough go of it once the market starts to move lower again.
That’s what I’m doing,
h
Market Signals for
03-27-2018
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
Category: Professor's Comments