Professor’s Comments March 29, 2018
Posted by professor at March 29th, 2018
The markets rallied early, then reversed and fell into the close. The Dow finished down 9 points at 23,848. Technology stocks were hit hard, causing the NASDAQ to close down 60 points. The broader SPX was down 8 points. Volume on the NYSE was moderate, coming in at 107 percent of its 10-day average. There were 19 new highs and 114 new lows.
Not much changed after yesterday’s session. My combination VTI-volume indicator on the Dow and NASDAQ remains on a Sell Signal. Since this indicator turned negative on 21 March, the Dow is now down 834 points. Pay attention to this indicator. It matters!
The days leading up to the Easter Holiday usually have a positive bias. So, it’s likely that the markets will drift higher today, before they start testing the 200-day moving average on the Dow when trading resumes next week.
My strategy for today will be to continue to scalp trade any rally by fading it on the short-term bars whenever they turn negative. I used this strategy yesterday for another Cigar Day.
The market remains in a down trend. And even though the market could experience several up-side bounces within this downtrend, with my VTI-volume indicator on a solid Sell Signal, I must trade this market like Wave 3 down of Major Wave 1 down is starting. If I’m right about Wave 3 down, it could be a devastating move down that will wipe out a good portion of the equity in many investor’s portfolios.
Right now, the Dow is at 23,848. So once the Bullish bias from the Holiday Weekend is over, the Dow should begin to test the 200-day moving average at 23,550. That’s 300 points from current levels. It could happen in a day. If 23,500 holds, it’s still possible that some type of Bullish Pattern can begin to develop using the 200 as support, but right now, I don’t see that happening. If a Bullish pattern is to develop, the Dow MUST start showing a lot of strength. And with a negative Dean’s List, a negative Tide, and an EXTREMELY weak Sector Ratio, the odds of this happening are low. The easier path is down. And it could be a long way down IF 23,500 is broken. The classic technical measure for projecting a Wave 3 down is 1.62 X Wave 1. This means that the Dow could trade down to a minimum target of 20,500. That’s another 3,300 Dow points below current levels. Be EXTREMELY careful now!!!!
The two shorts, IBKR and MS, highlighted by my algorithms declined yesterday, producing nice shot-term scalps. Interactive Brokers (IBKR) finished the day down 0.98 cents. Morgan (MS) finished down 0.24 cents. With both stocks on a VTI-volume Sell Signal, I will continue to look for opportunities to scalp them on the short-term bars. BTW, IF MS falls today, it’s VTI could enter the Down Trend Mode (below 30). If this happens, I will hold any shares I’m short over the weekend. Remember, we scalp trade stocks that are NOT in the Trend Mode. We only hold them when they begin to trend.
Yesterday’s Sector Ratio remained at 23-1 negative. The only strong Sector was Household Products. The Weak Sectors continued to be Real Estate, Autos, Transportation, Food Drug, Banks, and Financials. BTW, the Relative Strength Rankings between the Strong and Weak Sectors is something to note. Last night the RS of the Household Products, the lone Strong Sector, was a +1. The only Weak Sector with a RS ranking of -1 was the Utilities Sector. All the other Weak Sectors were -2s or less, with most being -3s and -4s. The Autos, Real Estate, and Energy were -5s . So IF anyone is telling you that this is a strong market, the Sector List is saying otherwise. The other thing the Sector List is telling me now is that 21 out of the 24 Sectors are currently in Down Trends. It’s a lot easier for a Sector to continue down than it is for it to reverse and move higher. That’s why I think we’ll start testing 23,500 next week.
The markets will be closed tomorrow, 30 March, in observance of Good Friday and Passover. I plan to spend some time with my family this weekend, so my next Update will be on Tuesday morning. Have a great weekend.
That’s what I’m doing,
h
Market Signals for
03-29-2018
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 |
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