Professor’s Comments March 29, 2019

Posted by OMS  at March 29th, 2019

The markets staged a moderate rally yesterday on low volume. The rally took the Dow to the 25,743 level before pulling back to close up 92 points at 25,717.  Remember, the Dow is likely forming a larger triangle with resistance near 25,850, so it’s likely the large cap index will continue to rally a bit more today before the rally completes. The NASDAQ and the SPX finished up 26 and 10 points, respectively. Volume on the NYSE was low, coming in at 88 percent of its 10-day moving average. There were 130 new highs and 31 new lows. 

Downside support within the triangle is still near the 25,370 level.  So, the two levels to watch are 25,850 on the up side and 25,370 on the down. A break a break above or below these levels will likely cause the market to begin a new directional trend. Until this happens, the Dow will likely continue to trade within the triangle.

BTW, as the Dow moves sideways within the triangle, the Bollinger Bands continue to narrow. At this point, the Bands are at their narrowest point since last October, just before the Dow dropped more than 5,000 points.  Narrow Bands usually lead to Big Moves, up or down, so, 25,370 is still the key level to watch.  A break below 25,350 would mean the pattern is NOT a triangle and the Dow is starting Wave 3 down.  This wave could drop the Dow down below the 24,500 level, with 23,000 a real possibility.  On the other hand, IF 25,370 holds, it’s likely the Dow will continue to trade within the triangle for the next few months (boring!) before it begins a run up to the 30,000 level. The odds for either scenario are about 50-50 at this point.

There were no changes to my market timing indicators for equities after yesterday’s volatile session. The Dow (DIA), SPX (SPY) and Russell 2K remain on Neutral Signals. The NASDAQ-100 (QQQ) remains on a Buy Signal.  So, at this point, my market timing signals for equities are still mixed.  Gold moved to a Sell Signal after turning Neural the previous day.

The Tide and the Dean’s List are both Neutral.

The Sector Ratio increased to 21-3 positive after yesterday’s session. The Strong List continues to be led by Household Products, Semiconductors, Utilities, Computers and Retail. The three Weak Sectors were Banks, Food Drugs and Media.

After yesterday’s session, nine of the Sectors on the Strong List continued to show RS ratings of 1 or zero.  So, even though the Sector Ratio is increasing, there are still a lot of Sectors that are not that strong.

Gold and mining stocks had a tough day yesterday. GLD dropped another 1.75 points to 121.9.  Gold has been showing signs of weakness during the past week, and now appears to be in wave ’c’ down within Wave 2 down.  My target for Wave ‘2’ down is near or below the 120 level. This is where I will begin to look for opportunities to buy gold for its next wave up (Wave 3 up).  At this point, I’m just watching for Wave 2 down to complete.  Gold shares could be a nice place to be a few months from now.  Gold is now on a Sell Signal. I’m being patient and waiting for the signal to turn positive. I’m NOT worried about missing the gold train.

Crude Oil was flat yesterday. Crude Oil also appears to be developing a large consolidation triangle which will likely limit its upside potential for the next few weeks.  The indicators on UCO, while still positive, are beginning to weaken. I still would feel much better about Crude Oil if it were to move above the 200, now at 22.59.  Until this happens, the pattern for Crude Oil remains unclear.

Model Portfolio:  There were NO changes to the Model Portfolio after yesterday’s session.  The Model continues to hold a half position (645 shares) in SKF, the 2X inverse Banking ETF as the Banking Sector continues to lead the Weak Sector List.

The remainder of the theoretical $100,000 portfolio, $89,460.58, 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

03-29-2019

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