Professor’s Comments May 10, 2018
Posted by OMS at May 10th, 2018
The markets rallied hard yesterday after Tuesday’s Small Change signal from the A-D oscillator. The Dow finished up 182 points at 24,543. It got as high as 24,586, testing resistance from the Upper Boundary Line of the triangle before falling back. The NASDAQ and SPX finished the day up 73 and 26 points, respectively. Volume on the NYSE was moderate, coming in at 107 percent of its 10-day moving average. There were 152 new highs and 60 new lows.
While yesterday’s rally was expected, it did not punch through the 24,600 level of the triangle. So, the Dow hasn’t broken out of its triangle …yet. My combination VTI-volume indicator remains on a Buy Signal, but the VTI portion of the indicator is only 50.3, so its not in the Trend Mode….yet. Also, last night, the 2-period RSI on the Dow finished with an overbought reading of 96.94.
What the above tells me is that the market is likely to chop around for the next day or so, re-testing the 24,600 level before breaking higher. Then once the breakout occurs, the market should continue to rally for the next several weeks, probably making new highs in the process.
The reason I say this is because last night, The Professor had another 45 stocks highlighted as longs. This goes with the 32 he had on Monday and the 27 he had on Tuesday. Like I said yesterday, he is definitely wide awake now. The last time I saw him this awake was in late November – early December 2017 when he highlighted 36, 37, and 39 stocks as longs. This was followed by a 2,500-point rally in the Dow. BTW, just before the November 2016 election, The Professor was highlighting 58-75 stocks as longs. The Dow rallied 2,700 points in the four months that followed. So, IF The Professor is right, the next rally should be stronger than the November 2017 rally, but weaker than the November 2016 rally. My target is somewhere above the 26 January high of 26,617. That’s still over 2,000 Dow points from current levels.
Last night the Sector Ratio improved to 12-12 neutral. The Semis, Technology, Banks and Financial Sectors joined Energy, Healthcare, Leisure, Utilities and Computers on the Strong List. This is what I’ve been waiting for. I’ve said many times in my Comments that I don’t believe a rally will start until the Semis, Techs, Banks and Financials appear on the Strong List. Now they’re back.
The top 5 weakest sectors were Household Products, Food, Service, Real Estate and Food Drugs. I only mention them today because these sectors should be avoided for now. If I’m right and the market starts to rally and breaks out of its consolidation triangle, many of these sectors will start to move on to the strong list. This will cause the Sector Ratio to become even more positive. Once the rally gets going, the ratio should start to show numbers above 18-6 positive. But don’t worry about this so much. For now, concentrate on the strongest sectors. This is where you want to be.
Yesterday I highlighted a few stocks from the Energy, Healthcare, and Computer Sectors. All were up nicely. Here’s the deal….the leaders lead! You expect these guys to perform well. And they did. Acadia Healthcare (ACHC) was up 0.81 cents. Intel (INTC) was up 0.71 cents. Devon Energy (DVN) was up 1.2 points. Chevron (CVX) was up 2.5 points. All were in the strongest sectors. All were on the Member’s watch List. I simply used the Strong Sector List to tell me which stocks to pick from the Member’s Watch List. The result was another Cigar Day.
Today, IF the market pulls back slightly or starts another re-test the 24,600 level, I’ll continue to look for opportunities to add to my positions. Remember, we’re at a point where the odds favor a significant move higher. So, IF I must pay a little more for a stock I like, this is the time when I’ll do it. I don’t want to be penny wise and pound foolish here. Not when my indicators are suggesting the possibility of a Big Move up.
Just remember that were NOT in a trend …yet. The 35-period CCI on the Dow is only at 68.4, which is still not in the Trend Mode. I need to see the CCI move above 100 to confirm the start of a new Up Trend. Same for the VTI which is showing 50.4. It needs to move above 70. Both indicators need to enter the Trend Mode before I become aggressive. Right now, I’m still only buying ‘trial’ positions, but I’m holding these positions because the pattern and indicators are suggesting the possibility of a new Up Trend starting. I like the odds.
Gold and mining stocks also look close to starting a new Up Trend. Same for silver. I continue to look for opportunities to add to my Basic Positions.
That’s what I’m doing.
h
Market Signals for
05-10-2018
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS |
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Category: Professor's Comments