Professor’s Comments May 21, 2019
Posted by OMS at May 21st, 2019
The markets fell on Monday in what appeared to be the start of wave ‘c’ down within large Wave ‘B’ down. The Dow finished with a loss of 84 points, closing at 25,680. The NASDAQ and SPX finished down 114 and 19 points, respectively. Volume on the NYSE was moderate, coming in at 96 percent of its 10-day moving average. There were 72 new highs and 116 new lows. Students should note that the number of new lows is now exceeding the new highs. Not good.
Wave ‘c’ down of Wave ‘B’ down has the potential to trade down to the 25,000 level, possible slightly lower (24,800). However, because it is a corrective wave, the move will NOT be straight down. There should be corrective bounces along the way. Then once Wave ‘B’ down completes, the markets should rally to new all-time highs into the fall.
So given the current pattern, the thing I want to discuss this morning is how I plan to trade this corrective wave ‘b’ down. For starters, I’m going to keep the positions small. That’s because this corrective wave down is likely being caused by the trade war with China. It’s mostly a ‘news’ trade. And as we know, the news could change …. a trade deal could be reached overnight, and stocks could rally hard before the market opens. Also, the Dow does NOT have to trade down to the 25,000 level. Corrective waves are notorious for not doing what we expect. So, IF I do make a gain on my SMALL POSITION, I plan to take it…. quickly. At this point, the better bet is NOT with the current decline, but in establishing long positions from the near the 25,000 level. Right now, with the Dow at 25,680, we probably only have about 600-700 points of downside. This should be weighed against a potential 2,000 points of upside…IF the Dow does decline to near the 25,000 level and a trade deal is reached.
The reason why I’m being cautious and talking about this today is because I’m still NOT seeing any indication of my Money Flow indicators turning negative. In other words, the institutions are still NOT selling. And as long as the Big Boys don’t throw in the towel, the odds favor a significant rally once the current correction completes.
There was a change to my market timing indicators after yesterday’s session. The NASDAQ and Russell 2K moved to Sell Signals. The Dow and SPX remain on Neutral Signals. Seeing mixed signals on the cockpit tells me that the markets are likely either in or starting a corrective turn. The one thing that is clear is that they have NOT entered the Trend Mode yet. So, we still need to be cautious with our positions.
The Tide and the Dean’s List remain Negative. The DMIs remain Negative.
The Sector Ratio stayed at 16-8 negative after yesterday’s session. The Strong List was led by Real Estate, Household Produces, Insurance, Foods and Telecoms. These are all defensive sectors. This is NOT the List you want to see if you’re Bullish on the markets. The Weak Sector List was led by Service, Semiconductors, Material, Retail, and Energy.
Gold (GLD) made a small move lower yesterday, down 0.01 cents to 120.64. Gold still appears to be in the process of completing wave ‘e’ down of Wave 2 down of Major Wave 3 up. The Materials Sector (with gold) remains on the Weak Sector List, as gold remains on a Sell Signal. I continue to watch for signs that Wave 2 down has completed, as gold will likely become a major portion of the Model Portfolio later this year. Not now. Gold (the metal) is currently trading near 1275. I still believe it could trade down to the 1260 level, possibly 1250. I plan to start establishing ‘trial’ positions near 1260.
Model Portfolio: There were NO CHANGES to the Model after yesterday’s session. The Model continues to hold a small ‘trial’ position (500 shares) of DXD, a 2X inverse leveraged ETF for the Dow. The Model is also holding a small ‘trial’ position in SCO, the inverse ETF for West Texas Crude Oil. The rest of the Model Portfolio, $77,364, 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
05-21-2019
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 10 May 2019 |
NASDAQ | NEG | 20 May 2019 |
GOLD | NEG | 17 May 2019 |
U.S. DOLLAR | POS | 16 May 2019 |
BONDS | POS | 01 May 2019 |
CRUDE OIL | NEU | 06 May 2019 |
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
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The Hockey Stick Pattern
The Creation of Waves and Trends
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Category: Professor's Comments