Professor’s Comments November 12, 2019

Posted by OMS  at November 12th, 2019

The markets were mostly flat yesterday. The Dow finished with a gain of 10 points, closing at 27,722. The NASDAQ and the SPX were down 11 and 6 points, respectively. Volume on the NYSE was low, coming in at 76 percent of its 10-day moving average.  There were 92 new highs and 52 new lows.

Yesterday’s flat trading didn’t really clarify which of the two scenarios I presented during the weekend. 

While the Dow did fall over 160 points early in yesterday’s session, reaching a low of 27,518, its still not clear if the low was the final low of the corrective move for wave 4 or was it just the ‘a’ wave of an a-b-c move that could decline to the 27,400+ level before rising in final wave 5 up.  Both scenarios I showed in the WSR are still possible.  A decline below the 27,400 level would increase the odds that the first scenario (a continued decline) is occurring.  On the other hand, IF the 27,400 – 27,500 level holds, the Dow should rally to just under the 28,000 level.

I continue to see large negative divergences developing between breadth and price.  Three of the 4 breadth indicators that make up The Tide are still negative, making The Tide neutral.  The lone positive hold out is the Up-Down Oscillator. If this indicator turns negative, it will increase the odds in favor of my first scenario.  Students should understand that the lack of upside breadth is a real issue for this market now. It tells me that a major top is fast approaching.  Whether the top is already in at 27,775 or if the market makes one more final rally to 28,000 shouldn’t matter.  The thing to focus on is what will happen next as the patterns clearly indicate the next major move on the Dow will be toward the December 2018 lows near 21,700.  I expect this major decline to begin near the end of November or early December, if not sooner.

Yesterday’s 160 point intraday decline was the large move predicted by the A-D oscillator.

The markets remain at a critical point in their patterns, showing negative divergences and sentiment readings that suggest they could begin to change direction in the days ahead.

There were no changes to the market timing indicators after Friday’s session.  The Dow, SPX, NASDAQ, and Russell 2K remain on Buy Signals.

The Dean’s List remains Positive.  The Tide remains Neutral.

The Sector Ratio stayed at 21-3 Positive after Monday’s session. The Strongest Sectors were Retail, Autos, Technology, Banks and Service.  The three Weak Sectors were Household Products, Food and Telecoms. Students should watch the Sector Ratio this week.  IF it begins to weaken and turns negative, it will confirm that the large decline I expect during the next few months is underway.  Otherwise, IF it stays positive after a possible decline to the 27,400+ level, it would suggest that the decline is only wave 4 down with wave 5 up required to complete Wave D up. Remember, yesterday’s decline to 27,518 could have been wave ‘a’ down of an a-b-c move toward 27,400+.  So, the key this week will be to watch the 27,400+ level.  If the Dow starts to fall below that level, it’s likely the decline I see coming is starting.  On the other hand, if 27,400-27,500 holds, it’s likely the Dow will have one more rally to just under the 28,000 level before falling.  Any negative change to the Sector Ratio now will increase the odds that the first scenario (a continued decline) is occurring.

Gold (GLD) fell another 0.33 cents yesterday to 137.06.  Gold remains on a Sell Signal as it continues to consolidate within its Wave 4 triangle.  The pattern of the triangle appears to be a 3-3-5 flat with minor wave 5 down almost complete.  If I’m right about the pattern, GLD should be close to a bottom.  If the indicators turn positive this week, the Model will re-purchase its gold shares as the large triangle pattern suggests higher prices.

Bonds (TMF) remain on a Sell Signal in a pattern that suggests Wave 3 down is starting. TMF was flat yesterday, closing at 25.70.  The Bond ETF continues to sit on its 200 day moving average which is major support.  If the equity markets decline this week, I would expect Bonds to rally off this support before falling again to re-test the 200.  At this point, Bonds remain EXTREMELY oversold, so some type of short-term bounce is likely.  I want to see the strength of the bounce before looking for an entry point to re-purchase shares of TBT for the Model.  As a minimum., I’d like to see TBT back at the 25.5 level.

UCO (crude oil ETF) fell 0.32 cents at 17.78.  As long as UCO continues to trade near or above the 18 level during the next few days, it would be a good sign that the ETF is preparing for a move to its target near the 27-28 level. 

There were NO CHANGES to the Model yesterday.  The Model continues to hold 1,500 shares of UCO, 800 shares of DXD and has $82,270 in cash. The Model plans to use its cash to buy additional shares of inverse index ETFs once the timing signals on the equity indexes turn negative.

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

11-12-2019

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.