Professor’s Comments November 14, 2019

Posted by OMS  at November 14th, 2019

The markets were mixed yesterday.  The Dow finished with a gain of 92 points, closing at 27,783. The Dow’s gain was mostly due to Disney which was up 10.14 points to 148.72. The NASDAQ was down 4 points while the SPX gained 2 points. Volume on the NYSE was low, coming in at 89 percent of its 10-day moving average.  There were 74 new highs and 69 new lows.  Students should note how the number of new lows is fast approaching the number of new highs. 

Yesterday’s put/call Ratio on the CBOE finished with a reading of 0.77, the lowest reading since 26 January 2018 when the Dow topped in intermediate Wave 3 up.  Two months later, the Dow was trading almost 3,300 points lower.

I continue to see large negative divergences developing between breadth and price.  After yesterday’s session, all four of the breadth indicators are negative, making The Tide negative.  Seeing The Tide turn negative tells me that the major decline I see coming near the end of November or early December is right on track.

Yesterday’s low on the Dow was only 27,587, so the Model did not sell its shares of DXD. At this point, the Model would rather be holding its shares of the inverse ETF than not.  The Dow reached a high of 27,806 yesterday, so it’s still not clear if the top is in or if the Dow will push slightly higher toward 28,000.  The few points shouldn’t matter as the patterns (and the odds) suggest the next major move on the Dow will be down with a decline toward the December 2018 lows likely.

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 has turned Negative.

The Sector Ratio fell to 18-6 Positive after Wednesday’s session. The decline was the first significant weakening of the Ratio in weeks. The Strongest Sectors were Healthcare, Service, Food Drugs, Technology, and Banks.  The Weak Sectors were Food, Household Products, Leisure, Computers and Telecoms. Students should continue to watch the Sector Ratio this week for further signs of weakening.  IF the Ratio turns negative, it will confirm that the large decline I expect during the next few months is underway.  Otherwise, IF it stays positive, it would suggest that the decline is only wave 4 down with wave 5 up required to complete Wave D up.

Gold (GLD) rose 0.55 cents yesterday to 137.98.  Gold remains on a Sell Signal as it continues to consolidate within its Wave 4 triangle.  It will be interesting to watch how gold responds once the Dow begins to decline.  The pattern on gold appears to be a 3-3-5 flat triangle with minor wave 5 down almost complete.  If I’m right about the pattern, GLD should be getting close to a bottom.  Yesterday gold (the metal) closed at 1463.  The pattern suggests it could decline to 1440-1450.  This would suggest the bottom for GLD would be closer to the 134 level.  If the gold decline to these levels in the days ahead, the Model will re-purchase its gold shares as the large triangle pattern suggests higher prices.  BTW, the same pattern applies to silver, which would put SLV, the Silver ETF, closer to the 15.5 level.  The 200-day moving average for SLV is currently at 15.45.

BTW, given that gold has done extremely well during historic stock market declines, it’s interesting to note that gold appears close to a completing a major bottom while the equity indexes appear to be approaching a major top.  This historical relationship is one of the reasons I’m watching for a signal change in gold now.

Bonds (TMF) remain on a Neutral Signal. The pattern continues to suggest that Wave 3 down is starting.  At this point, Bonds remain EXTREMELY oversold, so some type of short-term bounce is likely.  I still 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.  Yesterday, TBT fell 0.34 cents to 26.52.

UCO (crude oil ETF) rose 0.26 cents to 18.02.  Crude remains on a Buy Signal, as the ETF continues to trade slightly below its 200-day moving average.  A rise above the recent high of 18.37, and then a ‘Rope Jump’ above 19, 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 $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

11-14-2019

Not sure of the terminology we use? Check out these articles

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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.