Professor’s Comments November 19, 2019

Posted by OMS  at November 19th, 2019

The markets were mixed yesterday.  The Dow finished with a gain of 31points, closing at 28,036. The NASDAQ and SPX were up 9 and 1 point, respectively.  Small cap issues on the Russell 2K finished down 4 points. Volume on the NYSE was moderate, coming in at 90 percent of its 10-day moving average.  There were 115 new highs and 77 new lows.  Students should note the unusually high number of new lows, which is amazing for a market that is trading at its all-time high.   Also, even though the Dow made a record new high, more stocks closed lower on the NYSE yesterday and down volume exceeded up volume which is also amazing. This tells me that even though the Dow could push a few more points higher, this market is in the terminal stage of its final fifth wave rally. The patterns on most major indexes still suggest the current rally should complete somewhere between late November and early December.

I continue to see large negative divergences developing between breadth and price.  After yesterday’s session, three of the four breadth indicators that make up The Tide are negative.  The breadth indicator that has my attention now is the A-D oscillator, which has been negative for the past eight sessions during which time the Dow has gained over 350 points.  This is a very unusual event to say the least as a negative A-D oscillator means that more stocks are falling than rising.  Students should take a minute to reflect on this… it’s something that is very unusual!

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 is Neutral.

The Sector Ratio stayed at 20-4 Positive after Monday’s session. The Strongest Sectors were Healthcare, Semiconductors, Food Drugs, Retail and Technology. The Weak Sectors were Energy, Food, Household Products, and Utilities.  Students should continue to watch for changes to 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. 

Gold (GLD) rose 0.41 cents to 138.62.  Gold continues to work its way through its Wave 4 triangle. The pattern suggests that GLD could fall to the 134-135 level before Wave 4 completes.  I’m just waiting for a change in signal before re-purchasing my gold shares.

Bonds (TMF) remain in an unclear pattern on a Neutral Signal.  It’s possible that yesterday’s small rally in Bonds was wave ‘a’ up of a small a-b-c move within Wave 3 down for Bonds.  It’s also possible that Bonds are NOT in Wave 3 down and could be in the process of completing a large A-B-C pattern that started from the August highs. If this is the case, Bonds could be getting ready to move a lot higher.  Because of this I’m on the sidelines with Bond, awaiting the next signal change.

BTW, IF Bonds are about to move higher, which is still a BIG IF at this point, it means that the U.S. could be getting ready for negative interest rates on U.S. Treasuries.  This is something that would NOT be a long term positive for the economy, as negative interest rates are usually associated with an extremely weak economy.  This is one of the reasons I’m watching the timing indicator on Bonds very closely now.

UCO (crude oil ETF) fell 0.59 cents on Monday, giving back all the gains it made on Friday.  While the decline was disappointing, the VTI on UCO remains in the Trend Mode, and as long as the indicator shows Trend, there is still a good change the EFT will begin to test and exceed the 19 level this week. The 19 level is important because this is where the 200-day moving average is located. 

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 is up 28 percent after Monday’s session.

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

11-19-2019

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.