Professor’s Comments November 2, 2018
Posted by OMS at November 2nd, 2018
The markets continued their Wave 2 retracement rally yesterday. The Dow finished 265 points higher, closing at 25,381. The NASDAQ and SPX were up 128 and 29 points, respectively. Volume on the NYSE was moderate, coming in at 107 percent of its 10-day moving average. There were 28 new highs and 74 new lows.
Yesterday’s rally stalled for several hours in the afternoon, so it’s possible that the sideways action was part of a complex correction within wave ‘a’ up of Wave 2 up. If this analysis is correct, wave ‘a’ up’ could push even higher today. By moving sideways for such an extended period, the Dow formed the ‘Blade’ of a small positive Hockey Stock Pattern which projects higher prices. What this means to the overall pattern for Wave 2 is hard to project at this point, but it could mean that the a more complex pattern, maybe something like a 3-3-5 or a 5-3-5 zig-zag will form for Wave 2 up. If this happens, Wave 2 up on the Dow should still terminate near or slightly above the 25,800+ level, but it will take longer, possibly into late November or early December before completing.
Yesterday’s rally caused my VTI-volume indicator on the NASDAQ to turn neutral, joining the neutral signal on the Dow. There were no other changes to my market timing indicators. With neutral indicators on the equity markets, I’m just scalp trading the short-term bars. The extreme volatility we’ve been seeing as we move into Tuesday’s elections makes it extremely hazardous to hold positions overnight.
The BLS will be releasing the results of the October Jobs Report at 8:30 this morning. The report could move the market significantly.
IF the market rallies early today, I’ll look to fade any early pop given that the 2-period RSI is oversold at 89.6 with No Trend in place. IF we get a continuation rally, it will likely end near the 25,600 level, as this is the level the projected by yesterday’s small Hockey Stick pattern. The important thing to watch during any rally or decline will be the wave count during the pullback. The reason I say this is because it will help determine how the next major rally leg will unfold. If the pullback occurs in three waves, its highly likely that final wave ‘c’ up will have 5 waves, meaning the Wave 2 rally will extend into late November.
Any extended Wave 2 rally does not change anything with respect to the overall Wave count for the Bear Market. It just means that we probably won’t get a signal change (Sell Signal) for a few more weeks. Be patient.
The Sector Ratio increased to 6-18 negative after yesterday’s session. The Service Sector joined Media, Household Products, Food, Insurance, Food/Drugs on the Strong List. Students should continue to note that the strongest sectors now are all defensive in nature. There are not the sectors you want to see on the Strong List if you are Bullish.
Gold and mining stocks rallied hard from the oversold conditions I talked about yesterday. GLD rose 1.48 to 116.63 and remains on a Buy Signal. GDX, the ETF for the gold miners, remains on a neutral signal. However, yesterday’s rally caused the volume portion of my VTI-volume indicator on GDX to turn positive. It could be the first sign that gold is about to start its next rally leg. We’ll see.
Watching gold and looking to fade any significant early rally in the indexes.
That’s what I’m doing,
h
Market Signals for
11-02-2018
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 31 Oct 2018 |
NASDAQ | NEU | 01 Nov 2018 |
GOLD | POS | 11 Oct 2018 |
U.S. DOLLAR | POS | 03 Oct 2018 |
BONDS | NEG | 30 Oct 2018 |
CRUDE OIL | NEG | 23 Oct 2018 |
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The Hockey Stick Pattern
The Creation of Waves and Trends
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