Professor’s Comments November 26, 2019

Posted by OMS  at November 26th, 2019

The markets staged a strong rally yesterday boosted by the effects of the Thanksgiving Holiday period. The Dow finished with a gain of 191 points, closing at 28,066.  The NASDAQ and SPX were up 113 and 23 points, respectively. Volume on the NYSE was moderate, coming in at 101 percent of its 10-day moving average.  There were 135 new highs and 19 new lows. 

Yesterday’s expected rally appeared to be a continuation of wave 5 up within Wave 5 up.  The Dow has now closed back above the 28,000 level but so far has not exceeded the 19 November high of 28,091.  In an ideal world, the Dow should at least make an intraday high exceeding the 19 November high to be considered complete.  However, the final Wave 5 of a through-over pattern does not have to do this as it frequently truncates.  

A move below 27,600 on the Dow now would be cause for concern, as this is the level where major Trend Line support is currently located.  A close below 27,600 would likely mean the top is in.

There is a Fibonacci cluster date in early December where the markets could begin to turn negative.  My experience with these dates is that while they are usually accurate, the actual turn could occur as much as a week or so on either side of the date.  In other words, even though the market timing indicators and Sector Ratio are currently positive, the breadth and sentiment indicators and pattern suggest that the market could begin to decline anywhere between now and early December. 

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 turned Positive after yesterday’s session.

The Sector Ratio stayed at 18-6 Positive after Monday’s session.  I thought this was extremely unusual for such a strong day in the market.  I would have expected the Ratio to turn a bit more positive, but it didn’t.  Again, students should be watching the Sector Ratio now for any changes.  The Strongest Sectors were Healthcare, PharmaBio, Food Drugs, Retail, and Semiconductors.  The Weak List was led by Energy, Food, Utilities, Materials, and Transportation.

Gold (GLD) continued its decline, dropping 0.66 cents to 137.08.  Gold appears to be working its way through a Wave 4 triangle.  I still believe the odds are high that GLD will fall to the 134-135 level before Wave 4 completes.  It appears that the start of the Wave 5 rally in gold will coincide with the top in equities.

Yesterday, the Dollar generated a Buy Signal, which is a short-term negative for gold.  I don’t expect the rally in the Dollar will be significant as the intermediate and longer term patterns for the Dollar project significantly lower prices.  However, for the very short-term, the Dollar could still push a bit higher from current levels, which would cause GLD to fall a few points lower.  I’m not looking to trade the recent Buy Signal in the Dollar, as I would prefer to wait for gold to bottom and trade the ensuing rally.  I believe it’s a much safer trade.  Another trade I’m interested in now because of the weakening Dollar is the Euro.   Yesterday. The Euro appeared to complete a 5 wave sequence of a 3-3-5 pattern for Wave 2 down.  If this is the case, the Euro should begin to rally in Wave 3 up.  Students should watch for ULE or FXE to appear on the Dean’s List.  Yesterday, ULE fell 0.01 cents to 13.38.  If the ETF stays above its recent low of 13.35, and begins to rally, a move above the 14+ level is likely.  The rally in the Euro could last for months.  The reason for watching the Euro now is because of its impact on the Dollar (inverse) and gold. 

Bonds (TMF) rose 0.29 cents yesterday after generating a recent Buy Signal.  Yesterday’s rise may have completed sub-wave 2 up in Bonds, and if this is the case, Bonds should now resume their Wave 3 down pushing interest rates higher.  I’m starting to see a small positive divergence building between price and volume in TBT, the inverse Bond ETF.  If TBT generates a Buy Signal, I’ll buy a few shares for the Model.

UCO (crude oil ETF) fell 0.01 cents to 18.39 yesterday.  Crude still appears to be in the process of completing wave ‘b’ down leg within its triangle. If this is the case, once wave ‘b’ down completes, UCO should begin to chop higher, breaking above the 19 level as wave ‘c’ up unfolds.

There were NO CHANGES to the Model yesterday.  The Model continues to hold 1,500 shares of UCO and $103,342 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 28.9 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

P.S. The markets will be closed on Thursday for the Thanksgiving Holiday.  The markets will re-open on Friday but will close early (half session).  Because the day after the Thanksgiving is usually a very slow, low volume day, my next post will be the WSR.  If something happens to change the signals / short-term outlook between now and then, I’ll post my comments immediately.

Happy Thanksgiving!

Market Signals for

11-26-2019

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.