Professor’s Comments November 28, 2017
Posted by OMS at November 28th, 2017
The markets were mixed yesterday on weak internals. The Dow finished up 23 points, closing at 23,589. The NASDAQ was down 11 points, with the SPX closing up one point. Volume on the NYSE was moderate, coming in at 96 percent of its 10-day average. There were 167 new highs and 49 new lows.
Stocks continue to complete patterns that appear at major tops. However, they have still not generated Sell Signals. Yesterday’s small rise was accomplished on breadth that saw 1828 stocks decline vs. 1122 advancers. This caused the A-D oscillator to fall from 77.2 to 25.2, a big decline for a moderately up day in the markets.
Yesterday’s trading action also caused the Up-Down oscillator to turn negative after two days of being positive. This caused The Tide to turn neutral again, as now only three of the four breadth indicators are positive.
The Money Flow indicator on the Dow (DIA) remains negative, telling us that institutional money is now leaving the markets. This same indicator remains positive for the NASDAQ (QQQ), however it started to roll over yesterday. I’m paying attention to the Money Flow on the Q’s now, because except for one day in late October (10/26), Money Flow into large cap technology has been positive since 30 August. If this indicator turns negative with Money Flow on the Dow (DIA) already negative, it will likely trigger a significant decline in the markets.
The other indicator I’m watching closely now is the A-D oscillator. The oscillator turned positive on 20 November, after being negative for over a month. In other words, most of the rally since 17 October, when the Dow was at 23,000, was accomplished with a negative A-D oscillator. A rally with a negative A-D oscillator means that fewer and fewer stocks were leading the market higher. Most of the stocks on the NYSE were falling! Again, this is something often seen at market tops.
So as the Bullish Thanksgiving-end of month period winds down, we need to be on our toes looking for a correction. The Senate could vote on their version of the Tax bill as early as tomorrow. Yesterday, another Republican Senator, Steve Daines, Montana, said he would be voting ‘No’ on the bill as it currently stands. In the statement he released, he said “When Congress took on tax cuts, we promised to create more high paying jobs and to grow the economy. I want to see changes to the tax cut bill that ensure main street businesses are not put at a competitive disadvantage against large corporations. Two-thirds of our job creation comes from main street businesses and I’m doing what I can to make sure all of America is stronger and more competitive. Before I can support this bill, this improvement needs to be made. I remain optimistic and will continue working with my colleagues to find a solution.”
Good for him! Here’s another guy who recognizes that large corporations don’t create jobs. A tax cut for large C-corporations is just a re-distribution of wealth. It transfers the tax burden from the Big Guys to small businesses and individuals. It will result in more share buy backs for Wall Street and fewer jobs for Main Street. It will be a disaster for the American economy, especially when Obamacare premiums just rose 20 percent for most Americans. If the tax bill passes as currently structured, it will slow the economy in 2008. Heck, if large corporations needed more cash to expand and create jobs, they would have done so already. Interest rates have been at record lows for the past ten years. So, a shortage of cash is not the problem. Giving more cash to the Big Boys and increasing the tax burden on small businesses and individuals won’t help create jobs. All it will do is slow the economy as most Americans will see their standard of living reduced. If Congress really wants to create jobs, get the money into the hands of small businesses and individuals. That’s when you’ll see real growth.
Monday’s Sector Report strengthened slightly. The Sector Ratio rose to 19-5 positive. The Strong Sector List was led by Service, Leisure, Semis, Food Drug, and Technology. The Weak Sectors were led by Energy, PharmaBio, Healthcare, Utilities, and Foods. Continue to watch for changes to the Sector Ratio. If it starts to turn negative, now that money is starting to leave the market, it will likely mean that the top is in.
I shorted a few bank stocks yesterday, as the banking sector is starting to look weak. There’s a small negative Hockey Stick pattern on stocks like BBT, FTIB, MTB, and STI. The pattern on most of these stocks is very similar, as they trade near their 50-day moving average. If these stocks start to break down, the next target should be a test of the 200. My VTI-volume indicator is currently negative for the Banking Sector.
BBT has a three-touch trend line at the 46.15 level. If the stock breaks below the 46.15 level, it could cause it to drop the 43 level. It’s something to watch in the days ahead as the market waits for the vote on the tax bill.
That’s what I’m doing,
h
Market Signals for
11-28-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | POS |
VTI | POS |
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