Professor’s Comments November 30, 2017
Posted by OMS at November 30th, 2017
The markets were mixed yesterday. The Dow tacked on another 104 points, closing at 23,941. The NASDAQ fell 88 points, while the SPX finished flat, down less than a point. The NASDAQ-100 (QQQ) fell a whopping 2.73 points, mostly on declines by Apple and Amazon, which were down 3.59 and 32.33 points, respectively. Volume on the NYSE was EXTREMELY high, coming in at 135 percent of its 10-day average. There were 304 new highs and 66 new lows.
Yesterday’s decline in the AAPL caused its DMI to turn negative. My combination VTI-volume indicator on the stock is also negative, so I’d be careful if I were holding shares of AAPL now. The DMI on Amazon remains positive, however the VTI-volume indicator also turned negative, so now we have two of the leading stocks on the NASDAQ-100 on VTI-volume Sell Signals. BTW, yesterday’s decline in the Q’s also caused its VTI-volume indicator to generate a Sell Signal. So, even though the cockpit indicators remain mostly positive, I’m starting to see a few signs that the sky-rocket rally, especially in the Dow, could be nearing completion. However, students should note that even though the NASDAQ-100 (QQQ) is now on a Sell Signal, the Dow is far from generating one. It’s VTI-volume indicator is still very positive, so I would expect the rally in the Dow to continue for a bit longer. In other words, we could see a mixed market into early December before the Dow tops. Students should not count on this occurring, because the Senate could vote on the tax bill late today or tomorrow, and a no vote could send stocks reeling. Remember, Ending Diagonals can and do truncate early. There is no way to predict how high the rally can reach. The one thing we do know about sky-rocket rallies is that they usually don’t end well. Please be careful now. Also, even though the NASDAQ-100 has generated a Sell Signal, I wouldn’t expect it to start falling immediately. That’s because the ETF (QQQ) is oversold now (RSI at 11) without the VTI being in a down trend mode. In other words, the Q’s should bounce. If I were holding tech stocks now, I would think seriously about using the bounce to take profits. Wednesday’s Sector Report was unchanged. The Sector Ratio stayed at 21-3 positive. The Strong Sector List was led by Service, Cap Equipment, Semis, Food Drug, and Technology. There were only 3 weak sectors; Utilities, Household Products and PharmaBio. Continue to watch for changes to the Sector Ratio. If it starts to turn negative, it will likely mean that the top is in. Gold (GLD) fell 0.77 cents to 122.04. In doing so, it generated a VTI-volume Sell Signal. The negative Hockey Stick pattern on GLD that has been forming since early September suggests it could be starting its next wave down. If GLD breaks below its 200-day moving average now at the 119.39 level, it could trade down to 114 or below. Gold and silver mining stocks look a lot weaker than the metal at this point, so I shorted a few shares of GDX near yesterday’s close. While the DMI on GLD is still positive, both the DMI and the VTI-volume indicator on GDX are negative. The PT indicators are also negative on the Daily Chart. My initial target for the short on GDX is the 19 level, but I wouldn’t be surprised to see it fall to 17-18. I plan to hold this short until my targets are reached, or the indicators turn positive. BTW, the lower trend line of the Hockey Stick Pattern on GDX has now been broken. This is something that did not happen with a few of the other stocks I’ve been watching for the past few weeks. For example, the trannies (IYT) never broke below their lower trend line and yesterday the ETF sky-rocketed for almost 6 points. Same thing happened with the banks. The ‘Blades’ of these patterns were never broken as the stocks held trend line support. This is one of the reasons I’m shorting GDX now. It has broken below trend line support and the 50 is now BELOW the 200, so the ETF is now in a down trend. Same comments apply to SLV, the silver ETF. The PT indicators and VTI-volume indicator on SLV are on Sell Signals. That’s what I’m doing, h Market Signals for 11-30-2017
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