Professor’s Comments November 5, 2019

Posted by OMS  at November 5th, 2019

The markets rose on Monday with the Dow moving closer to finishing its Bearish Ending Diagonal Pattern. One more rally, either today or tomorrow, could do it.

The Dow finished with a gain of 114 points, closing at 27,518. The NASDAQ and SPX were up 47 and 11 points, respectively.  Volume on the NYSE was heavy, coming in at 119 percent of its 10-day moving average.  There were 152 new highs and 40 new lows.

In my WSR, I mentioned that students should pay attention to the 27,399 level early this week, because if broken, it would increase the odds of a move toward the 27,500 -27,700 level.  So yesterday, the Dow moved above 27,399 level and quickly moved to a high of 27,518 where it ran into stiff resistance from the Upper Trend Line of its larger pattern from October 2018. If Monday’s high holds after a re-test either today or tomorrow, the markets should begin to head south. If 27,518 doesn’t hold, the Dow will likely move closer to the 27,700 level in the ‘through-over’ wave I discussed during the weekend.

The markets remain at a point where most of the major equity indices, Bonds, Crude Oil and Gold are at critical are points in their patterns and could begin to change direction in the days ahead.

There were no changes to the market timing indicators after yesterday’s session.  The Dow, SPX, NASDAQ, and Russell 2K remain on Buy Signals.

The Dean’s List and the Tide remain Positive.

The Sector Ratio increased to 23-1 Positive after Monday’s session.  The Strongest Sectors are Service, Retail, Energy, Banks and Autos.  Energy Sector has now moved to the # 3 position on the Strong List. The only weak sector was Household Products.

Gold (GLD) fell 0.41 cents to 142.16.  Gold remains on a Buy Signal, but it’s still not clear if gold is breaking out of its Wave 4 triangle.  I need to see GLD move above the 25 October high of 142.83 for me to say that Wave 5 up is starting.  Otherwise, there is a danger that gold will begin to move lower in a small wave ‘c’ down before Wave 4 completes.  If this happens, the Wave 5 up rally in gold will be delayed for a few weeks, but the pullback should give us an even better buying opportunity.  As of yesterday, the Model’s shares of GDX and NUGT are still profitable (+354 and +390) so the Model will continue to hold its gold position. However, if things begin to turn south, the Model will exit its gold position and look to buy the shares back at lower prices. Gold is a 50-50 bet at this point. I don’t like even money bets.

Bonds (TMF) fell 1.14 on Monday causing the timing indicator for Bonds to move to a Sell Signal.  TBT, the inverse ETF for Bonds currently in the Model Portfolio, gained 0.64 cents to 25.71.  It’s still not clear if wave 3 down on Bonds is starting, but the fact that the timing signal has turned negative suggests that yesterday’s decline has more decline to go. The Model will continue to hold its shares of TBT as long as the timing signal remains Negative. The developing ‘Blade’ on TBT’s Hockey Stick Pattern continues to suggest higher prices towards the 28+ level.

UCO (crude oil ETF) gained 0.30 cents yesterday closing at 17.60.  During the day, the ETF moved above the 18 level getting as high as 18.12 before pulling back.   The next day or so will be critical to determining if UCO is breaking out of its 4 month triangle.  If UCO continues to trade near or above the 18 level during the next few days, it would be a good sign that the ETF is gathering strength for a move to its target near the 27-28 level. 

There were NO CHANGES to the Model after yesterday’s session.  The Model continues to hold 1,000 shares of GDX, 300 shares of NUGT, 1,500 shares of UCO, 600 shares of TBT and $51,223 in cash. The Model plans to use its cash to buy DXD, QID, and a few shares of SQQQ once the timing signals on the equity indexes turn negative. The Model is up 29.4 percent after yesterday’s session which translates to an annualized return of 45.3 percent. 

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

11-05-2019

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.