Professor’s Comments November 7, 2019
Posted by OMS at November 7th, 2019
The markets were mostly flat yesterday. The Dow finished with a loss of 0.07 points, closing at 27,492. The NASDAQ was down 24 points while the SPX was up 2 points. Volume on the NYSE was moderate, coming in at 111 percent of its 10-day moving average. There were 106 new highs and 33 new lows.
Yesterday’s relatively flat trading was likely a small wave 4 within final wave 5 of Wave 5 up. If this is the case, the Dow should have one more rally wave higher, retesting and likely exceeding yesterday’s intraday high of 27,526 before moving lower. If the 27,574 level is exceeded, the Dow could trade as high as 27,722 before Wave D up completes.
I continue to see large negative divergences developing between breadth and price. Yesterday the Hi-Lo indicator turned negative, which makes The Tide neutral. I also noted that the A-D oscillator had its second lowest reading, 5.5, since 15 October. Low readings like this are a sign of a weak market and usually occur within a few days of a major market turn.
BTW, the market’s sentiment measured by the P/C ratio was 0.66 earlier in the week, which was its lowest reading since 23 January 2018. The low reading in 2018 occurred 3 days before the Dow topped on 26 January. Two weeks later, the Dow was down over 3,300 points. While the short-term pattern suggests the markets will make one more push higher, I believe the Bullish sentiment in this market is way to high now.
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 yesterday’s session. The Dow, SPX, NASDAQ, and Russell 2K remain on Buy Signals.
The Dean’s List remains Positive.
The Sector Ratio stayed at 21-3 Positive after Wednesday’s session. The Strongest Sectors were Service, Retail, Autos, Technology, and Banks. The three Weak Sectors were Household Products, Telecoms, and Insurance. If the Sector Ratio begins to weaken, it will confirm that the large decline I expect during the next few months is underway.
Gold (GLD) rose 0.60 cents to 140.45. Gold remains on a Buy Signal, but still appears to be consolidating within its Wave 4 triangle. I’m still waiting for GLD to move above its recent high of 142.9 before I do anything more with the metal. Otherwise, gold could l 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. Gold remains a 50-50 bet at this point.
Bonds (TMF) rose 0.49 cents Wednesday but remain on a Sell Signal. TBT, the inverse ETF for Bonds currently in the Model Portfolio, fell 0.30 cents to 25.98. 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) fell 0.40 cents yesterday closing at 17.56. Yesterday’s pullback was stopped by the Upper Trend Line of its triangle, which is a test of Trend Line support. If UCO continues to trade above the 17.50 level during the next few days, it would be a good sign that the ETF is preparing for a move to its target near the 27-28 level.
The Model bought a ‘trial’ position of 800 shares of DXD yesterday when the 60 minute bars on the Dow turned negative. This purchase might have been a bit early, but the Model wanted to have a small inverse position established just in case the Dow started to decline in the overnight 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 $31,647 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 29.1 percent after yesterday’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
Market Signals for
11-07-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 25 Oct 2019 |
NASDAQ | POS | 24 Oct 2019 |
GOLD | NEU | 05 Nov 2019 |
U.S. DOLLAR | NEU | 05 Nov 2019 |
BONDS | NEG | 04 Nov 2019 |
CRUDE OIL | POS | 01 Nov 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.
Category: Professor's Comments