Professor’s Comments October 10, 2018
Posted by OMS at October 10th, 2018
The markets were mixed yesterday. The Dow was down 56 points at 26,430. The NASDAQ finished up 2 points, while the SPX was off 4 points. Volume on the NYSE was moderate, coming in at 104 percent of its 10-day moving average. There were 47 new highs and 248 new lows.
The number of new lows yesterday drove my Hi-Lo indicator to its lowest reading since 2 April 2018 when the Dow was trading at 23,644, almost 2,800 points lower than its current level. That’s a significant negative divergence! It’s telling me that only a handful of stocks are supporting the price level of the current market. This EXTREME negative divergence is warning that equity prices could be significantly lower in the months ahead.
There were no changes to my market timing indicators for equities. The Dow remains on a Buy Signal that continues to weaken. The volume portion of the indicator is getting very close to generating a Sell Signal. Another down day today could drop the indicator into negative territory. The NASDAQ remains on a strong Sell Signal. Although I don’t show signals for the RUT and SPX on the cockpit, both indexes are on Sell Signals.
From a pattern perspective, it appears that the markets topped and are now starting to roll over within their Ending Diagonals (Dow) or Channel Patterns (NASDAQ and SPX). The NASDAQ is likely ahead of the Dow at this point, appearing to put in waves 1 and 2 of Wave 1 down. Yesterday’s small rally in the NASDAQ appeared to be part of a small retracement sub-wave within wave 3 down. If this is the case, once this retracement completes, the NASDAQ should resume wave 3 of Wave 1 down.
My VTI-volume indicator remains negative for Bonds. The same indicator for Crude Oil and the Dollar remains positive. Gold remains on a neutral signal.
The Dean’s List turned negative after yesterday’s session. So now all four of the inverse ETFs for the major indexes are on the List. If the short-term bars give me an opportunity for an entry point, I’ll use it to buy a few shares of DXD, the inverse ETF for the Dow. I already have established an inverse position the NASDAQ, so now I’m looking to establish an inverse ‘trial’ position in the Dow. If the VTI-volume indicator on the Dow turns negative I’ll add to the position.
BTW, my target for the Dow is the 24,000 level or below. My target for the NASDAQ is the 4 April low of 6,327, a decline of 1,045 points from its current level of 7,372. The target for the Dow is derived from its Ending Diagonal Pattern, as EDs usually decline to where they began. The target for the NASDAQ is not as easily determined as it’s pattern is a rising channel. With rising channels, I trend to look for support levels once the lower trend line of the channel is broken. So, in this case, now that the NASDAQ has fallen below its 50-day moving average, the next level of support is the 200 currently located at 7,027. Once this support level is broken, there is no support until the April low near 6,400. In other words, the 200-day moving averages on the NASDAQ is EXTREMELY important now.
The Sector Ratio fell to 9-15 negative after yesterday’s session. The Strong Sector List continues to be dominated by ‘defensive’ sectors like Utilities, FoodDrug, Media, Telecoms, and PharmaBio. Technology is noticeably absent.
The Weak Sector List continues to be led by Service, Semiconductors, Consumer Products, Leisure, Real Estate and Autos. Yesterday I talked about how Fed tightening would start to impact consumer spending. So, I found it interesting that the Auto Sector joined Consumer Products on the Weak List. Hmmm?
That’s what I’m doing,
h
Market Signals for
10-10-2018
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 04 Oct 2018 |
NASDAQ | NEG-T | 05 Oct 2018 |
GOLD | NEU | 08 Oct 2018 |
U.S. DOLLAR | POS | 03 Oct 2018 |
BONDS | NEG | 05 Sep 2018 |
CRUDE OIL | POS-T | 19 Sep 2018 |
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The Hockey Stick Pattern
The Creation of Waves and Trends
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