Professor’s Comments October 18, 2018
Posted by OMS at October 18th, 2018
The markets flip-flopped all day yesterday, finishing mostly down. The Dow fell 92 points closing at 25,707. At one point during the day, the Dow was down 324 points! The NASDAQ finished down 3 points. The SPX was flat. Volume on the NYSE was low, coming in at 89 percent of its 10-day moving average. There were 15 new highs and 129 new lows.
Yesterday’s internals were pretty negative for a mixed day on the indexes. There were almost twice as many declining stocks as advancers. Same for the number of new lows which continues to swamp the number of new highs. The breadth (internals) continue to warn that the patient (the market) is not healthy. This warning is occurring despite some great news about the number of new jobs that are being created and the economy. It makes me wonder if any of the news being reported is real?
Not much change with the indicators after yesterday’s trading. It still appears that the markets are completing their recent corrective rally, with the Dow most likely finishing its sub-wave 4 triangle within Wave 1 down. If the is the case, once sub-wave 4 completes, wave 5 down should re-test its 11 October low of 24,900. If Wave 1 down completed on 11 October, the alternative is that the recent rally off that low was wave ‘a’ of Wave 2 up, with wave ‘b’ down and ‘c’ up to follow. However, given the volatility of the recent rally, and the fact that indicators, Lists, and Sector Ratio are still very negative the odds favor the sub-wave 4 scenario.
Yesterday, the 35-period CCI on the Dow rose above the -100 level (96.2), moving the Dow out of its down Trend Mode. This is normal for where we are in the overall pattern. By moving back above -100, the CCI is simply telling me that the Dow is undergoing a correction. So far, the indicator is NOT showing any signs that a new rally mode is starting. So with NO Trend in place, I am now looking for opportunities to short the market on the short-term bars whenever the 2-period RSI becomes overbought. That’s what I started doing yesterday.
With the 2-period RSI on the Dow at 78.61 late yesterday, I bought a few shares of SDOW. I will exit these shares when they become overbought on the short-term bars and then look to re-enter the trade when they become oversold. If the CCI re-enters the Down Trend Mode during the day, I’ll hold some of this position overnight. Otherwise, I’ll be out of the trade by days end. Remember, the CCI is showing No Trend, so without a trend in place, scalping is the order of the day.
Also, with the VTI-volume indicators on BOTH the Dow and NASDAQ on Sell Signals, I’m just looking for opportunities to start getting short again. Seeing a negative Dean’s List and Sector Ratio increase the odds.
BTW, the Sector Ratio fell to 3-21 negative after yesterday’s session. The only Strong Sectors are Utilities, Media, and Telecoms. All three are ‘defensive’ sectors, which should tell you something about where the institutional money is going. Yesterday I heard the Commentators talking about buying opportunities. Nonsense!!! Let them buy when the Sector Ratio is 3-21 negative. I’m not!
Gold (GLD) was down slightly yesterday as it continues to catch it breadth after last week’s pop. I re-bought a few shares of NUGT yesterday wanting to buy back some of the position I sold last week when the miners became overbought. GLD is now above its 50-day moving average with the 200 and a ‘Rope Jump’ just a few points away. A move above the 200 would identify the move since early October as Wave 1 of Major Wave 3 up. So while the major equity indexes appear to be in the process of developing the initial waves of the next Bear Market, gold is doing just the opposite. If I’m right, Wave 3 up in gold should take the metal to the 1,600 level or higher. Yesterday gold (the metal) closed at 1,227. BTW, one of the reasons I’m watching the miners now is because I believe they will out-pace the basic metal. Right now, the HUI, the gold miners index is at 155. If I’m reading my charts correctly, the HUI should be trading in the 700-800 level in the next 2-3 years. The reason I say this is because the HUI made its Wave 1 high way back in late 2011 when it toughed the 650 level. So, IF Wave 3 up is starting, this wave should easily exceed that 2011 high and then some. If you’re a long-term investor, you might be interested looking at a chart of the HUI.
That’s what I’m doing, ‘
h
Market Signals for
10-18-2018
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 10 Oct 2018 |
NASDAQ | NEG | 05 Oct 2018 |
GOLD | POS | 11 Oct 2018 |
U.S. DOLLAR | POS | 03 Oct 2018 |
BONDS | NEG | 05 Sep 2018 |
CRUDE OIL | NEG | 17 Oct 2018 |
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