Professor’s Comments October 25, 2017
Posted by OMS at October 25th, 2017
Overall, the markets were up mildly yesterday. The Dow continued its sky-rocket rally, finishing up 168 points at 23,442. The NASDAQ and SPX were up 12 and 4 points, respectively. Volume on the NYSE was heavy, coming in at 111 percent of its 10-day average. There were 207 new highs and 55 new lows.
Yesterday was another one of those strange days we’ve been seeing for the past week. The Dow was propelled sharply higher by two stocks, CAT and 3M. However, the broader S&P500 was only up about 35 equivalent Dow points. So, there’s a growing disconnect between the Dow and the broad averages. It makes me wonder if someone is playing games.
Yesterday’s was also strange in that on a big rally day on the Dow, the DMI on the NASDAQ (QQQ) turned negative. This is the first time this indicator has been negative since 29 September. My VTI-volume indicator on the NASDAQ remains neutral, but it’s in a position where one decent down day could generate a Sell Signal.
Also, on a day where the DMI on the QQQ turned negative, the ETF re-appeared on the Dean’s List, replacing QID. So, the Dean’s List has turned back to positive. Usually when we see an ETF like QQQ move off and back on the List, it’s because it’s getting close to changing direction. However, students should note that the Money Flow indicators are still positive, and as long as they remain positive, money should continue to flow into the markets maintaining a positive bid.
There was another small change in the A-D oscillator last night, so we need to be on the lookout for another Big Move within 1-2 days.
Something to watch: Apple (AAPL) finished up 0.03 cents yesterday, and appears to be forming the ‘Blade’ of a small negative Hockey Stick Pattern. The pattern started on 19 October with a 3.78-point downside gap which formed the ‘Stick’. The past three days of basically sideways action appears to be the ‘Blade’. The reason this is becoming important is because IF AAPL starts to break below 155 now, it projects a move down to the 151 level, which is where the lower trend line or ‘neck’ of a much larger Head & Shoulders Reversal Pattern is located. Then IF 151 is broken, especially given the negative DMI on the QQQ’s, it could be extremely troubling for the overall markets. BTW, the DMI and Money Flow indicators on APPL are negative, with my VTI-volume indicator just a hair away from generating a Sell Signal. APPL is also a major component of the Dow 30. Watch APPL.
Tuesday’s Sector Report was unchanged. The Sector Ratio remained at 19-5 positive. The Strong Sector List continues to be dominated by the Semis, Cap Equipment, PharmaBio, Material and Computers. The Weak Sectors are led by Household Goods, Media, Telecoms, Consumer Products, and Food. Stocks in the Strong Sectors, like CAT (up a whopping 6.5 points), were up again yesterday. Those in Weak Sectors, like Media, the second weakest sector, got hammered. Continue to stay in stocks and ETFs in the strong sectors and avoid those in the weak sectors. Watch for a change in the Sector Ratio.
BTW, I hope my students have been paying attention to what’s been happening in the strong and weak sectors of the Sector Report. It makes me want to develop a Spread Trading Strategy, where I Buy a few stocks in the strong sectors and short a few in the weak ones. Imagine what would have happened if on 29 August, when the Tide turned positive, you bought Intel (INTC) and shorted something like Clorox from the weak Household Products sector. Spread trading strategies can be a way to reduce volatility in a portfolio. The can also be very profitable. If you get a chance, just look at how stocks in the strong and weak sectors have performed since 29 August. I think you’ll be amazed.
Gold (GLD) fell slightly yesterday. The VTI-volume indicator on GLD has turned negative, so I’m avoiding the metal for now. The pattern remains unclear as the Bollinger Bands continue to narrow.
That’s what I’m doing,
h
BTW, here’s something else to watch. Bonds (TMF) are completing the small Head & Shoulders Pattern they have been developing since July. The ‘Head’ of the pattern formed on 7 September, with double neckline support near the 20 level. If TMF breaks below 20, it could start a move toward 16. The reason this is important now is because if TMF starts to decline, it means that interest rates are rising. This would be a huge negative for the equity markets, especially for small cap stocks. The fact that the DMI on the Q’s is now negative could be reflecting this concern over rising interest rates.
Market Signals for
10-25-2017
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | NEG |
VTI | POS |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments