Professor’s Comments October 27, 2017

Posted by OMS  at October 27th, 2017

The markets were mixed yesterday.  The Dow finished up 71 points at 23,400. The NASDAQ was down 7 points while the SPX finished up 3.  Volume on the NYSE was heavy, coming in at 119 percent of its 10-day average.  There were 187 new highs and 83 new lows,

Yesterday’s rally in the Dow retraced a good portion of Wednesday’s decline, so its possible that it was a continuation of sub-wave 2 up of wave 1 down.  The trading action looked corrective, but it’s hard to tell. The way we’ll know is if the markets start to fall impulsively in sub-wave 3 down, which based on the pattern, should start either today or Monday.

The Money Flow indicators on the Dow(DIA) and NASDAQ (QQQ) turned negative last night, joining The Tide and the DMI on the NASDAQ (QQQ).  The DMI on the Dow remains positive as does my VTI-volume indicator.  These indicators need to turn negative before I become aggressive on the short side. 

The Dean’s List turned neutral as QID, the inverse index ETF for the NASDAQ, re-appeared on the List near the bottom.  The RS ranking on QID is only ‘0’, so with the three other index ETFs still on the List, it’s still an iffy proposition for a trade.  I would really like to see one or two more index ETFs on the List before I start looking to trade the downside.   

Besides, Apple (AAPL) finished up a dollar at 157.41 and continues to form a ‘Blade’. Because AAPL is such a big part of the NASDAQ-100, I really want to see it start to break down before I start trading the downside.  The stock has minor support at 155 and until this level is broken, the H&S neckline at 151 is not in danger.  And because Apple is both a NASDAQ-100 and Dow 30 stock, I don’t see how any real decline in the overall market can start without Apple moving lower.

Wednesday’s Sector Report increased slightly. The Sector Ratio rose to 19-5 positive.  The Strong Sector List was led by the Semis, Service, Cap Equipment, Banks, Autos and Leisure.  The Transportation and Leisure Sectors had large negative Delta Trend Scores (DTS) yesterday.  Large changes in DTS are often seen just prior to a large price move in the sector.  At this point, six out of the 19 positive sectors still have positive Trend Scores, so the momentum remains positive.  Continue to stay in stocks and ETFs in the strong sectors and avoid or short those in the weak sectors.

Gold (GLD) was down a buck yesterday as the Dollar rallied.  UUP, the tracking ETF for the Dollar, appears to be breaking out of a Three Lows to a Bottom (TLB) pattern.  If this is the case, it should provide a strong headwind for gold and stocks that do a lot of their business overseas.  The VTI-volume indicator on GLD is very close to entering the Down Trend Mode.  The current reading is 32.4.  If the reading falls below 30, there is a good chance that GLD could start a trend that will cause it to fall to the 105 level or below.  I’m still avoiding the metal for now.

Energy traders should be watching news from Venezuela today. With two critical debt repayment deadlines approaching, $985 Million today, and $1.2 Billion due 2 November, it’s possible that Venezuela could default today as the bonds have no grace period. Yesterday, Petroleos de Venezuela SA, the state-owned oil company, went into ‘radio silence’, which rattled its bonds and those issued by the Venezuelan government.  Pertroleos owns Citgo, which operates three refineries in the U.S. with a capacity of 749,000 bpd, making it one of the largest refineries in the country. If Venezuela defaults today, it will likely impact oil prices, energy stocks, and the supply of gasoline in the U.S.

Watching,

That’s what I’m doing,

h

Market Signals for

10-27-2017

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