Professor’s Comments September 19, 2018

Posted by OMS  at September 19th, 2018

The markets made a strong rally yesterday on relatively light breadth and volume. The Dow finished up 185 points, at 26,244.  It got as high as 26,317 intraday, which is less than 300 points from my target of 26,600+.  The NASDAQ and SPX also finished higher, gaining 60 and 16 points respectively. Volume on the NYSE was moderate, coming in at 97 percent of its 10-day moving average.  But even though the 30 Dow stocks were up big, the new lows still outnumbered the new highs by 114 to 90.  So, the bearish divergence between price and breadth continues.  Again, negative divergence is usually one of the more reliable tells that a top of major significance is approaching.

Yesterday’s decline did not change my VTI-volume indicator on the Dow.  It remains positive. The same indicator on the NASDAQ remains neutral. The indicator for gold and the Dollar is also neutral, but negative for Bonds.  The VTI-volume indicator for Crude Oil turned neutral after yesterday’s session. 

This morning I want to talk about the NASDAQ-100 or QQQ.  The index contains the top 100 stocks on the NASDAQ Composite.  Stocks like Amazon (AMZN), Intel (INTC), Google (GOOG), Apple (AAPL), and Netflix (NFLX) are all in the NASDAQ-100.  It’s an important index. 

The reason I want to talk about it this morning is because it could be the first index to roll over and turn bearish.  Yesterday, while the overall market was having a big day, the Q’s were not.  The Q’s were only up 1.5 points.  The index appears to have topped on 30 August at the 187.52 level.  Since the high, it fell to a low of 180.40 on 7 September, and then bounced.  The bounce appears to be the ‘Blade’ of a small, negative Hockey Stick Pattern.  The ‘Blade’ has been forming just above the 50-day moving average which is currently located at the 180.54 level.  A downside break of this level would be EXTREMELY negative for the index and because most of the stocks in the Q’s are widely held, it could impact the larger markets. 

Most of my indicators suggest a downside break is coming.  Negative Hockey Sticks are not bullish patterns. Also, the volume portion of my VTI-volume indicator has been negative since 5 September.  The only thing required to generate a Sell Signal on the indicator is for the momentum to turn negative. This momentum shift could happen within the next few days as it is currently showing a reading of 56.0.  If the reading drops below 50, it would turn the momentum negative. 

So, IF you’re currently holding large cap technology stocks, please be careful and pay attention to the 180.54 level on the Q’s. 

If the Q’s drop below the 180.54 level, I’ll start shorting the index by buying (long) a ‘trial’ position in SQQQ, which is a highly leveraged (-3X) ETF for shorting the NASDAQ-100.  Also, because of its high leverage, I’ll keep the position small and consider it to be a trade only.

There were no changes to the Sector Ratio after yesterday’s session.  The Ratio remained at 12-12 neutral.  This is another reason why I’m very concerned about the overall health of this market.  One would think that a 185 point pop in the Dow would change a few things.  It didn’t. 

The Strong Sector List continues to be dominated by the ‘defensive’ sectors like Household Products, Transportation, Telecoms, FoodDrugs, and PharmaBio.  Technology continues to be noticeably missing.  

The Weak Sector List continues to be led by Semiconductors, Energy, Banks, Media, and Computers.  

Students should continue to hold stocks in the strongest sectors and avoid those in the weak sectors. Also, if the Sector Ratio starts to turn negative, students might want to re-examine their equity holdings. A negative Ratio would mean that most of the Sectors in the SP-500 have started to move lower.  

Gold (GLD) fell 0.17 cents to 113.44 as the Dollar rose slightly.  GLD continues to trade just below its 50-day moving average with tightening Bollinger Bands.  If GLD can move higher in the days ahead, it would be a very positive long-term development for gold.

BTW, the gold miners (gold still in the ground) are getting close to generating a VTI-volume Buy Signal.  The volume portion of my VTI-volume indicator on GDX has turned positive.  All we need now is for the momentum to turn positive. I’m still holding my ‘trial’ positions in gold. Yesterday I added a few shares of NUGT, a highly leveraged positive gold ETF, to the mix.

That’s what I’m doing,

h

Market Signals for

09-19-2018

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

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.