Professor’s Comments September 20, 2017
Posted by OMS at September 20th, 2017
The markets were up slightly again yesterday. The Dow finished up 39 points at 22,371. The NASDAQ and SPX were up 7 and 3 points, respectively. Volume on the NYSE was moderate, coming in at 97 percent of its 10-day average. There were 164 new highs and 18 new lows.
The Fed will be announcing its latest policy on interest rates at 2pm today. It will also likely announce the details of its massive ‘unwinding’ or selling program. In previous meetings they indicated that they could sell as much as $80 Billion per month. This would be an enormous amount of selling for the market to absorb. Fed selling would effectively tighten the money supply because it would remove money that would normally be available to build businesses, buy homes, cars, and consumer goods. If this selling starts in October, without Congress passing a tax break, it will put pressure on the U.S. economy and its equity markets.
The markets traded in a narrow range yesterday, so the possibility of a Big Move from the small change signal in the A-D remains in effect for today. The Big Move could occur right after the Fed announcement.
With the Dow approaching 22,400, it could be close to a short-term top. Yesterday’s rally appeared to be a continuation of sub-wave 3 up within wave 5 up. If this is the case, the Dow will still need a wave 4 down and 5 up to complete the topping pattern. If my wave count is correct and the Dow starts to decline after the Fed announcement, I would expect the index to decline to about the 22,200-22,250 level in sub-wave 4, before rising above 22,400+ to complete the pattern.
There is a possibility that the NASDAQ and SPX may have already topped. Unlike the Dow, these indexes have completed all five waves of their respective patterns. So, IF they start to decline, they do not need to rally to another high. The thing to watch on the SPX is the lower trend line on its Ending Diagonal Pattern, currently located near 2,488. A break below 2,488 will likely turn the indicators on SPY negative. A break below 2,440 will confirm that the next Bear Market has started. If the SPX remains above its lower trend line, it will likely continue to chop higher.
The way we’ll know when the market has topped is when the cockpit indicators start to turn red. Right now, they’re still Green.
Tuesday’s Sector Report weakened slightly. The Sector Ratio dropped to 15-9 positive. The Strong Sector List continues to be led by the Semis, PharmaBio, Energy, Utilities and Computers. The Weak Sectors are led by Media, Consumer Products, Telecoms, Household Goods, and Service.
Gold rose slightly yesterday. GLD finished up 0.26 points to 124.62. At this point I’m still on a Sell Signal for GLD as my VTI-volume indicator remains negative. If the Fed does announce an unwinding program today, it will likely be a positive for the Dollar and a negative for gold. With negative indicators, I am avoiding the metal for now. If GLD pulls back to the 122 level and HOLDS, there is a possibility that it could rally to the 131 -132 level before wave ‘B’ up completes. But IF 122 is broken, gold could begin a decline to the 105 level or below that could last for months.
Waiting for the Fed announcement at 2pm today.
That’s what I’m doing,
h
Market Signals for
09-20-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS |
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