Professor’s Comments September 21, 2018
Posted by OMS at September 21st, 2018
The markets continued to rally yesterday with the Dow reaching my target level. Several months ago, I said that the Dow would likely trade back to the 26 January high of 26,670 before final Wave 5 up completes. Yesterday, the Dow reached 26,697 before closing at 26,657. It finished up a whopping 251 points! The technology laden NASDAQ and the SPX also had strong days closing up 78 and 23 points, respectively.
Volume on the NYSE was moderate, coming in at 108 percent of its 10-day moving average. New lows continued to outpace the new highs by a 94-90 margin. I can’t tell you enough how strange it is to see the Dow rise 251 points with the number of new lows continuing to exceed the number of new highs. Same for the A-D oscillator which remained negative for the 13th consecutive day. Think about it for a minute. The 30 stocks on the Dow made a new all-time high when most of the stocks on the NYSE are in down trends! That’s what the breadth indicators are telling me. It’s crazy!
On the other hand, the VTI-volume indicator on the Dow remains on a Buy Signal. Since this signal was generated, the Dow is now up 685 points. The really crazy thing about all this is that as long as the Dow remains on its Buy Signal, it could continue to push higher. Remember, the Dow is in a pattern called an Ending Diagonal. It’s called an Ending Diagonal because it is a termination pattern. However, the pattern also has the potential to develop a ‘through-over’ wave, which could take the index a lot higher. The chances of this happening are about 50-50. This is why when I first mentioned the 26,670 level as a target, I put a plus (+) after the number. Theoretically, the ‘through-over’ wave, if it develops, could reach the 28,000 level. I’m not saying it will, but it can. It’s also possible that the pattern on the Dow can terminate within the next day or so and start heading down. If my VTI-volume indicator on the Dow turns negative, the new target will be the 24,000 level or below. So, there you have it. We’re in uncharted territory now with odds of about 50-50 of going either way, up or down.
So, with the pattern complete on the Dow, we must now rely on the indicators. As I said above, the VTI-volume indicator on the Dow remains positive while the same indicator on the NASDAQ remains negative. BTW, the longer-term pattern on the NASDAQ is a rising channel. However, a small negative Hockey Stick Pattern has developed within this channel, which might be part of sub-wave 2 down. This is one of the reasons I started to mention the 180.54 level on the NASDAQ-100 (QQQ). As long as the Q’s stay above 180.54, the NASDAQ should be OK. But if the Q’s move below that level, they will likely take the Dow down with it. That’s why I’m watching the NASDAQ more than the Dow at this point.
My market timing indicator for gold and the Dollar remains neutral, but negative for Bonds. The indicator for Crude Oil remains positive. BTW, the VTI-volume indicator for gold (GLD) is very close to turning positive. The volume portion of the indicator turned positive yesterday. All it needs now is a momentum shift.
The Sector Ratio increased to 18-6 after yesterday’s session. However about 50 percent of the Sectors have Relative Strengths of 1 and 0, so while the List is growing in length, it still isn’t very strong.
The Strong Sector List continues to be dominated by the ‘defensive’ sectors like Household Products, Transportation, Telecoms, FoodDrugs, PharmaBio and Cap Equipment. Technology continues to be noticeably missing. The Materials Sector, which includes gold, has moved to the Strong List, near the middle.
The Weak Sector List was led by Semiconductors, Computers, Energy, Healthcare and Leisure.
Students should continue to hold stocks in the strongest sectors and avoid those in the weak sectors.
Gold (GLD) rose another 0.39 cents to 114.27. The increase was still not enough to generate a new Buy Signal on gold. However it’s getting close. The signal remains neutral. However, the gold miners remain on a Buy Signal, so with the Materials Sector now on the Strong List, I wouldn’t be surprised to see gold (GLD) generate a new Buy signals did on any rise today. It’s that close.
I still want to see GLD move above its 50-day moving average before I become aggressive with my gold purchases. Remember, we could be in the turning process for gold, which would be the start of Major Wave 3 up. But until GLD performs a ‘Rope Jump’ we still don’t know if the recent move up in GLD is part of its Wave 1 up. A move above the 50 would help identify the change in direction.
That’s what I’m doing,
h
Market Signals for
09-21-2018
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 11 Sep 2018 |
NASDAQ | NEG | 19 Sep 2018 |
GOLD | NEU | 14 Sep 2018 |
U.S. DOLLAR | NEU | 14 Sep 2018 |
BONDS | NEG-T | 05 Sep 2018 |
CRUDE OIL | POS | 19 Sep 2018 |
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The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments