Professor’s Comments September 26, 2019
Posted by OMS at September 26th, 2019
The markets rallied hard yesterday, reversing Tuesday’s losses. However, the rally appeared corrective as it occurred on breadth that was weak enough to turn The Tide negative. The Dow finished with a gain of 163 points, closing at 26,974. The NASDAQ and SPX were up 84 and 18 points, respectively. Volume on the NYSE was low, coming in at 87 percent of its 10-day moving average. By comparison, the volume on Tuesday’s decline was 102 percent of its 10 day average, so we’re seeing more volume on declines than on rallies which is another sign of a weak market. There were 81 new highs and 22 new lows.
Yesterday’s decline caused the market timing indicator on the Dow to turn Neutral. The indicators for the NASDAQ and SPX remain Negative.
The market remains in a very fragile condition.
The DMIs on the Dow, NASDAQ, and SPY remain Negative.
The Dean’s List remains neutral while The Tide is Negative.
The fact that the indicators are Neutral to Negative now increases the odds that the market indexes will begin a significant decline during the next few weeks, possibly within the next few days.
I still believe that if the Dow remains below the 27,307 level, the current wave structure will have a negative resolution. If the Dow rallies and exceeds 27,307, it will likely test and exceed the 16 July high of 27,399 before ending near 27,500. If this final rally does not materialize, the Dow should begin to weaken during the next few days as Wave 3 down unfolds. Wave 3 down should drop the Dow down to the 3 September low near 26,000 which is the next major support level. Once this level is tested, the next series of waves should see the Dow decline to near or below the 24,000 level to complete Major Wave ‘D’ Down.
The Sector Ratio strengthened to 16-8 Positive after yesterday’s session. The Strong Sector List was led by Service, Semiconductors, Food Drugs, Consumer Products, and Insurance. The Weak Sectors were Real Estate, Leisure, Energy, Foods and PharmaBio.
Gold (GLD) took a big hit yesterday dropping 2.68 points to 141.83. The decline appeared to be the end of wave ‘b’ up. Wave ‘c’ down should be next to complete the a-b-c move for Wave 4. I still expect that wave ‘c’ down on GLD will see the 137-138 level.
Bonds declined yesterday with TMF dropping 1.42 points to 29.64. The Money Flow indicators on Bonds continue to weaken with yesterday’s VZO reading approaching zero. If the VZO turns negative, I’ll add a few shares of TBT, the inverse ETF for Bonds, to the Model.
BTW, one of the reasons I’m watching Bonds closely now is because of the apparent lack of liquidity in the banking sector. Overnight on Tuesday, the Fed had to add another $100 Billion to the ‘repo’ market so the banks could continue to operate on Wednesday. I mentioned how unusual this was last week, and the problem doesn’t appear to be going away. Liquidity is the life blood of Wall Street and if it begins to dry up, it will cause major problems with Bond prices and interest rates. I’m almost to the point of looking at adding shares of TBT (inverse ETF) to the Model as an insurance policy.
The Model bought 1,000 shares of DXD and 700 shares of QID during yesterday’s session. Price paid for the shares was 25.59 and 30.30. The Model also holds a ‘trial’ position of 600 shares of SQQQ. The Model is currently up 26.1 percent with $60,875 in available cash.
The Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
That’s what I’m doing,
h
Market Signals for
09-26-2019
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 25 Sep 2019 |
NASDAQ | NEG | 20 Sep 2019 |
GOLD | NEU | 25 Sep 2019 |
U.S. DOLLAR | POS | 25 Sep 2019 |
BONDS | NEU | 18 Sep 2019 |
CRUDE OIL | NEU | 19 Sep 2019 |
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Category: Professor's Comments