Professor’s Comments September 7, 2018
Posted by OMS at September 7th, 2018
The markets were mixed again yesterday. Once again, the Dow was up mildly, this time 21 points, with the NASDAQ and SPX down 72 and 11points, respectively. The 30 Dow stocks appear to be masking what’s really going on with the market. Technology stocks are getting hit pretty hard. Volume on the NYSE was heavy, coming in at 111 percent of its 10-day moving average. There were 99 new highs and 109 new lows.
The number of new lows outnumber the new highs again yesterday. This is not a good sign going forward. It is a dangerous condition that could lead to a significant correction during the next few weeks.
The BLS will be releasing the August Jobs Report numbers at 8:30 today. I don’t like to hold large positions in front of the Jobs Report, because an unexpected number can trigger large moves in the market. In this case, with the patterns for the Dow, SPX and NASDAQ near important lower trend lines, the market can move significantly lower if these trend lines (support) are breached.
Yesterday, the SPX closed at 2,878 after getting as low as 2,867. Students should continue to watch the 2,850 level. A break of this level would project significantly lower prices for the SPX, possibly down to the 2,580 level.
There were no changes to the VTI-volume indicators on the equity markets after yesterday’s trading. The Dow remains on a Positive/Trending signal, with the NASDAQ on a Neutral Signal. The signal for Crude Oil remains Positive, with Bonds, Gold, and the Dollar on Neutral signals. These signals could all change after today’s Jobs Report.
The Sector Ratio fell to 20-4 positive after yesterday’s session. As I mentioned yesterday, the strong Ratio is somewhat misleading because the Relative Strength of most sectors on the Strong List is still extremely low, mostly 1s and zeros. If the market starts to decline today, the Strong List could change dramatically.
The Strong Sector List continues to be led by ‘defensive’ sectors like FoodDrugs, Household Products, PharmaBio, Telecoms, and Transportation. Students should note how the Household Products Sector has been in the top 5 sectors for the past few months. During this time, stocks like Clorox (CLX) have made new highs, rising from 120 to 150. It pay$ to own stocks and ETS in the strongest sectors.
On the other hand, stocks in the Auto Sector, which has been on the Weak List for months have had a rough time of it. During the same time that Clorox was rising, Ford (F) fell from 12 to 9+. GM fell from 44.95 to 34.38, as it continues to make new lows.
BTW, a lot of the problems with the Autos Sector has to do with the trade-tariff issues with Canada. As an example of how the problems of tariffs impact the sector, one just needs to understand how a typical auto part or assembly is made. By some estimates, a typical auto part moves across the U.S.-Canadian boarder seven times as it’s being assembled. And each time the part crosses the boarder, it gets taxed. The policy is ridiculous! Both Canada and the U.S know this and hopefully will work together to change the policy so it reduces the cost to consumers. The Canadian trade representative, Chrystia Freeland, is in Washington this week and appears anxious to negotiate a new deal to replace NAFTA. IF this deal happens, it would be a significant positive for the auto sector, especially to companies that make and distribute auto parts. Yesterday, the Auto Sector moved to the bottom of the Strong List. Hmmm?
The Weak List was led by Food, Media, Healthcare, and Energy. I am avoiding issues in these sectors.
Gold was up slightly again yesterday, but not enough to change its VTI-volume signal. The signal remains Neutral, so I’m still not adding to my ‘trial’ positions in gold.
With several Neutral Signals on the Board for Gold, the Dollar, and Bonds, I’m waiting to see if the Jobs Report moves the market enough to produces a change in signals. I’m also very concerned about the fact that the number of new highs vs. new lows has reversed and is now favoring the new lows. This is NEVER a good sign. It’s usually an indication that an important top is either in or fast approaching. With mixed markets and mixed signals, this is not the time to be aggressive
That’s what I’m doing,
h
Market Signals for
09-07-2018
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
Professors Major Market
Timing Signals for
09-07-2018
DOW | POS-T |
NASDAQ | NEU |
GOLD | NEU |
U.S. DOLLAR | NEU |
BONDS | NEU |
CRUDE OIL | POS |
DATE of SIGNAL |
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