Weekend Strategy Review December 18, 2016

Posted by OMS  at December 18th, 2016

The Dow fell 9 points on Friday, closing at 19,843.  It was up 87 points for the week.  The NASDAQ finished down 20 points on Friday and down 74 points for the week.  The SPX and Russell 2K were also down slightly on Friday, and had losing weeks.  So, the only index that had weekly gains was the Dow.  Hmmm?

Friday’s small price decline produced large declines in my Money Flow indicators.  The Money Flow on the NYSE had its largest decline since 14 December when the Dow fell 119 points.  So, while the TV commentators are cheering on the Dow toward 20,000, money is now quietly leaving the market. 

As of Friday, the VTIs on 3 of the 4 major U.S. indexes are still positive.  The only index with a negative VTI is the Russell 2K.  BTW, it had the largest weekly decline (24 points) even though it is the smallest index in terms of price.

So, while the Generals in the Dow continue to urge their troops on toward 20,000, the troops have decided not to follow their lead.  This is something students should consider this weekend, because it’s always the men in the trenches, the ones doing the fighting, that are always the first to know when a battle is nearing an end.

BTW, when the VTI on UWM, the ETF for the Russell 2K, turned positive on 7 November, UWM was trading at 85.9.  The VTI never wavered as the ETF moved higher, reaching a high of 117.42 on 9 December.  Since reaching its high, the VTI has turned negative, and the ETF has been dropping steadily.  It closed at 112.54 on Friday.  This is why I have been placing increased emphasis on the VTI, and have been telling students when it changes direction. 

DIG is another good example of the effectiveness of the VTI indicator.  The VTI turned positive on 7 November with the ETF trading at 36.46.  The VTI went into the trend mode on 22 November with the ETF at 40.24.   DIG closed at 45.02 on Friday.  The VTI is still positive and in the Trend Mode.

BTW, the VTI on DUG, the inverse energy ETF turned negative on 7 November, the day of the election, BEFORE THE RESULTS WERE IN. The following day, DUG fell off the List and DIG appeared, telling us that energy was turning positive.  The VTI on DIG, the positive energy ETF, turned positive on 7 November.  DIG finally appeared on the Dean’s List on 10 November.  So, the take away from this is that we need to pay attention to changes in the VTI.  They seem to be occurring about a day or two BEFORE the Dean’s List changes.

This is why I’m watching EEV, the ETF that shorts the emerging markets.  On Friday, the ETF appeared at the bottom of the Dean’s List.  The VTI turned positive on Thursday and is now heading higher.  The Money Flow indicators are also positive.  Emerging markets borrow a lot of money, so rising interest rates tend to hurt them disproportionately.  I find it interesting that EEV is the first INVERSE index ETF to appear on the Dean’s List.  If I’m right about the market forming an important top, we’re going to see a lot more of these inverse index ETFs appear in the weeks ahead.

I plan to use EEV for some of the money in the ‘International’ side of my portfolio.

Gold (GLD) rose 0.71 on Friday.  The VTI is still negative.  UUP remains on the Dean’s List with a positive VTI.  Be patient.

In the week ahead, continue to watch for and pay attention to any changes in the VTI for the Dow shown on the cockpit. If the VTI turns negative, look for inverse indexes to appear on the Dean’s List. This should help focus your trading as we approach the year’s end.

Bottom Line:  Be careful with your money now.  It appears that the market is starting to roll over.  The Money Flow indicators are showing that money is leaving the market.  Usually, when this happens, it’s only a matter of time before price follows.

Have a great weekend,

That’s what I’m doing.

h  

Market Signals for

12-19-2016

FAQ

Only getting the Professor’s Weekend Review? Try his daily update Cum Laude service fro 2 weeks only $9.99 LEARN MORE

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.