Weekend Strategy Review December 31, 2017
Posted by OMS at December 31st, 2017
The markets finished the week on a down note. Intraday, the Dow reached a high of 24,872 before falling 118 points to close at 24,719. It was down 35 points for the week, its first weekly loss since 17 November. The NASDAQ and SPX were down 47 and 14 points on Friday, finishing the week down 56 and 10 points, respectively.
Most European markets were also down on Friday and down for the week. The patterns on these markets continue to warn that a Major Bear market will start soon and last for years. The Bollinger Bands on EWQ, the country ETF for France, have narrowed to their smallest spread since November 2016, after which they started several rallies that boosted the ETF from 23 to just under 30. That’s a 27.3 percent increase in the ETF for the year, which is big move for a country ETF.
The move in the EWG, the ETF for Germany, was even higher. It rallied from 25.43 to 33.69 over the same period for a gain of 32.5 percent! But now the Bands are narrowing, and this time all the indicators are negative. BTW, my VTI-volume indicator on EWG has been on a Sell Signal since 20 December.
In other words, both the U.S and European markets appear to be rolling over.
As of Friday, the pattern and wave count still suggest the Dow is nearing completion of wave 5 up of final Wave 5 up. But I still don’t have a Sell Signal on the Dow. I do have a Sell Signal on the NASDAQ-100 and Russell 2K markets. Once this current rally in the Dow completes, the indicators should start to turn negative telling us that the Bull Market that started in March 2009 is over.
Friday’s decline turned several of the cockpit indicators negative. However, The Tide remains positive with a neutral Dean’s List. The positive Tide and a positive VTI-volume indicator on the Dow tells me that it’s still too early to be shorting the large cap industrial stocks. But the same indicator on the NASDAQ is negative and Friday’s decline also turned the VTI-volume indicator on that market negative. So now with QID and TWM, the inverse index ETFs for the NASDAQ-100 and Russell 2K, both on the Dean’s List and both supporting Sell Signals, I’ll be looking to establish a few ‘trial’ positions in those ETFs.
The reason I’m still being cautious with ‘trial positions’ is because the Sector Ratio is still pretty positive. It fell to 18-6 on Friday as the Semiconductors, Technology, and Computers moved back on the Weak List. Also, as I noted in Friday’s Comments, the Auto Sector made a significant move to the downside after posting a large negative Delta Trend Score (DTS). Autos are now at the bottom of the Strong Sector List. The Bands continue to tighten, but I still don’t have a VTI-volume Sell Signal on the Sector. It’s close.
The Strong Sector List continues to be led by Energy, Materials (gold is in this Sector), Household Products, FoodDrugs, and Cap Equipment. Continue to stay in stocks in the Strong Sectors and avoid or short those on the Weak Sector List. BTW, Gilead Sciences is now down to 71.64, dropping 0.84 cents on Friday. I started shorting GILD between 75 and 76 when PharmaBio first appeared on the Weak List…even though the overall market was rising. This is one of the reasons I’m watching the Autos now. Pay attention to the Sector Lists! It pay$.
Also, GLD is now up almost 4 points since I mentioned that it generated a VTI-volume Buy Signal on 18 December. The ETF is completing its Wave 1 up ‘Rope Jump’ and appears overbought at current prices. Once the current rally completes, prices should pull back closer to the moving averages. If you noticed, the 50 is currently above the 200 on GLD, so it’s in an Up Trend. If it pulls back next week, such that its 2-period RSI becomes oversold, I’ll be looking to buy a few shares of gold and the miners. Rifle Trading conditions are now in effect for gold. Silver still has some work to do as its 50 is still below the 200.
Have a great weekend and a Happy New Year.
That’s what I’m doing,
h
Market Signals for
01-02-2018
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
SUM IND | POS |
VTI | NEG |
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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.
Category: Professor's Comments, Weekend Strategy Review