Weekend Strategy Review January 13, 2019
Posted by OMS at January 13th, 2019
The markets opened lower on Friday, with the Dow dropping over 200 points at its low. However, the early decline was not enough to turn the 35-period CCI on the 60 minute chart negative which would have triggered a Sell Signal. So, by the end of the day, the Dow rallied back to close down 6 points at 23,964. The large cap index was up 563 points for the week. The NASDAQ finished down15 points on Friday but was up 15 points for the week.
The market remains EXTREMELY overbought. The A-D oscillator which has been showing readings above 287 all week, came in with another EXTREME reading of 321 on Friday. It is very unusual for the A-D oscillator to support readings above 250 for more than 2-3 days, so last week’s string of overbought readings was exceptional. I don’t expect these EXTREME readings to last much longer.
I like to use the WSR to discuss strategy. So, this weekend, I’m attaching a 60 minute chart of the Dow (DIA). It should give you all the strategy you need to prepare for the weeks ahead.
The chart shows how the corrective a-b-c rally that began after the DIA completed its Wave 3 down low of 216.85 on 26 December. Students should note how the CCI identified all three waves (A-B-C) of the correction. Students should also note that while this corrective rally has been developing, the CCI on the Daily Charts has remained negative. This tells me the DIA is still in a major down trend.
So once the current Wave 4 rally completes, probably sometime next week, Wave 5 down within Major Wave 3 down should begin. I would expect Wave 5 down to re-test the 26 December low as a minimum.
The Sector Ratio improved to 14-10 positive after Friday’s session. I’m not too concerned about the fact that the Ratio has turned positive because all except the top three sectors have RS ratings of zero. The List could change in a heartbeat if the market starts to pullback next week.
The Strong Sector List was led by PharmaBio, Retail, Consumer Products, Semiconductors and Real Estate. The Weak List was led by Food, Utilities, Food Drugs, Technology, and Energy. Looking at both Lists, the RS of the Weak Sectors is still weaker than the Strong Sector List is strong. This tells me that the market is a lot weaker than the current rally suggests.
Gold (GLD) rose 0.21 cents on Friday to 121.8. With GLD now in an Up Trend (50>200), I’m just watching for entry points on any pullback.
Have a great weekend.
That’s what I’m doing,
Market Signals for
|DOW||POS||08 Jan 2019|
|NASDAQ||POS||07 Jan 2019|
|GOLD||POS||27 Dec 2018|
|U.S. DOLLAR||NEG||27 Dec 2018|
|BONDS||NEU||10 Jan 2019|
|CRUDE OIL||POS||08 Jan 2019|
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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.