Weekend Strategy Review June 25, 2017
Posted by OMS at June 25th, 2017
The Dow fell 3 points on Friday, closing at 21,395. It was up 10 points for the week. The SPX (SPY) was flat on Friday and flat for the week. The NASDAQ finished up 29 points on Friday and up113 points for the week.
Friday’s flat trading on the Dow and SPX did little to clarify the wave count on these indexes. With a positive DMI on the Dow and SPY, I’m still in the Bullish camp for the large cap stocks. However, as I mentioned on Friday, the PT indicators are very close to turning negative, especially on the NASDAQ (QQQ), so I’m watching these very carefully. Once big down day could change everything. Remember, the Q’s continue to form the ‘Blade’ of a negative Hockey Stick Pattern and a break of the Blades trend line could send stocks reeling.
Students also should note that the value of the DMI on the SPY has fallen to 0.24. The SPY has developed a Three Highs to a Top (THT) Pattern since the November election. So, if the DMI turns negative early next week, it would generate a Sell Signal for that index. This would mean that two of the 4 ETFs for the Major indexes (QQQ and SPY) would be on DMI Sell Signals. This is also occurring at a time when the Bollinger Bands on the SPY are narrowing. In other words, we could be setting up for a ‘Big Move from the ’toothpaste squeeze’.
The last ‘Squeeze’ back in mid-April resulted in an almost 900-point gain in the Dow. So please pay attention if you see the DMI start to turn negative.
Other than that I really don’t see much in the indexes this weekend.
Oil and energy still appear to be trying to put in a bottom. But my money flow and volume indicators remain negative and the VTI remains in the Down Trend Mode. It’s really amazing how long DUG, the inverse ETF for energy, has remained on the Dean’s List this year. It’s kept us from trading energy since early January. When DUG replaced DIG on the List on 5 January, DUG was trading at 36.76. On Friday, DUG closed at 49.26 after reaching a high of 50.62. On the other side of the trade, DIG fell from 44.2 to 31.1 once it fell off the List. This is why students should ALWAYS pay attention to the energy Sticks in the Sand.
BTW, students should note how tight the Bollinger Bands were on both DIG and DUG on 5 January. Can you spot the ‘tube of toothpaste’ and the nozzle that developed prior to the trade? OK, so now switch charts and look at the SPY. Do you see why I’m starting to get concerned?
Friday’s Sector Report continued to weaken. The report now only has 10 strong sectors, down 1 from the previous day, and 14 weak sectors. A few weeks ago, the sector report was dominated by the strong sectors. It was that way since mid-November. Now the report has been taken over by the weak sectors. Hmmm? Leisure, PharmaBio, Computers, Healthcare, and Semis continue to lead the strong sector list, with Energy, Retail, Autos, Telecoms, and Food/Drug lagging. I’ve been watching to see if any of the weak sectors start to produce large Delta Trend Scores (DTS) over 100, which usually lead to Big Moves in the sector. But there really haven’t been any. The largest DTS on Friday was in the Media Sector (73), so I would expect media stocks to be among the weakest next week.
Bonds continue to rally. A few weeks ago, I mentioned how the two bond ETFs, TMF and TLT, had replaced TBT on the 15 May Dean’s List. Seeing this told me that long term interest rates were FALLING! This was occurring despite the fact that the Fed was talking about raising short-term rates, which they did on 9 June. So, we now have a condition where short-term interest rates are rising and long-term rates are falling, which means the yield curve is flattening. This is something that should be watched carefully, as a flat yield curve is one of the best indicators that the economy is weakening. Pay attention to what the Bonds are saying!
Gold (GLD) appears to be very close to completing sub-wave ‘b’ up within an a-b-c pattern for Wave 2 down. On Friday, the 2-period RSI on GLD rose to 88.6, with the VTI showing 39.9. So, the gold ETF is now in an overbought condition with no trend in place. In other words, GLD and mining stocks should be very close to finishing sub-wave ‘b’ up and starting wave ‘c’ down of Wave 2 down.
Have a great weekend.
That’s what I’m doing,
h
Market Signals for
06-26-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | NEG |
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