Weekend Strategy Review March 11, 2018
Posted by Laurie Liessmann at March 11th, 2018
On Friday, the BLS reported that non-farm payrolls rose by 313,000 in February while the unemployment rate remained at 4.1 percent, the lowest since December 2000. The markets rallied hard after the report.
Remember when I used to talk about 140,000 jobs as being pathetic? Remember how I used to tell you what I saw under President Reagan, with 300,000-400,000 new jobs per month being the norm? Some months we even created 600K-700K new jobs a month…..or more. So, it appears the President Trump’s policies are working. This together with the tax cut, the reduction in regulations, the end of Obamacare, etc., could push the market higher.
BTW, another thing I often talked about with respect to jobs is the black unemployment rate. I have continually said that the high unemployment rate in the black community was unacceptable if we were going to forward as a country. Well, the BLS reported that only 6.9 percent of black adults were unemployed in February, the second-lowest rate in history (or at least since the agency has been keeping track). It’s a start.
On the other hand, wage growth was muted. Average annual earnings were only up 2.6 percent on an annualized basis. This tells me that there are still far too many people who could be working but are not. The supply of labor still exceeds demand. But if you look at the numbers carefully, the supply was not excessive in the skilled jobs, like medical, engineering, science, and technology. Wage growth is strong in these areas. It’s the low skilled jobs, the jobs being replaced by automation, where the problem is. I believe this will continue to be a problem in the future, perhaps more so.
Anyhow, the markets liked what they saw in the Jobs Report. The Dow rose 440 points to 25,336. My target for the move (see Friday’s Comments) was 25,300+. This was IF the move was sub-wave ‘b’ up of Wave ‘C’ down in the Bullish Scenario. If it’s not, and the rally is part of Wave 2 up in the Bearish Scenario, the Dow could go a little higher, maybe to 25,700. But IF this happens, it would NOT necessarily be a good thing. The Bullish Triangle Scenario needs to develop a few more legs before moving higher. So, what happens early next week will be important to watch.
From an indicator perspective, the Dow is still in the NO TREND Mode. Even after Friday’s strong rally, the VTI only had a reading of 46.9. So, the VTI is still NOT in positive territory (>50). The 2-period RSI finished with a reading of 96.8, so the Dow is overbought with NO TREND in place. It should start to pull back. If Friday’s rally was sub-wave ‘b’ up of Wave ‘C’ down in the Bullish Scenario, the Dow should start to decline back to the 24,200+/- level.
However. my combination VTI-volume indicator is still on a Buy Signal. The volume portion of the indicator is positive. This indicator generated its Buy Signal on 8 March wit the Dow at 24,895. So, IF the Dow is going to decline to the 24,200 level, we should see the VTI-volume indicator start to turn negative. If it does, it will be my signal that the next leg down is starting.
Friday’s Sector Ratio closed with a reading of 17-7 positive. Semiconductors, Healthcare, Computers, Technology, and Banks continued as the leading sectors. The weak sectors were Autos, Food Drug, Utilities, Media, and Real Estate. Students should note which sectors led the way Friday’s rally. For example, Intel (INTC) was up another 1.45 points. Microsoft (MSFT) was up 2.11 points. Apple (AAPL) was up 3.04 points. Cardinal Health (CAH) was up 0.74 cents. All stocks from the Strong Sector List. On the other hand, a stock from the weak auto sector, like General Motors (GM) was unchanged.
I can’t say it enough. Continue to trade stocks and ETFs in the Strong Sectors and avoid the weak ones.
This weekend, from a strategy perspective, students should review some of the things I said in my Class About Nothing. Start by reviewing the Flow Chart I posted several weeks ago. This chart basically says, when The Tide (or my VTI-volume indicator) turns positive, use the Strong Sector List to help select stocks and ETFs from the Dean’s List and Member’s Watch List. For example, IF you see the market starting to move up (Tide or VTI-volume indicator generate a Buy Signal), AND you see Semiconductors and Computers at the top of the Strong Sector List, pick ETFs and stocks from the Dean’s List and Member’s Watch List. That’s how I got INTC, MU, and MSFT, among others. That’s also how I got Cardinal Health. All these stocks were the highest ranked stocks in the Strongest Sectors once the market turned positive. I knew they would lead the way higher. They did.
So, this weekend, please take the time to study the Flow Chart and Lists. If the market starts to move lower next week, please make sure that you avoid stocks in the weak sectors. If the market starts to decline, it’s a good bet that stocks in these sectors will lead the way lower. You could get hurt!
Also, continue to develop your strategy for the future. Remember, even though the market had a nice day on Friday, we still don’t know which Scenario (Bullish or Bearish) is occurring. An eventual break above 26,000 (after five waves of the triangle are complete) would favor the Bulls. A move below 24,000 would be very Bearish.
So, while the Dow is in the NO TREND Mode, continue to develop your strategy for the next time the market starts to trend. Take time to thoroughly understand the methodology, especially how to use the Flow Chart and the Lists.
BTW, the feedback I received on the Class About Nothing was GREAT! IF you missed that Class and would like to attend a repeat session, please send me an email. I believe the information I presented in Class was EXTREMELY important for understanding and trading the current market. If there’s enough interest, I will schedule another Class.
Have a great weekend.
That’s what I’m doing.
Market Signals for
Only getting the Professor’s Weekend Review? Try his daily update Cum Laude service for 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.