Weekend Strategy Review March 18, 2018
Posted by Laurie Liessmann at March 18th, 2018
The markets finished the week flat to slightly positive. The Dow gained 73 points on Friday. It was down 389 points for the week. The NASDAQ was flat on Friday, but down 79 points for the week.
It’s starting to look like the Bullish Triangle Scenario I have been talking about for weeks, is nearing completion. A break above Dow 25,500 next week would increase the odds for a move toward 28,000+. This would be final Wave 5 of the five-wave rally that started with the November 2016 election.
The Bearish Scenario is still in play, but the odds are dropping with every passing day. A decline below Dow 24,000 will need to occur for this Scenario to occur. Right now, I don’t see this happening, but it’s entirely possible if some type of Black Swan event (like a trade war) occurs. Otherwise, the markets should do what they usually do after they develop a Bullish triangle. They go up.
Here’s the thing: In Class I always talk about Trends and No-Trends. Right now, we have two types of markets in play. The technology heavy NASDAQ is in an Up Trend. Its VTI is currently showing a reading of 78.4, so it’s in the Up-Trend Mode (above 70). On the other hand, the more stodgy Dow has a VTI reading of 44, so its still nowhere near entering the Trend Zone. But it does have that Bullish Triangle, and triangles are consolidation patters, so once it completes, prices should start to move up. This is why I believe we’ll be off to the races next week.
I can also add another item to my ‘tip’ sheet. On Friday, my combination VTI-volume indicator on the Dow turned positive. So, I now have Buy Signals on both the NASDAQ and Dow. Also, Friday’s rally on the Dow caused the Up-Down oscillator to turn positive, so now 3 of the 4 indicators that make up The Tide are positive.
Do you see where I’m going here? Hmmm?
OK, so from a strategy perspective, I must favor a Bullish Breakout from the triangle. So, what to do? Well, going back to the Flow Chart I posted several months ago, the chart says, “When the Tide Turns positive, I select ETFs and stocks in the strongest sectors from the Dean’s List and Member’s Watch List.” That’s all I do. Period. More recently I have been using the VTI-volume indicator along with The Tide as the indicator to start the process. So now the VTI-volume indicator is positive for both markets, and 3 of the 4 indicators that make up The Tide are positive. Once all, 4 indicators are positive, it will be Post Time.
Yesterday, while I was smoking a nice cigar at the rail, I was watching Micron put in a bullet workout. Bullet workouts are noted in the racing program by an asterisk. It means the horse is in great shape. Like I told you yesterday, I have a few tickets on Micron. Why? Because Semiconductors, Technology, Computers, Healthcare, and Household Products continue to lead the Strong Sector List. So, IF the market starts to rally next week like I expect, stocks in these sectors should lead the way.
Do you really think that stocks from the Food Drug, Auto, Transportation, Retail, or Material Sectors will lead? I don’t. They’re at the top of the Weak List for a reason. I have no idea what the reason is, but I don’t care. I just know that I don’t want to be anywhere near them. Yeah, some of them might move up if the overall market rallies. But I don’t bet on weak horses. That’s why I only select horses from the strong sectors.
BTW, Micron was up 1.74 yesterday. That’s why I was smoking a nice cigar.
Have a great weekend. Develop your strategy using the Lists and listen for the bugler to play the Call to Post (Tide turns positive).
That’s what I’m doing,
Market Signals for
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