Weekend Strategy Review May 20, 2018
Posted by Laurie Liessmann at May 20th, 2018
The markets traded flat to down on Friday. The Dow rose 1 point closing at 24,715. It was down 116 points for the week. The NASDAQ and SPX were down on Friday, losing 28 and 14 points, respectively. The NASDAQ was down 48 points for the week; the SPX was down 14 points.
Friday’s trading appeared to be a continuation of wave ‘C’ of Wave 2 down. Friday’s low on the Dow was 24,664, so by not exceeding the low of 24,629 on 15 May, it still might need another small dip before Wave 2 completes. I say ‘might’ because Friday’s trading produced a major change in a several of my key indicators.
The first major change was that the VTI-volume indicator on the Dow moved above 70, causing it to enter the Up-Trend Mode. This is the first time this indicator has been in the Trend Mode since it came out of the Trend Mode in early February. Before that, the indicator entered the Trend Mode on 27 November 2017 resulting in a move of over 3,000 Dow points. So, seeing the indicator back in the Up-Trend Mode is significant.
The second item of significance is the fact that we got a second consecutive Small Change Signal from the A-D oscillator on Friday. Small Change signals usually result in a Big Move within 1-2 days. So, the early part of next week should be interesting.
But before you get too excited about the upside, the market also produced an important negative signal on Friday. The same VTI-volume indicator that entered the Up-Trend Mode on the Dow generated a Sell Signal on the NASDAQ. So, one of these signals must be wrong. If Wave 3 of Major Wave 5 up on the Dow is about to start, I don’t see how this can happen without participation from the NASDAQ. On the other hand, the NASDAQ’s VTI-volume indicator is still showing a very positive bias with a reading of 68.5, so if the market starts to move higher early next week, I would expect this indicator to turn around and join the Dow in the Trend Mode. If his happens, the wave count and pattern suggest we could be off to the races by early next week.
But I need to see conformation from the Sector Ratio and The Professor. Right now, The Professor is sleeping. This is something he usually does during a Wave 2. But when an impulse wave is starting, The Professor is wide awake and screaming. This hasn’t happened …yet.
Also, the Sector Ratio is still NOT where I want to see it. On Friday, the Ratio was still 18-6 negative. This needs to change. If Wave 3 up is going to start, the Ratio should begin to turn neutral early in the week, and then become very positive by weeks end. Remember, we’re looking for an impulse wave to start, so the indicators MUST confirm this, otherwise something else is going on.
Anyhow, the early part of next week should be very interesting. With a positive VTI on the Dow and an A-D oscillator signaling that a Big Move is coming, I will be ready to push the Buy button on the orders I have entered in my trading platform. Remember, IF I’m right and Wave 3 up of Major Wave 5 up is about to start, the move should take the Dow to new all-time highs. The move should be IMPULSIVE! If it’s not, it’s probably NOT associated with Wave 3 up. This is the time when I’m looking to buy strength. I’m not looking for bargains or any weakness now. So early in the week, IF the market starts to rally, watch the Strong Sector List closely.
Right now, Energy, Healthcare, Consumer Product, Utilities, and Materials are the Strongest Sectors. Several of these sectors, like Consumer Products, Utilities, and Materials, should be replaced by the Semiconductors, Technology, Computers, Banks, and Financials. I strongly believe that IF the market is going to 26,600+, it’s NOT going there on the back of the Utilities and Material Sectors. So, this needs to change. Watch for it.
Bottom Line: My strategy for next week is petty simple. If the market starts to move impulsivey higher on Monday or Tuesday, I’ll be looking to buy stocks and ETFs aggressively from the Member’s Watch List and the Dean’s List. I’ll be using the Strong Sector List to help guide my selections. As long as my VTI-volume indicator on he Dow remains in the Up Trend Mode, I will be looking to buy and hold (not trading) stocks. Like I said, the strategy is simple.
Have a great weekend.
That’s what I’m doing,
BTW, I’m in Cape Cod this week. It’s cold and raining. I’m begining to wonder why I booked this trip :>)
Market Signals for
|A/D OSC||SM CHG|
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