Weekend Strategy Review November 2, 2019
Posted by professor at November 4th, 2019
The markets rallied hard on Friday after three consecutive days of small change signals from the A-D oscillator. The Dow finished with a gain of 301 points, closing at 27,347. It was up 389 points for the week. The NASDAQ rose 94 points on Friday and was up 143 points for the week.
Friday’s quick Comments proved spot on as the Dow opened higher and continued to rally into the close. The rally had all the characteristics of a wave 5 up and if that’s the case, the Ending Diagonal Pattern I showed on Friday’s chart should be complete or nearly so. The rally carried slightly above the 9 September high of 27,307, but remains short of the 15 July high of 27,399, so the Dow is right in the middle of those two highs.
If the markets begin to move lower early next week, the Model will begin to establish short positions on the Dow and NASDAQ using inverse index ETFs.
The markets are at a point where most of the major equity indices, Bonds, Crude Oil and Gold are at critical are points in their patterns and could begin to change direction in the days ahead. Now that all five waves of the Ending Diagonal Pattern on the Dow are in place, the odds for a move lower have increased significantly. Ending Diagonals have a target of where they began, so in this case, the target is the 3 October low of 25,743. However, we still need to pay attention to the 27,399 level early this week, because it it’s broken, the Dow could still rally to the 27,500 – 27,700 level. I give this scenario low odds as long as the Dow remains under 27,399. On the other hand, IF 27,399 is broken, it means that wave 5 up has developed a ‘through over’ wave which could easily carry it to the 27,500+ level. So, what happens early next week will be critical to the direction of our short-term trading.
There were no changes to the market timing indicators after yesterday’s session. The Dow, SPX, NASDAQ, and Russell 2K remain on Buy Signals.
The Dean’s List and the Tide remain Positive.
The Sector Ratio stayed at 21-3 Positive after Friday’s session. The fact that the Ratio did not increase after Friday’s 300 point rally is a negative sign. Student should watch for any negative increase in the sectors, as it will likely signal the start of the decline I see coming.
The Strongest Sectors are still Service, Retail, Autos, Healthcare and Semiconductors. I noticed that the Energy Sector has moved to the # 6 position on the Strong List. The three weak sectors were Household Products, Food, and Leisure.
Gold (GLD) rose 0.13 cents to 142.56 yesterday. Gold remains on a Buy Signal, but it’s still not clear if gold is breaking out of its Wave 4 triangle. A move above the 25 October high of 142.83 would be a good indication that Wave 5 up is starting. If this happens, gold (the metal) could rise to the 1,600-1,650 level. This would put the target for GLD near of slightly above the 148+ level.
Bonds (TMF) fell Friday causing TBT to gain 0.16 cents to 27.07. Bonds remain on a Neutral Signal. It’s still not clear if the current small wave 2 rally in Bonds is complete or will require a bit more rally before the next wave of selling resumes. The Model will continue to hold its shares of TBT as long as the timing signal remains Neutral. The developing ‘Blade’ on TBT’s Hockey Stick Pattern continues to suggest higher prices towards the 28+ level.
UCO (crude oil ETF) rallied hard from oversold conditions on Friday. The ETF gained 1.14 cents to 17.30 and is now just under the Upper Trend Line of its 4 month triangle. A move above the 18+ level would confirm the breakout, which has a potential target near the 27-28 level. Crude Oil moved back to a Buy Signal on Friday.
There were NO CHANGES to the Model after yesterday’s session. The Model continues to hold 1,000 shares of GDX, 300 shares of NUGT, 1,500 shares of UCO, 600 shares of TBT and $51,223 in cash. The Model is up 29.5 percent after Friday’s session which translates to an annualized return of 46.1 percent.
If I had to rank the best trades on the Board at this time based on patterns, they would be Long Crude Oil (possible breakout of a long term triangle), Short Bonds (once minor wave 2 up completes), Short Equities using DXD, QID or SQQQ, (once the short-term indicators turn negative, and Long Gold (assuming wave 5 up is about to start). Gold is the most uncertain of the bunch because its pattern is a 2-month long downward sloping triangle. If gold doesn’t break out of its triangle in the next week or so, the momentum to the downside will begin to increase. If this happens, it would mean that gold (GLD) topped on 4 September and is starting a major Bear Market. Right now, I give this scenario low odds, but gold needs to break out soon or the odds of a significant decline starting will increase with each passing day.
The Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
Have a great weekend.
That’s what I’m doing,
h
Market Signals for
11-04-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 25 Oct 2019 |
NASDAQ | POS | 24 Oct 2019 |
GOLD | POS | 23 Oct 2019 |
U.S. DOLLAR | NEG | 30 Oct 2019 |
BONDS | NEU | 30 Oct 2019 |
CRUDE OIL | POS | 01 Nov 2019 |
DISCLAIMER
As always, the Professor never makes recommendations. The information is provided on an educational basis so you can have informed discussions with your financial advisors and/or accountants about your individual investment decisions.
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