Weekend Strategy Review November 24, 2019

Posted by OMS  at November 24th, 2019

The Dow rose 109 points on Friday, closing at 27,876. It was down 129 points for the week. The NASDAQ was down 14 points on Friday and down 21 points for the week.

There were no changes to the market timing indicators after Friday’s session.  The Dow, SPX, NASDAQ, and Russell 2K remain on Buy Signals.

However….

Wave Count and Volume:  Yesterday’s rally was not impulsive, so it’s hard to say whether the rally was associated with a wave 5 up within Wave 5 up or just a retracement rally from the decline since the 19 November high of 28,090.  The reason I say this is because neither the decline since 19 November nor the rally off last Wednesday’s low have been five wave affairs.  The most important take away from Friday’s rally was that it occurred with 30 percent less volume than Wednesday’s decline.  So, once again we’re seeing more volume on the declines than on rallies.  This type of volume action is usually associated with important market tops.

Breadth:  I’m seeing the same type of negative action with breadth as yesterday’s rally failed to turn even one of the indicators that make up The Tide.  So, The Tide remains Negative.  Yesterday, the A-D oscillator closed below zero for the 12^th consecutive session since 7 November, even though the Dow has been rising for most of the period.  This is an EXTREMELY unusual event as a negative A-D oscillator means that more stocks on the NYSE are falling rather than rising. 

Sentiment:  The low Put/Call ratios I mentioned last week proved spot on as the markets pulled back immediately after reaching its high.  During the week, the ratios remained low, so market sentiment remains Bullish which is usually the wrong side to bet with given the current pattern.

Seasonality:  The period between now and early December is usually very Bullish.  Holiday periods are generally supportive of higher prices and with Thanksgiving occurring near the end of the month, it usually benefits from end-of the month Mutual Fund re-balancing.  Students should not underestimate this positive effect.

Sector Ratio:  The Ratio improved to 18-6 Positive after Friday’s session.  As long as the Ratio remains positive, the odds continue to favor higher prices as more sectors are moving higher than lower.  The Strong Sector List was led by Healthcare, PharmaBio, Food Drugs, Retail and Semiconductors.  The Weak List was led by Energy, Food, Materials, Utilities and Transportation.

Bottom Line for Equities.  The markets remain at a critical point in their patterns, showing negative divergences and sentiment readings that suggest they could begin to change direction in the days ahead.  There is a Fibonacci cluster date in early December where the markets could begin to turn negative.  My experience with these dates is that while they are usually accurate, the actual turn could occur as much as a week or so on either side of the date.  In other words, even though the market timing indicators and Sector Ratio are currently positive, the breadth and sentiment indicators and pattern suggest that the market could begin to decline anywhere between now and early December. 

Gold (GLD) fell 0.26 cents to 137.74.  Gold remains on a Neutral Signal as it continues to trace out a Wave 4 triangle that is becoming complex.  The pattern continues to suggest lower prices with a target near the 134 level.  If the triangle develops into a 3-3-5 pattern, the price of GLD could fall even lower.  This would put gold prices near or under the 1420 level.  Gold closed at 1463 on Friday.  I’m avoiding gold for now.

The Dollar rose fractionally on Friday with UUP gaining 0.08 cents.  UUP appears to be nearing completion of a Wave 2 rally.  If this is the case, the next major move in the Dollar should be down.  And IF the Dollar begins to decline, the Euro should rally.  Both actions, because they will likely be impulsive Wave 3s, should be tradeable events, and will likely impact equity prices.

Bonds (TMF) have moved to a Neutral Signal.  After topping on 1 October, TMF declined into late October and then bounced in what appears to be an a-b-c retracement rally. The rally appears to be nearing completion.  If this is the case, the next major move in Bonds should be down. It should also be a Wave 3.  Because a Wave 3 is the best opportunity for a profitable trade, I’m just waiting for a signal change before buying TBT, the inverse Bond ETF, for the Model.

Crude Oil (UCO) fell 0.27 cents on Friday to 18.4.  I’m still waiting for the ETF to move above the 19 level.  On Friday, my VTI-volume indicator rose to 68.68.  If it can move above 70, the ETF will begin to trend.  I’m just watching and being patient.

The Model sold its shares of DXD just after yesterday’s open at 23.84.  The Model continues to hold 1,500 shares of UCO and $101,342 in cash. The Model plans to use its cash to buy additional shares of inverse index ETFs once the timing signals on the equity indexes turn negative. The Model is currently up 28.9 percent after Friday’s session.

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

11-25-2019

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.