Professor’s Comments February 1, 2017
Posted by OMS at February 1st, 2017
The markets were mixed yesterday. The Dow fell over 187 points early, but gained back 80 of those points to close at 19,864. The NASDAQ gained 1 point and the SPX lost 2. Volume was heavy, coming in at 111 percent of its 10-day average. There were 72 new highs and 19 new lows.
The story of what is happening with the markets now is being told by the two Money Flow indicators on the cockpit. They remain positive. Money is NOT leaving the markets. Not only is money not leaving, it’s not even moving between sectors.
So yesterday, when Big Cap stocks were down early, traders stepped in to do some bargain hunting, checking the markets decline. It’s likely that this type of action will continue if the Money Flow indicators remain positive.
Yesterday’s action was unusual from another perspective. Not only did the Money Flow indicators not decline, they increased! Also, the number of advancing issues swamped the number of decliners by almost 2:1. This was very strange on a day when the Dow was down almost 200 points at one point. It tells me that a lot of traders are still very Bullish about this market and are willing to use money to back up their bets. This will likely keep the markets propped up until some type of external event changes their thinking.
Today is a Fed Day, so it’s likely that not much will be happening until after 2pm when Ms. Yellen and Company announce their latest policy thinking on interest rates. Most traders are assuming that the Fed won’t be doing much with interest rates in the current environment. Especially after the government announced that GDP growth slowed to 1.9 percent in the final quarter of 2016. Growth in the previous quarter was 3.5 percent, so it’s obvious that a lot of Ms. Yellen’s projections for a strong economy, which was why she was talking about raising rates, were wrong. Anyhow, it will be interesting what she says later today. Fed Days are events that could change investors thinking and move markets.
Yesterday’s Sector Report was little changed. The report showed 15 strong and 9 weak sectors. The Semiconductors, Transports, and Banks continue to lead, with Retail, Foods, and Service lagging. The Financial and Energy Sectors had a large negative change in Trend Score. Large changes in Trend Score usually mean that something is going on in that sector. It usually pay$ to watch these sectors for possible day trades.
As the market declined, gold rose. The VTI on gold (GLD) has turned positive, however with a reading of 65.7, the indicator is still not in the Trend Mode. The 2-period RSI is currently showing a slightly oversold reading of 90, so without a Trend in place, it’s likely that GLD will continue to remain in its trading range. So far, I only see one low in the ‘Blade’. I’d like to see one more.
On the other hand, if Ms. Yellen mentions anything about inflation picking up in her comments, gold could start moving higher. At 115.5, GLD is trapped right in the middle of its 50 and 200 day moving averages. If it’s going to move significantly higher, it needs to move above the 200. If it doesn’t, it might have to put in one more low before that happens. I continue to view any pullback in the 2-period RSI as a buying opportunity.
That’s what I’m doing,
h
Market Signals for
02-01-2017
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG |
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