Professor’s Comments August 31, 2017
Posted by OMS at August 31st, 2017
The markets finished higher yesterday. The Dow was up 27 points, closing at 21,892. The technology laden NASDAQ and the SPX were a lot stronger than the Dow, finishing up 65 and 11 points, respectively. Volume on the NYSE was moderate, coming in at 92 percent of its 10-day average. There were 75 new highs and 45 new lows.
My VTI-volume indicator generated a short-term Buy Signal yesterday. This signal clouds the technical picture for the short-term. The Dean’s List and The Tide are still neutral. The Hi-Lo indicator, the most sensitive breadth indicator in The Tide, fell yesterday even though the markets rallied. The DMI on the Dow is negative, but the same indicator on the NASDAQ (QQQ) has turned positive. So overall, the indicators are mixed.
However, the new Buy Signal from the VTI-volume indicator reduces the probability that the next Bear Market has started. Currently the odds are only about 60-40, as I must now consider two scenarios: one Bearish and one Bullish.
The Bearish Scenario suggests that the Dow rises to about the 21,940 – 21,950 level to complete wave 2 up before an impulsive decline for wave 3 down begins. This scenario still assumes that the Dow topped on 8 August, completed wave 1 down on 21 August and is in the process of completing retracement wave 2 up, with wave 3 down next. The fact that there have been NO impulsive moves to the downside also has me thinking that wave 2 up has not finished.
The Bullish Scenario suggests that the Dow has not topped yet and is forming wave ‘b’ of a five-wave triangle pattern for Wave ‘D’ within an Ending Diagonal Pattern. If this is the case, the Dow should rise to about the 22,000+ level to complete wave ‘b’, then trade between 22,000 and 21,700 to develop waves ‘c’, ‘d’, and ‘e’ of the triangle, before rising to 22,400+. This is still NOT my primary scenario, but if the Dow starts to move above 21,950, it will eliminate the Bearish scenario. The Bullish Scenario would also mean traders will have to wait until late-September-early October before the market tops and the next significant decline begins.
Yesterday’s Sector Report remained weak. The number of strong sectors stayed at 8. The strong sectors include the Material, Semis, Utilities, Computers and PharmaBio. The Weak Sector List remained at 15 led by Consumer Goods, Autos, Service, Energy and Household Goods. The fact that the Sector List ratio remains at about 2:1 negative is one of the reasons I’m still favoring the Bearish scenario discussed above.
Gold pulled back slightly yesterday. GLD fell 0.06 points to 124.36. It’s likely the ETF will see the 120 level near its 50 before starting another rally to about the 127+ level to complete wave ‘B’ up of Wave 2 down. If GLD does fall to 120, it will become an interesting short-term trade along with the other miners. Gold remains a short-term trade only as once wave ‘B’ up completes, it will likely fall to the 105 level during wave ‘C’ down.
The market should have a positive bias for the next few days as the pre-Holiday and end-of month trading is usually Bullish. However, the BLS will be releasing the August Jobs report at 8:30 tomorrow morning. This report can move markets, so the normally Bullish bias can turn negative if the report surprises traders. Be extremely careful with your trading now.
That’s what I’m doing,
h
Market Signals for
08-31-2017
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEU |
SUM IND | POS |
VTI | POS |
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