Professor’s Comments April 13, 2018

Posted by OMS  at April 13th, 2018

Even though the markets rallied hard again yesterday, nothing changed with respect to the overall pattern.  The markets continue to trade between the 50 and 200 day moving averages.  At some point, they will break out of the current consolidation pattern and start a new directional trend.  Until then, with No Trend in place, scalp trading conditions remain in effect.

The Dow finished the day up 293 points at 24,483.  It got as high as 24,592, slightly exceeding its 50-day moving average at 24,592 before pulling back to close under the 50.  So, now that the 50-day moving average has been tested once, with a positive VTI-volume indicator, I would expect the Dow to challenge the 50 again within the next day or so.  If it closes above the 50 this time, it’s likely that it will begin a move toward 25,500+ as wave ‘c’ up of Major Wave 2 up unfolds. IF the Dow closes above 24,592, the rally will likely continue into late May (providing of course that the government doesn’t do something stupid like bombing Russian troops in Syria). If this happens, all bets for a rally are off.

Volume on the NYSE was moderate, coming in at 93 percent of its 10-day average.  There were 53 new highs and 41 new lows.

The two scenarios I have for the markets are still on the board. A break below 23,500 would likely send the markets reeling in Major Wave 3 down, while a close above 24,500 would mean a zig-zag or 3-3-5 flat pattern is forming to complete Wave 2 up. If the latter pattern is occurring, the Dow will likely rally to the 25,500+ level before Major Wave 3 down begins. Both scenarios are likely at this point although with a positive VTI-volume indicator, I must start favoring the Bullish Scenario. The major difference between the Scenarios is that in the Bullish Scenario, the start of Major Wave 3 down, the crash wave, will likely be delayed for another 6 weeks or so, probably into late May.

The Sector Ratio strengthened yesterday with several technology sectors and Material Sectors (with gold) joining the Strong List.  So now, the Strong List consists of Energy, Consumer Products, Household Products, Material, Computers, Telecoms, Technology and Semiconductors.  This is the first time in weeks that we’ve seen leadership from technology in the market.  This is a very positive sign. Just remember that at this point, the Relative Strength of the Strong Sectors is mostly 1s and zeros, so the sectors are still not all that strong.  At least they’re gaining strength.

Another thing that’s gaining strength is the Dean’s List.  The List is now positive and starting to lengthen.  Last night’s Dean’s List was almost twice the length of the Lists we’ve been seeing the past few weeks. 

So, with a positive Tide, a positive Dean’s List, a Sector Ratio that’s increasing and a positive VTI-volume indicator, I’m going to start trading the long side.   However, with my VTI still only showing a reading of 42.2 (bias is still negative) and the CCI only reading -19.7, which is still far from the Trend Zone, this tells me that IF I trade the long side now, I MUST do it with caution. Scalps only!!! 

A few of the stocks I’ll be looking to trade are: INTC, MSFT, and CVX.  With DIG now back on the Dean’s List and the calendar showing mid-April, I’m going to give energy a shot.  Energy ETFs and stocks like CVX and Marathon have moved to the top of the Dean’s List.  And now that Energy is the strongest Sector, the sector could lead the market higher into late May.  BTW, energy stocks like MRO and CVX are now in the Trend Mode.  Students should check out their CCIs. 

Gold pulled back from overbought conditions yesterday. GLD fell 1.49 points to 126.67.  Students should note that even though my VTI-volume indicator remains on a Buy Signal, it’s still NOT in the Trend Mode.  So, pullbacks from over bought conditions MUST be expected.  I look at these pullbacks as Buying opportunities.  Yesterday’s 2-period RSI on GLD fell to 30.6.  So, the stock is in an uptrend with its 2-period RSI oversold. Hmmm?  Where have I seen this before?  ‘Rifle Trade’?

Also, remember the Flow Chart we use when the Tide turns positive.  With a positive Tide, we use the Strong Sector List to help us select strong stocks and ETFs from the Dean’s List and Member’s Watch List.  Just use caution because the market is still NOT in the Trend Mode.

That’s what I’m doing,

h

Market Signals for

04-13-2018

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