Professor’s Comments April 17, 2018

Posted by OMS  at April 17th, 2018

The markets rose yesterday, with the Dow testing and exceeding its recent rally high of 24,592.  This increases the odds that the Dow could push even higher toward 25,500+.  The Dow finished the day up 213 points at 24,573.  A close above 24,592 would tend to confirm the next leg of the zig-zag pattern for Wave 2 up is underway.

The NASDAQ and SPX were up 50 and 22 points, respectively.  Volume on the NYSE was moderate, coming in at 94 percent of its 10-day moving average.  There were 65 new highs and 41 new lows.

Yesterday, the Dow finally closed ABOVE its 50-day moving average.  For the past month, the Dow has been trading between its 50 and 200-day averages. So, by closing above its 50, it means that it is now free to move significantly higher.  Also, by consolidating between the 50 and 200 since 19 March, the Bollinger Bands have narrowed. So, IF the Dow moves higher now, it would begin to push on its Upper Bollinger Band. The resulting Band Squeeze could help push prices higher.

My VTI-volume indicator remains on a Buy Signal.  The Tide is positive, but the Dean’s List is still negative.  Also, when I ran The Professor algorithm last night, he only highlighted 8 stocks as ready to trend.  That’s still shy of the 50 stocks I need to confirm the start of a new, significant rally phase. In other words, it’s still early, so I need to be cautious.  Besides, with no positive index ETFs on the Dean’s List, I can’t start buying index ETFs.  However, with a positive Tide and a positive VT-volume indicator, I can use the strong Sector List to help me establish a few trial positions in stocks from the Member’s Watch List. 

The Sector Ratio strengthened considerably after yesterday’s trading. The Ratio now stands at 14-10 positive.  The Strong Lists now led by Energy, Household Products, Consumer Products, Material, Computers, Technology and Semiconductors.  Last Friday, I mentioned that the List was gaining strength and we’re seeing leadership from technology in the market.  This is a very positive sign.  The Weak List was led by Real Estate, Autos, PharmaBio, Banks, and Food Drug.  I plan to avoid these Weak sectors.

I’ll concentrate on Computers, Technology and the Semis.  Even though Energy is at the top of the Strong Sector List now, stocks like MRO and an energy ETF like DIG look a bit overextended.  I believe some of their recent strength has been a result of political strife in the middle-east. I’ll look to buy them in a pull-back when the 2-period RSI becomes oversold.  Right now, the 2-period on DIG is at 98.4.  I hate buying stocks when the 2-period RSI is this overbought. I’m also going to pass on Household Products. No diapers or toilet paper stocks for me.  A semiconductor stock like MU is high on the List, has a nice pattern, but its VTI-volume indicator is still negative.  This too tells me it’s early, so if I do anything today, I’ll look to scalp INTC and MSFT. Both stocks have positive VTI-volume indicators.

Remember, it’s early and there is still No-Trend in place.  So, scalp trading conditions still apply.  Small trial positions only! 

That’s what I’m doing.

h

Market Signals for

04-17-2018

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