Professor’s Comments April 19, 2017
Posted by OMS at April 19th, 2017
After gaining 184 points on Monday, the Dow fell 114 points yesterday, closing at 20,523. Volume was moderate, coming in at 106 percent of its 10-day average. There were 98 new highs and 22 new lows.
The VTI on the Dow changed direction again and is now heading down. With a reading of 33.7, the indicator has a negative bias, but is still not in the Trend Mode. This means that yesterday’s decline was likely part of a corrective wave within Major Wave ‘D’ down. This corrective wave could still rally to the 20,750 level before it completes, but it doesn’t have to. Once this corrective wave completes, the Dow should start to decline to the 20,000 level or below.
Yesterday’s decline took the Dow back down to the 20,460 level. This is the second time in three days that the 20,450 level has been tested without breaking. The 20,413 level is also where Wave ‘a’ down of the current triangle pattern was stopped on March 27. These two points form an important support line and increase the probability that the Dow will rally back to 20,750 before starting the next wave down toward 20,000.
If this rally happens, I will become increasingly aggressive in establishing short positions from higher levels. I still believe that short positions in inverse index ETFs from the 20,650 level or higher will be winners as the market moves into late April – early May.
While the Dow is bouncing around in its triangle, the S&P is forming an entirely different pattern. Since rallying to a small top in early April, the index has pulled back and appears to be forming the right shoulder of a small Head & Shoulders pattern. The neckline of this pattern is near the 2330-2335 level. It looks like the pattern needs one more small rally to about the 2350 level before it completes. If this happens, students should watch the next pullback for a break of the neckline. The head of the pattern is about 50 points, which places the target for the SPX near the 2280-2285 level.
The cockpit indicators remain mixed with NO Trend in place. So, scalp trades using the 2-period RSI remain the preferred method of trading. Trading within major triangle patterns is always difficult. Keep positions small and take profits when you have them.
Yesterday’s Sector Report was little changed. The report had 16 strong sectors and 8 weak. The Utilities, Housing, and Food Sectors were the leaders, with Energy, Service, Banks, and Autos lagging. Currently there are only 6 Sectors with positive Trend Scores, so even though the strong sectors outnumber the weak sectors by 2:1, most of the of the sectors are now in down trends. This tells me that short positions established from higher levels should continue to be good bets into late April.
Gold rose as equities pulled back. Gold appears the be starting Wave 3 up. As long as GLD remains in an Up Trend, I will continue to look for Rifle Trades in gold ETFs and mining stocks. Yesterday the VTI on GLD finished at 86.0. The VTI on GDX finished with a reading of 76.3. Both VTI’s indicate a strong Up Trend.
BTW, UDN, the inverse Dollar ETF remains on the Dean’s List. Yesterday the ETF rose 0.16 cents to 21. The rise increased the VTI to 58.1, which is a positive bias. As long as the VTI on UDN remains positive (above 50), gold should continue to remain strong.
That’s what I’m doing,
h
Market Signals for
04-19-2017
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | POS |
VTI | NEG |
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