Professor’s Comments April 24, 2018

Posted by OMS  at April 24th, 2018

The markets fell early, then rallied into the close.  The Dow finished down 14 points at 24,449.  The NASDAQ and SPX were down 18 and 1 points, respectively. Volume on the NYSE was moderate, coming in at 97 percent of its 10-day moving average.  There were 63 new highs and 108 new lows.

Yesterday’s early decline and late rally appeared to be corrective.  The decline to 24,328 could have marked the end of sub-wave 2 down within the five-wave zig-zag pattern for Major Wave 2 up.  If this is the case, the markets should continue to rally today as sub-wave 3 begins to unfold.  Once sub-waves 3, 4 and 5 of this rally complete, the Dow should be trading near the 25,500+ level, possibly higher.

The reason I say this is because of the large triangle pattern triangle that has developed since 26 January.  Triangles are continuation patterns. Prices normally leave a triangle in the direction they entered the pattern.  They are not usually reversal patterns. So, even though the Dow crossed below its 200-day moving average on 2 April, which would normally identify the move as Wave 1 down in a new Bear market, the large triangle tends to argue against this, suggesting instead that the large triangle is part of a larger Wave 4

In other words, we’re back to two scenarios:  One Bullish and one Bearish.  Both scenarios suggest a rise to the 25,500 level, but IF the Bullish case is unfolding, the markets could rally beyond 25,500 in the next move up, possibly exceeding the 26 January high.

None of the indicators are confirming any of this now.  It’s all in the patterns.  And as we know, patterns can and do morph into other patterns.  But at this point, I simply can not ignore the large triangle.  I can’t.  To do so would be foolish on my part.   

But with negative indicators, I can’t get aggressive on the long side either. So, I’m going to take it slow and continue with my scalping.  Remember, the market is still in the NO TREND Zone.  Yesterday even though the VTI on the Dow was heading down, it still had a positive reading of 54.09. In other words, the momentum is still positive!  The CCI closed with a reading of -9.16.  So clearly there is NO TREND in place. With the 2-period RSI showing an oversold reading of 13.9, the market should rally.  And IF I’m right about sub-wave 2 completing yesterday, the market should rally hard today.

Which Sectors will likely lead the market higher?  Hmmm?

Let’s look at Sector List.   Last night’s Sector Ratio was 13-11 positive.  Energy, Leisure, Telecoms, Technology, and Material were the strongest sectors.  So, I’m going to choose stocks from those sectors.

The energy sector looks a little overbought at this point, so I’m going to wait for a pullback before adding to shares.  I’d love to see CVX get closer to its 50-day moving average, near 117.  But at this point, any reading below 30 on its 2-period RSI will cause me to initiate a Rifle Trade on the stock.  Remember, CVX is in an Up Trend, so as long as the DMI is positive, Rifle Trading conditions apply.  Just watch the 2-period RSI to tell you when it’s a good time to go hunting.

I’m still watching (and trading) LVS from the Leisure sector. Look at the large triangle that’s formed since late January and you’ll know why.  If the stock starts to move above 75 in the days ahead, it should have a nice run.  That triangle is the ‘Blade’ on an 18 point ‘Stick’ that began on 30 October.  If I add those 18 points to the 4 April low, I get a potential target near 84. 

I’ll also be watching technology.  A stock like GE has been getting hammered for the past year, dropping from 31 to 13.  During the decline, the stock formed a Three Lows to a Bottom (TLB) Pattern and has recently moved above its 50-day moving average.  From a long-term perspective, much technical damage has been done to the stock that will need to be repaired.  However, all the signs for a turnaround are in place on the chart, so GE could reward patient investors.  I’m not all that patient, especially in this market.  But If the market rallies like I expect, GE should move with it.  My combination VTI-volume indicator is on a Buy Signal.

Here’s the thing:  Even though technology is near the top of the Sector List, the Computer Sector is still near the bottom.  The Semis are not even on the Strong List.  I have a problem with this.  That’s because I believe IF this market is going to move toward 25 500+, it MUST have strong participation from these sectors.   Same for the financial sector.  It too is on the Strong List, but at the bottom.  This MUST change.

So, for the next day or so, I’m just going to scalp a few stocks to the upside and wait. I’d also like to see what The Professor algorithm says about any rally.  I’d feel a lot better about things if I saw him highlight a bunch of stocks to the long side.  He’s not doing this now.

Scalping a few longs.

That’s what I’m doing,

h

Market Signals for

04-24-2018

One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE

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