Professor’s Comments April 26, 2018

Posted by OMS  at April 26th, 2018

The markets continued to show corrective action on Wednesday, this time falling early in the session and then rising into the close. The Dow finished up 60 points at 24,084.   At one point, the Dow got as low as 23,823, slightly exceeding the previous day’s low of 23,829.  The NASDAQ was down 4 points while the SPX finished up 5. Volume on the NYSE was moderate, coming in at 110 percent of its 10-day moving average.  There were 26 new highs and 166 new lows.

Yesterday’s early decline and late rally was likely the end of sub-wave ‘a’ and the start of sub-wave ‘b’ within Wave ‘’e’ down in the Major triangle pattern that has been developing since 26 January.  If this is what’s happening, the Dow could rally to about the 24,250 level to complete sub-wave ‘b’ up before falling to 23,500 before Wave ‘e’ down completes.

The markets remain oversold with NO TREND in place.  The 2-period RSI on the Dow rose to 20.9 which is still oversold. Yesterday I mentioned the 2-period RSI on the Dow was EXTREMELY oversold with a reading of 2.29 which could lead to a short-term bounce. It did.  But because the A-D oscillator is still negative with a reading of 74.3, I would expect any rally to be short lived.  The odds still favor lower prices before Major Wave 4 completes. After that, Major Wave 5 up should take the Dow to new highs.

With NO TREND conditions in place, students should continue to expect large intraday price swings. Yesterday there was a ‘relatively’ small change in the A-D oscillator of 14 points.  This is slightly larger than the 10 points I normally use for a small change signal, but I mention it because it could lead to another Big Move during the next 1-2 days.

The cockpit indicators remain negative.  However yesterday’s Money Flow indicator on the Dow rose modestly on the rally.  This is a positive sign because it suggests that institutional money is coming in as the market falls. The Money Flow indicators are not at a point where they can trigger a new rally, but IF they continue to show strength as the market declines, it would be another indication that the decline is only corrective and not the start of Major move down.     

I ran The Professor algorithm again last night to what he’s saying about a new down trend starting.  He only had 22 stocks highlighted as Sells, still far from the 40-50 I would expect to see at the beginning of a new down trend.  So again, given the pattern, indicators, and Lists, I still believe that the markets are in the process of developing Wave ‘e’ down of the large triangle for Major Wave 4. 

The Sector Ratio fell slightly to 12-12 with Energy, Leisure, Telecoms, Technology, and Computers being the strongest sectors.  The Semis dropped off the Strong List and moved to the bottom of the Weak List.  The Weak List was led by Real Estate, Autos, Food, Retail, and Consumer Products. Students should note that the Sector Ratio is not showing any bias at this time. So without a strong bias one way or the other, the market will likely continue to trade within the boundaries of the large triangle pattern until the final waves of the pattern complete. This could take another 2-3 weeks, so be patient. 

Gold and the miners fell slightly yesterday.  GLD was down 0.82 cents at 125.41.  My combination VTI-volume indicator on GLD is remains on a neutral signal. The 2-period RSI on GLD fell to 20.63 after yesterday’s session, which means GLD is now in Rifle Trading territory.  The ETF is in an Up Trend as defined by its 50-and 200 day moving averages and is now oversold.  So today, I’ll be watching the 60 minute bars for possible entry points.  The overall pattern on GLD suggests a new Up Trend could be close to starting.   If I’m right about the pattern, gold (the metal) could be trading above 1,600 in the next 12-18 months. 

That’s what I’m doing,

h

Market Signals for

04-26-2018

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