Professor’s Comments August 14, 2018

Posted by OMS  at August 14th, 2018

The markets experienced a broad sell off yesterday. The Dow dropped 125 points to 25,188.  The NASDAQ and SPX were down 19 and 11 points, respectively.  Volume on the NYSE was moderate, coming in at 97 percent of its 10-day moving average.  There were 42 new highs and 117 new lows.

My VTI-volume indicator on the Dow and NASDAQ remains on a neutral signal.  The DMI and Coach (Money Flow Indicator) on the Dow is negative, but the same indicators on the NASDAQ remain positive.  The fact that these indicators are mixed tells me that money is NOT leaving the market but is rotating from the large cap international stocks to smaller cap stocks.  This is all being caused by a rising Dollar.

Europe remains a problem.  Students should note how EEM, the short Emerging Markets ETF and EPV, the short ETF for Europe, have moved to the top of the Dean’s List.  These inverse ETFs have replaced all the country ETFs for Europe (like EWG, EWQ, and EWD) that were on the Dean’s List for the past month.  My combination VTI-volume indicator for all the European ETFs is now on a Sell Signal.  The question remains when or IF this selling will start to spill over into U.S. markets.

The overall patterns suggest it will.  U.S. markets have entered the final wave of a Major five wave pattern that started in March 2009.  The fifth wave of this Major pattern started in November 2016, just after the election.  Since then, the markets have risen steadily in five waves, with final wave 5 up starting on 5 July when my VTI-volume indicator generated a Buy Signal with the Dow trading at the 24,356 level.  Since the Buy Signal was generated, the Dow has gained 1,347 points at its high.  Now, that signal has turned neutral.

The Sector Ratio has also turned neutral.  Yesterday’s Ratio came in at 12-12.  The Strong Sector List has also turned defensive with FoodDrugs, Telecoms, PharmaBio, Household Products and Foods leading the List.  About a week ago, I noted that several sectors were starting to show negative divergence in their indicators, but there were too many strong sectors to be worried about divergences.  I also said that I wouldn’t begin to worry about the market until the Ratio fell below 50-50.  We’re there now.

So, is it time to sell?  Hmmm?

I don’t think so.  The signals are still only neutral.  I’ll start selling once the signals turn negative.  But the fact that my market timing signals have turned neutral is a warning.  They’re warning that final wave 5 up could truncate and might not reach the 26, 600+ level.  Truncation of the final wave up of a Major five wave pattern is ALWAYS possible.  So please be careful. Now is NOT the time to be aggressive with your trading.

The Weak Sector List was led by Leisure, Material, Computers, Service, Financial and Semiconductors.  Seeing several of the sectors that usually lead the market higher on the Weak Sector List is not a good sign.  Without the Semiconductors, Financials, Banks, and Technology on the Strong List, the market will have a tough time moving higher.

Same for gold and the metals.  The Material Sector remains on the Weak List and my combination VTI-volume indicator for gold and silver remains on a Sell Signal.  As long as this indicator remains on a Sell Signal, I am avoiding the metals.

That’s what I’m doing,

h

Market Signals for

08-14-2018

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

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.