Professor’s Comments August 15, 2018

Posted by OMS  at August 15th, 2018

One day after a broad- based sell off, the markets bounced back with a show of surface strength. However, the internals continue to weaken. The Dow gained back 112 of the dropped 125 points it lost on Monday, closing at 25,300. The NASDAQ and SPX were up 51 and 18 points, respectively.  Volume on the NYSE was moderate, coming in at 95 percent of its 10-day moving average.  There were 89 new highs and 77 new lows. Students should note that the number of new highs and new lows are getting closer to each other.  This is usually a sign that a top of significance is approaching.

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 continues to rotate from the large cap international stocks to smaller cap stocks.  Again, this is being caused by a rising Dollar.

The Tide is negative while the Dean’s List is positive. This is a problem for me now, because I always start looking for things to buy (or short) when the Tide turns.  But right now, with a positive Dean’s List, there are no inverse index ETFs on the List to buy. So, with a neutral VTI-volume indicator on the Dow and NASDAQ and no inverse index ETFs on the List, I’m on the sidelines.

The longer-term patterns continue to suggest a top is approaching. The short-term pattern on the Dow suggests that yesterday’s rally was part of a small inverse Hockey Stick, that started from the 7 August high of 25,693.  Since reaching that high, the Dow has fallen for four consecutive days, with loses of 45, 74, 196, and 125 points before yesterday’s rally of 112 points.  In other words, the four day impulsive decline of 399 points may have been the ‘Stick’ of the new declining pattern. If this is the case, yesterday’s rally was the start of the ‘Blade’.

If the market continues to trade sideways during the next few days, it would set up the next decline, which by measuring the ‘Stick’ would be about 400 points. A decline like this would surely turn the VTI-volume indicator negative and put a few inverse index ETFs on the Dean’s List.  So be careful.  The problems in Turkey/Europe represent a clear and present danger to equities, especially the financial stocks. This is occurring while the Fed is tightening the money supply by selling the assets it has accumulated since 2009.  Fed selling will continue to put pressure on the equity markets.

The Sector Ratio remained at 12-12 neural.  The Strong Sector List remains defensive with FoodDrugs, Telecoms, PharmaBio, Household Products, and Foods continuing to lead the List.  The aggressive sectors like Technology, Computers, Semiconductors and Financials are all on the Weak List, near the bottom.  As long as these ‘aggressive’ sectors remain on the Weak List, the market isn’t likely to go significantly higher.  If these sectors start to move up on the Weak List, the market will move lower.  Remember, these sectors lead, and if they start to weaken, they will lead the market lower.

Same for gold and the metals.  The Material Sector, which includes gold, remains near the top of the Weak List and my combination VTI-volume indicator for gold and silver remains on a Sell Signal.  If the VTI-volume indicator remains on a Sell Signal, I will avoid the metals.  Remember, this indicator generated a Sell Signal on 15 June with GLD trading at 121.34.  Yesterday GLD closed at 113.07.  Pay attention to the indicators.

That’s what I’m doing,

h

Market Signals for

08-15-2018

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

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