Professor’s Comments August 22, 2018

Posted by OMS  at August 22nd, 2018

The markets were higher again yesterday. The Dow finished up 64 points after getting as high as 25,889. That’s only about 100 points from my target for Wave 3 up, so the wave could be nearing completion. The NASDAQ and SPX were up 38 and 6 points, respectively.  Volume on the NYSE was moderate, coming in at 100 percent of its 10-day moving average.  There were 162 new highs and only 21 new lows.

There were no changes to my key equity indicators after yesterday’s session. However the VTI-volume indicator on the Dollar generated a new Sell Signal. The VTI-volume indicator on the DOW remains positive.  The same indicator on the NASDAQ remains neutral. It’s still very close to generating a new Buy, but it hasn’t happened yet.

Yesterday, I talked about the recent VTI-volume Buy Signal on the Russell 2K. So yesterday, UWM, the tracking ETF for the Russell 2K goes up 1.95 points. Hmmm? The ETF was up 1.65 points from the open.

Same thing for the Dow. Its VTI-volume indicator generated a new Buy signal last Friday. Since the new signal, the Dow is up 155 points. Hmmm?

Pay attention to these signals.

BTW, all of the indexes are pretty overbought now, and only the Dow is in the Trend Mode. So when the 2-period RSI is overbought and No Trend is in place, the indexes usually pull back to relieve the overbought conditions. The key as to whether any pullback will turn into a buying opportunity will be in the indicators. As long as they remain positive, it’s a buying opportunity. But we need to be mindful that there’s a potential for Wave 4 on the Dow to correct back to the 25,000 level. In other words, we need to be careful.

Yesterday’s Sector Ratio increased to 17-7 positive.  The defensive sectors, like the Telecoms, FoodDrugs, Household Products, Transports, and Utilities continue to lead the Strong List.  However, Cap Goods has moved to the #6 position on the List. Students should note that how the Dollar fell yesterday pushing stocks in the Cap Goods sector higher. Caterpillar (CAT) was up 1.32 and is very close to generating a VTI-volume Buy Signal. Banks, Technology, and Financials are all on the Strong List, but still near the bottom.

The Weak List continues to be led by Material, Semis, Energy, Healthcare, and Leisure. Students should watch for the Materials sector to strengthen now that the Dollar has generated a VTI-volume Sell Signal.

With the Dow getting close to its Wave 3 target and the aggressive sectors starting to move up the Strong Sector List, students should start looking for opportunities in technology and small cap stocks as the rotation between sectors continues. As long as the Sector Ratio remains positive, the big institutional money will stay in the market. It will just rotate between the different sectors. Its when the Sector Ratio begins to turn negative when I’ll worry. That would tell me that the big boys have begun to sell and the party is over. This is not happening now.

Gold had a nice pop yesterday, reacting to the weak Dollar. However the pop was not enough to change the VTI-volume indicator. It remains on a Sell Signal.

That’s what I’m doing,

h

Market Signals for

08-22-2018

Professors Major Market

Timing Signals for

08-22-2018

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