Professor’s Comments August 22, 2019
Posted by OMS at August 22nd, 2019
The markets began their wave ‘c’ up rally within Wave 2 up yesterday, a rally that should take the Dow close to the 26,600 level. The Dow got as high as 26,268 before finishing at 26,203 with a gain of 240 points. The NASDAQ and SPX were up 72 and 24 points, respectively. Volume on the NYSE was low again, coming in at 85 percent of its 10-day moving average. There were 146 new highs and 210 new lows.
There were NO CHANGES to the market timing signals. The Dow and SPX remain on Neutral Signals. The NASDAQ and Russell 2K remain on Sell Signals.
The Tide is Neutral while the Dean’s List has turned Positive. The Money Flow indicators on the Dow, SPY, and NASDAQ remain Negative.
So overall, the signals remain mixed which is usually a good indication that the market is undergoing a correct wave.
Students should take the opportunity today to look at a chart of the Dow and how it has moved down since topping on 16 July at 27,399. The first move down into 7 August low was a ‘Rope Jump’, something we talk about all the time in Class. By moving below the 50 and the 200 day moving averages, it identified the decline as Wave 1 down. That’s what ‘Rope Jumps’ are about. They help us identify Wave 1s. So once Wave 1 down was complete, we had to expect a Wave 2 retracement. This is what everything since 7 August has been about…Wave 2. Students should note two things about the Wave 2. The first is the choppy, a-b-c like trading. The second is that all this trading is being done BELOW the 50 day moving average. And by staying below the 50, it continues to pull the 50 down, closer and closer to the 200. Students should also note how back in early June, the Dow was trading comfortably ABOVE its 50 and 200 day moving averages. The Dow was in an Uptrend. This is no longer the case. Now the Dow is between to 50 and 200, so the market is currently in transition. And once wave 2 up completes, the Dow should resume its decline which should pull the 50 BELOW the 200. Then once the large institution investors see this, they will no longer be able to justify the holding of stocks and will start selling in earnest as the market enters a down trend (50 below the 200). Spend some time looking at this today if you want to get a better feeling for what’s happening in this market. Don’t be confused about all the down-up-down-up action. Step back and think…isn’t this what I learned in Class?
IYT, the transportation ETF, gained 1.9 points yesterday to 182.14. The VTI-volume indicator turned neutral, telling me the trannies are also correcting. The Money Flow indicators on IYT remain very negative, so I wouldn’t be surprised to see transportation stocks lead the market down once the current corrective wave is complete. BTW, the trannies are now in a down trend, as the 50 day moving average is below the 200.
Gold (GLD) pulled back slightly dropping 0.45 cents to 141.76. The 2-period RSI on GLD closed at a neutral 39.6 yesterday. I continue to view any pullback below the 30 level as a buying opportunity for ETFs that own the metal. Mining stocks and ETFs could pullback a bit more than those owning the pure metal, as the HUI, the index for the miners, suggests that the 180 level is possible. Yesterday, the HUI closed at 217.07. The 50 is at 201.06, with the 200 at 178.17, so the miners appear somewhat overbought. I’d view any pullback near the 50 as a buying opportunity. Once equities finish their current corrective wave 2 up, the miners should begin to rally again.
The Sector Ratio strengthened to 12-12 Neutral after yesterday’s session. The Strong Sector List was led by Semiconductors, Computers, Household Products, Telecoms, and FoodDrugs. The Weak Sector List was led by Real Estate, Autos, Retail, Banks, and Energy.
Model Portfolio: The Model sold its shares of DXD just after yesterday’s open. Price received for the shares was 27.25. So now the Model only owns 650 shares of UGL, a 2X leveraged ETF for gold. The Model will now wait for the market to approach its target levels for Wave 2 up before re-establishing its position in DXD and other inverse index ETFs.
After yesterday’s session, the Model is up 27.99 percent which translates to an annualized gain of 65.9 percent. The Model continues to hold a lot of cash ($90,065) waiting for high probability opportunities to put its cash to work. That opportunity will likely come towards the end of next week as the Labor Day weekend approaches.
The Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
That’s what I’m doing,
h
Market Signals for
08-22-2019
DMI (DIA) | NEG |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 19 Aug 2019 |
NASDAQ | NEG | 30 Jul 2019 |
GOLD | POS | 01 Aug 2019 |
U.S. DOLLAR | POS | 14 Aug 2019 |
BONDS | POS | 30 Jul 2019 |
CRUDE OIL | NEU | 19 Aug 2019 |
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Category: Professor's Comments