Professor’s Comments August 27, 2020
Posted by OMS at August 27th, 2020
Yesterday was another one of those strange days in the market where the major indexes rose on negative breadth. There were 61 decliners for every 31 advancing issues on the NYSE, yet the exchange rose 40 points. The Dow finished with a gain of 83 points, closing at 28,332. The NASDAQ and SPX rose 199 and 35 points, respectively. Volume on the NYSE was moderate, coming in at 107 percent of its 10-day average. There were 89 new highs and 11 new lows.
Yesterday’s rally in the NASDAQ was driven by Salesforce.com, which rose 26 percent in two days after it was announced that it will be added to the Dow next Monday. The other two stocks that will be added are Honeywell (HON) and Amgen (AMGN), which only rose 0.79 and 0.46 percent. The volume in Salesforce.com was over six times its normal volume which puts it in the mania category.
This week’s Investor Intelligence Advisors’ Survey shows that 60 percent of the advisors are bullish with only 16 percent being bearish. This is the highest level of bullishness since January 2020, just before the market began to crash in February. BTW, to put this high level of advisor bullishness into perspective, this week’s net bullish reading of 43.6 percent is the highest level since the January 2018 reading of 54 percent, which was its highest level in 31 years! So, from a contrarian perspective, which is what the IIA Survey measures, advisor bullishness at historically EXTREME levels.
So with growing negative divergences between price and breadth, weakening indicators, sentiment readings (P/C ratios) at 20 year extremes, and patterns that appear to be days away from completing, it still appears that not only equities, but the Dollar, Euro, Bonds, and gold are at or near major turning points. I’m just waiting for the timing signals to turn.
The Market Timing Indicators for the Major Indexes remain Positive.
The Dean’s List remains Positive while The Tide remains Neutral. Two of the four breadth indicators that make up The Tide remain negative. The important A-D oscillator remains negative with a reading of continues to decline and now has a reading of -111. So even though the market has been rallying for the past few days, more stocks on the NYSE continue to decline than advance, something that usually occurs near the end of a major rally.
The Sector Ratio fell slightly to 19-5 Positive after yesterday’s session. Students should continue to watch the Sector Ratio as the week progresses. IF it begins to weaken and turns negative, pay attention. Right now, seven of the strong sectors have an RS rating of 1 or zero. So, IF the market begins to fall, the decline could produce a major change in the Sector Ratio very quickly.
The top five strong sectors were Retail, Transportation, Material, Service and Consumer Products. The five weak sectors were Energy, Banks, Real Estate, Financials, and Utilities. The seven sectors still on the Strong List with weak RS ratings are Healthcare, Insurance, PharmaBio, Technology, Food Drug, Telecoms, and Leisure.
There were NO CHANGES to the Model after yesterday’s session. The Model continues to hold trial positions of 1,200 shares of TWM, 1,600 shares of DXD, 400 shares of DUST, and $43,379 in cash. The Model continues to look for opportunities to buy shares of inverse index ETFs.
Gold (GLG) rose 2.14 points yesterday to 183.36. Gold moved to a Neutral Signal after yesterday’s session. Once gold (the metal) completes its current wave 2 retracement rally, it should begin a wave 3 decline that could trade down to the 1,700 level. Spot gold closed at 1,952 yesterday.
The Euro and the Dollar still appear to be completing major reversal patterns. This would be a top for the Euro and a bottom for the Dollar. The Dollar might need one more small decline to complete a small wave 2 down before it begins its wave 3 rally. If the Dollar moves to a Buy Signal, it would be a strong negative for gold. Students should watch for a signal change during the next few days.
That’s what I’m doing,
h
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.
Market Signals for
08-27-2020
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 20 Aug 2020 |
NASDAQ | POS | 30 Jul 2020 |
GOLD | NEU | 26 Aug 2020 |
U.S. DOLLAR | NEU | 25 Aug 2020 |
BONDS | NEG | 13 Aug 2020 |
CRUDE OIL | NEU | 14 Aug 2020 |
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.
Category: Professor's Comments