Professor’s Comments August 30, 2017

Posted by OMS  at August 30th, 2017

The markets finished higher yesterday.  The Dow finished up 57 points, closing at 21,865. The NASDAQ and SPX were up 19 and 2 points, respectively.  Volume on the NYSE was moderate, coming in at 96 percent of its 10-day average.  There were 67 new highs and 70 new lows.

When the markets don’t do what I expect, I step aside and wait for the pattern to clarify.

That’s what I did yesterday when the Dow opened sharply lower, dropping to its 50-day moving average, and then rallied to recover it’s opening loses, closing moderately higher.  If the wave 3 of 3 scenario I expected was unfolding, the Dow should not have rallied as hard as it did.  Something else could be going on.

Of course, it’s still possible that yesterday’s early decline followed by a late day rally was another sub-wave 1 down and sub-wave 1 up of wave 3 down.  But I really need to see impulsive action with follow through on the down waves if the current up-down action is part of wave 3 down.  And as of yesterday, the market is still not doing this…yet.

That’s because the Dow is still in a battle with its 50-day moving average.  If the Dow starts to break below 21,674, it will confirm that wave 3 down is underway.  But until this happens, it’s possible that a Bullish triangle is developing that could take the Dow to the 22,400+ level once it completes.  This is still a very low probability scenario, but the longer the Dow stays above the 50, the odds for this scenario start to increase.

Basically, the Bullish triangle scenario assumes that the 21 August low of 21,600 on the Dow was Wave ‘a’ down of a developing triangle for Wave “D” within the Ending Diagonal Pattern.  If this is the case, the Dow should rise to about the 22,000+ level for wave ‘b’, then bounce around between 22,000 and 21,700 to develop waves ‘c’, ‘d’, and ‘e’, before rising to 22,400+.  Like I said, right now, this is NOT my primary scenario, but if the Dow doesn’t start breaking below its 50 soon, it MUST be considered.

One of the reasons I’m still bearish is because of the impulsive downside action that occurred on 10 and 17 August.  I can’t ignore this.  These declines occurred exactly where they should have if the market was turning Bearish.  They look to be part of a significant impulsive decline and NOT a retracement wave ‘a’.  You usually don’t see two impulsive down moves of 205 and 274 points on a retracement wave.  It’s possible, but not likely.

So for now, I’m just going to watch from the sidelines and see what happens in the next few days.  If yesterday’s early decline and late day rise were sub-waves 1 and 2 of wave 3 down, the markets should start to decline hard soon.   BTW, the 25 August high of 21,907 comes into play now, because it represents the top of wave 2 in my Bearish scenario.  In other words, as long as the Dow stays below 21,907, the odds for the wave 3 down scenario remain high.  Any move above 21,907 would likely mean that a triangle is forming for Wave ‘D’ which once complete would lead to higher prices (22,400+).

Yesterday’s Sector Report remained weak. The number of strong sectors stayed at 8.  The strong sectors include the Semis, Material, Utilities, Computers and PharmaBio.  The Weak Sector List remained at 15 led by Consumer Goods, Autos, Service, Energy and Specialty Banks. The top weak sectors continue to have weaker RS ratings than the Strong Sectors.

Gold (GLD) got as high as 125.87 during yesterday’s early decline in the Dow.  So it finally hit the target I mentioned several weeks ago (125+) projected by its Hockey Stick pattern.  GLD finished the day down 0.27 cents at 124.42.  In doing so, the ETF formed a Bearish Belt Hold Candlestick Pattern.  This pattern often provides significant resistance to further moves to the up side.  So it’s possible that yesterday’s high marked the end of wave ‘B’ up for gold.  If it did, then GLD should start to fall to the 105 level to complete Wave ‘C’ of Wave 2 down.

The next few days will be critical to answering the questions on which scenario is taking place as the Battle for the 50 continues.

Waiting and watching.

That’s what I’m doing,

h

Market Signals for

08-30-2017

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

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The Hockey Stick Pattern
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