Professor’s Comments August 7, 2018

Posted by OMS  at August 7th, 2018

The markets rose yesterday, continuing their move higher.  The Dow finished up 40 points at 25,502.  The NASDAQ and SPX were up 48 and 10 points, respectively.   Volume on the NYSE was low, coming in at 84 percent of its 10-day moving average.  There were 100 new highs and 36 new lows. 

Yesterday’s early 81 point decline on the Dow was expected.  It appeared to be the completion of a small sub-wave 2 within Wave 3 of Major Wave 5 up.  The pullback provided students with a nice buying opportunity.  If I’m correct about yesterday’s pullback being sub-wave 2, the markets should begin to move impulsively higher in the days ahead as sub-wave 3 up of Wave 3 up unfolds.

All the cockpit indicators are positive and my combination VTI-volume indicator on the Dow and SPX is in the Up Trend Mode.  The same indicator for the NASDAQ is NOT in the Trend Mode, and the 2-period RSI is EXTREMELY overbought at 93.5, so technology stocks could see a slight pullback to relieve the overbought conditions.

With positive indicators on the Dow and SPX, it appears that large cap stocks are right on track to re-test the January highs.  My target for the Dow remains at the 26,600+ level, so the Dow is still almost 1,100 points from my target.  On the other hand, the broader S&P-500 is now only 20 points away from its January highs.  The reason for the disparity is probably due to the strong dollar.  The large cap international stocks in the Dow are being impacted more by the strong dollar than the domestic stocks of the SPX. Students should note that UUP, the ETF for the Dollar, remains on the Dean’s List. As long as UUP remains on the Dean’s List, international stocks like Caterpillar (CAT), will continue to remain under pressure.

The Sector Ratio increased to 20-4 positive after yesterday’s session.  The ‘aggressive’ sectors finally took over the Strong List.  Semiconductors, Computers, Healthcare, Banks, Financials, and Technology have now moved to the top of the Strong Sector List.  As most of you know, I have been waiting for this to happen for the past several weeks. It confirms that Wave 3 of Major Wave 5 up is underway.

Yesterday’s change in leadership suggests the Dow and SPX are now in position to re-test the January highs.  So, with positive indicators on the cockpit and Semiconductors, Computers, Technology and Financial Sectors back on the Strong Sector List, I’ll use this information to help select stocks and ETFs from the Dean’s List and Member’s Watch List. 

The Weak Sector List was led by Autos, Household Products, Real Estate, and Telecoms.  I will not be purchasing stocks in these sectors.  

My VTI-volume indicator for gold and silver remains on a Sell Signal.  GLD fell another 0.59 cents to 114.33 yesterday.  The indicator generated its first Sell Signal on 15 June with GLD at 121.34.  BTW, the Materials Sector (that includes gold), moved to the middle of the Strong Sector List after yesterday’s session.  So, it’s possible that gold is nearing completion of its down trend.  However, because the VTI-volume indicator is still in the Down Trend Mode, I’m being patient and waiting for the signal to change.

That’s what I’m doing,

h

Market Signals for

08-07-2018

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