Professor’s Comments August 8, 2018

Posted by OMS  at August 8th, 2018

The market continued its Wave 3 rally yesterday.  The Dow finished up 127 points at 25,629.  The NASDAQ and SPX were up 24 and 8 points, respectively.   Volume on the NYSE was moderate, coming in at 93 percent of its 10-day moving average.  There were 120 new highs and 41 new lows. 

Yesterday’s impulsive rally appeared to be a continuation of sub-wave 3 up within Wave 3 of Major Wave 5 up.  If I’m correct about this, the markets should continue to move higher in the days ahead, however as the Dow approaches the 26,000 level, it’s likely that trading will become choppy as sub-wave 3 up completes and sub-wave 4 starts to unfold.  Given that all indicators are positive and the market leadership has changed, the Dow appears right on track to re-test the January highs at the 26,600+ level. At this point, I would view any pullback as a buying opportunity. I would look for stocks in sectors that are stating to move to the top of the Strong Sector List.

BTW, if the Dow does pause near the 26,000 level, and spends some time trading sideways, it would be a very good thing for the overall market. The ‘base’ would become the ‘Blade of a small ‘Hockey Stick’ pattern, and depending on how it develops, could propel the Dow significantly higher during the final rally of Wave 5 up. This ‘through over’ wave could take the Dow as high as the 28,000 level before it completes.  Through-over waves for the final wave of a five wave sequence are more common than not.  They usually form an Ending Diagonal. So, as the market moves into the early fall, we need to start watching for this pattern to develop. It would signal the end of the Bull Market is approaching. But not now.

Right now the Sector Ratio is way too strong.  After yesterday’s rally, the Ratio increased to 22-2 positive.  The ‘aggressive’ sectors continue to lead the Strong List with PharmaBio, Transportation, Cap Goods, Semiconductors and Banks rounding out the top 5.  However, I should point out that even though these sectors are ‘technically’ at the top of the Strong List, there’s not a lot of difference in Relative Strength between the top 5 sectors and those in the middle of the pack.  In other words, the Strong List is very strong now.  It confirms that Wave 3 of Major Wave 5 up is underway.

The only sectors on the Weak List now are Leisure and Healthcare.  I was a little surprised to see Healthcare on the Weak List now, but it’s actually pretty normal.  The Healthcare Sector is made up of a lot of ‘defensive’ issues that provide patient care, drug testing, uniforms, and supplies.  These companies are more dependent on demographics than anything else, and do not usually lead market rallies.  Yesterday, dental supply company Dentsply Sirona, (XRAY) dropped 9.04 points to 39.4 which is a 5-year low.  No, the PharmaBio Sector is where the action is in a Bull Market.  Stocks that test your blood and provide supplies to clean your teeth depend too much population growth.  So, if you want upside action, you might want to look elsewhere, especially now that Healthcare is on the Weak List.

Also when I see Leisure at the top of the Weak List, I immediately think Disney. But DIS is NOT a Leisure stock. It’s in the Media Sector, under the Entertainment Group. The Leisure Sector consists mostly of gaming stocks (casinos) and lodging companies, including the cruise lines. These stocks have been getting pounded lately as high gasoline and fuel prices continue to curtail travel. As long as crude oil prices remain high, stocks in the Leisure Sector will continue to remain under pressure. If you want to trade stocks in the Leisure Sector, look for DIG to appear on the Dean’s List.

My VTI-volume indicator for gold and silver remains on a Sell Signal.  However, the volume portion of the indicator is starting to show some strength.  The indicator generated its first Sell Signal on 15 June with GLD at 121.34.  Now GLD is at 114.59. The Materials Sector has recently moved to the Strong List but remains near the bottom.  I’m still being patient and waiting for the signal to change.

That’s what I’m doing,

h

Market Signals for

08-08-2018

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

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.