Professor’s Comments December 13, 2018

Posted by OMS  at December 13th, 2018

The markets rallied out of the gate yesterday, with the Dow getting as high as 24,828 before pulling back to close up 157 points at 24,527.  The rally was the Big Move predicted by Tuesday’s Small Change signal in the A-D oscillator.  The NASDAQ and SPX were up 66 and 14 points, respectively.  Volume on the NYSE was moderate, coming in at 92 percent of its 10-day moving average.  There were 35 new highs and 128 new lows.

Yesterday’s early rally and late corrective pullback appeared to be part of final sub-wave ‘c’ of Wave 2 up.  If I’m correct about this, the Dow should continue to rally into the end of the week approaching the 25,000 level, possibly as high as 25,000+.

There’s a chance that yesterday’s rally to the 24,828 level was the end of Wave 2 up.  If this is the case, the next rally should fall short of the 24,824 level as the Dow starts making lower highs which would indicate that Wave 3 down is underway.  The reason I say this is because yesterday’s up-down trading produced a Shooting Star Candlestick Pattern on the Dow.  The last two interim tops, on 8 November and again on 3 December, were marked by similar negative candlestick patterns.   

The other possibility is that yesterday’s rally was the completion of sub-wave ‘a’ within final wave ‘c’ up.  If this is the case, the Dow should exceed 24,828 on the next rally moving close to or slightly above 25,000 before wave ‘c’ up completes. 

In either case, the Dow is approaching the end of Wave 2 up with Wave 3 down next.   Wave 3 of Major Wave 3 down will cause trillions of dollars to evaporate from the market.  Please be EXTREMELY careful with your trading now.

BTW, I traded yesterday’s early rally using UDOW, then faded the afternoon decline with SDOW.  Turned out the be another double cigar day. I’m really getting to love trading the Big Moves highlighted by the A-D oscillator.  Students can easily see the entry and exit points for both trades on the short-term bars. Basically, I got long immediately after the open and reversed the position near the 13:55 mark in the afternoon.  I closed the short position at the close.  I also traded NUGT, buying at the open, then selling just after the 2pm mark.  Remember, gold and the miners are now on a Buy Signal so I’m looking for any excuse to trade gold. Seeing the 5s turn positive on NUGT was all the excuse I needed.

There were no changes to my market timing indicators.  I’m still on Sell Signals for equities.  However, my custom Money Flow indicator on the Dow and NASDAQ turned negative after yesterday’s session.  This is another reason why I believe Wave 2 up is nearing completion.  The Big Boys are now taking money out of the market.

Yesterday’s Sector Ratio finished with another 1-23 negative reading.  This time the only positive sector was Household Products.  It’s RS Rating was zero, so it’s not that positive.  Students should understand that a Sector Ratio of 1-23 negative means that almost all sectors in the S&P500 are now moving down.  In other words, we’re no longer seeing the rotation between sectors we saw several weeks ago where money was moving out of technology and into the defensive sectors. Now money is leaving the market. The Big Boys have started to sell.

Protect yourself.

That’s what I’m doing,

h

Market Signals for

12-13-2018

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