Professor’s Comments December 14, 2018

Posted by OMS  at December 14th, 2018

The markets were mixed yesterday in corrective up-down up trading typically found in the final wave(s) of a termination rally.  The Dow closed 79 points higher at 24,597.  The NASDAQ was down 28 points with the SPX finishing flat.  The breadth on the NASDAQ was more than 2:1 negative even though the QQQ finished slightly higher. This was a very unusual event.  It marked the seventh consecutive day of negative breadth and is NOT something you want to see at this point in the rally if you’re still Bullish.  It’s tells me the troops have given up the fight and are beginning to pull back even though the generals are still calling for a charge.  Always pay attention to the troops, not the generals. And right now, the guys doing most of the fighting are abandoning the trenches.  It suggests we’ll see lower prices, possibly significantly lower prices, in the days ahead.

Volume on the NYSE was moderate, coming in at 93 percent of its 10-day moving average.  There were 25 new highs and 378 new lows.

Yesterday’s corrective trading action saw the Dow reach a high of 24,741, which did not exceed the previous day’s high.  This rather innocuous event probably didn’t seem like a big deal, but it was.  It was a failed re-test and any failed re-tests at this point have significant meanings.  It could signal be signaling that wave ’c’ up of Wave 2 is finally over.

If you recall, I have been looking for final wave ’c’ of Wave 2 up on the Dow to complete somewhere between the 24,800- 25,000 level.  So, Wednesday’s high of 24,828 and yesterday’s failed re-test of 24,740 could have done the job.  If we start to see some impulsive action the downside today, it would likely mean that Wave 2 up is complete, and Wave 3 down has started.  I haven’t calculated a new target for Wave 3 down, but for now I’m going to go with my old target of 23,500 as a minimum.  I’ll have more info on this in my WSR.  Just remember that IF Wave 3 down is starting, things could get ugly very quickly.  This wave 3 down will be Wave 3 of Major Wave 3 down.  Be careful.  BTW, the 200-day moving average on the Dow’s Weekly chart is near the 21,350 level, so it could come into play.  Not sure if this will happen on this move down, but it could.

There were no changes to my market timing indicators.  I’m still on Sell Signals for equities.  My custom Money Flow indicators on the Dow and NASDAQ turned negative after Wednesday’s session, so they’re no longer supporting the market.  It’s another reason why I believe Wave 2 up has completed.

Yesterday’s Sector Ratio improved slightly to 2-22 negative.  I wouldn’t get too excited about the slight increase as both strong sectors, Real Estate and Household Products, are extremely weak with an RS ratings of zero. It’s the EXTREMELY high negative number of sectors (22 negative) that should catch your attention.

Gold pulled back slightly yesterday, with GLD dropping 0.26 cents to 117.53.  Gold and mining stocks remain on Buy Signals.

Protect yourself.

That’s what I’m doing,

h

Market Signals for

12-14-2018

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