Professor’s Comments December 6, 2018

Posted by OMS  at December 6th, 2018

The markets fell hard on Tuesday, a day after the Dow rallied for 283 points on news of a possible trade deal with China. The Dow finished down 799 points, closing at 25,027.  Transportation stocks had their largest one day decline ever.  The NASDAQ and SPX were down 283 and 90 points, respectively. Volume on the NYSE was heavy, coming in at 116 percent of its 10-day moving average.  There were 75 new highs and 373 new lows.

Tuesday’s decline was impulsive.  The decline was a continuation of the pullback that started Monday afternoon.  In my early Comments on Tuesday, I mentioned that the Monday’s late pullback formed a negative Evening Star Pattern that could have marked the completion on Wave 2 up.  And because of this, I said the target I was using for the Dow of 26,300 might not be reached.  

Tuesday’s decline appeared to be part of sub-wave 3 within Wave 3 down.  If this is the case, the markets should continue to decline another 300-400+ points today to complete sub-wave 3 before the decline is checked.  After sub-wave 3 completes, there should be a small rally followed by more decline.  Right now, it appears that once all five waves of Wave 3 down complete, the Dow will be trading near or below the 23,500.  This is the same target level I was using for Wave 3 down several weeks ago, before the news of a possible trade deal with China caused the wave structure morph and develop a extended ‘c’ wave within Wave 2 up.  

In my first paragraph, I mentioned that The Dow Transports were among the hardest hit sectors on Tuesday.  Students should take the time today to look at a chart of ITY, the ETF I use to trade the transports.  One of the things that is quickly apparent from this chart is the clean wave structure for Waves 1 down and 2 up.  The waves are almost perfect.  There is no morphing of patterns on the chart.  Students should also note that the 50-day moving average has been below the 200 since 20 November, so the Trannies have already started their Wave 3 down trend.  In other words, even though the Dow Industrials were struggling to complete their Wave 2, the trannies were not confirming the Dow’s positive action.  This is classic Dow theory, straight from Charles H. Dow (1851-1902), the guy who founded the Wall Street Journal and Dow Jones and Company.

BTW, after you look at the Daily chart of IYT, change it to show a Weekly chart.  On the weekly chart, you will note how the recent wave 2 action as formed a perfect Hockey Stick Pattern.  That pattern suggests the next target for the Transportation ETF is near the 200-week moving average or 167.  On Tuesday, IYT closed at 187.16, down 8.57 points. 

Again, one of the reasons I continue to mention the transports is because CSX is located in Jacksonville and many of my subscribers either work for or are retired from the company and own its stock.   IYT has been on a Weekly Sell Signal since 12 October.  My VTI-volume indicator for CSX is still positive, however it the trannies start to decline, the pattern in CSX suggests will follow the trannies lower. 

BTW, CSX has also formed a major Head & Shoulders topping pattern on its Weekly chart.  The neckline for the pattern is right around the 64 level.  IF this level is broken, CSX could trade down to the 48 level where the 200 is located.   If In other words, be careful.

The Sector Ratio fell to 3-21 negative after Tuesday’s session.  The only Strong Sectors were Household Products, Utilities, and PharmaBio.  BTW, ConEd (ED), was up 0.76 cents on Tuesday.  

Gold and most mining stocks were also up on Tuesday.  GLD rose 0.71 cents to close at 117.22.  Gold (the metal) remains on a Buy Signal with the miners still Neutral.

Be careful with your trading today. If you’re scalping, make sure you remain on the right side of the CCI and VZO indicators.

That’s what I’m doing,

h

Market Signals for

12-06-2018

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

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