Professor’s Comments December 7, 2018

Posted by OMS  at December 7th, 2018

The markets fell sharply again on Thursday, dropping over 700 points before rallying into the close. The Dow finished down 79 points, closing at 24,948.  The NASDAQ and SPX finished down 30 and 4 points, respectively. Volume on the NYSE was heavy, coming in at 134 percent of its 10-day moving average.  There were 35 new highs and a whopping 648 new lows.

Thursday’s early downdraft was another impulsive decline.  In my Comments on Thursday, I mentioned the Dow would likely decline between 300-400+ points before sub-wave 3 down was checked.  It turned out the decline was more like 700+ points.  This tells me the market is weaker than I expected, and I must now change the labeling of the wave count somewhat.  I must now label the decline since the 3 December high of 25,980 into yesterday’s low of 24,242 as Wave 1 down of Major Wave 3 down.  This means that Wave 3 down (not MAJOR Wave 3 down) will likely complete closer to the 23,000 level before it completes.  MAJOR Wave 3 down could complete closer to the 22,000 level, but for now, this is too far off to predict. However, the one thing we know is that decline will NOT be straight down.

One of the reasons I say this is because my custom Money Flow indicators on the Dow and NASDAQ remained positive after yesterday’s session. This tells me that yesterday’s late rally was likely part of sub-wave ‘a’ up within corrective Wave 2 up.  If this is the case and the Dow is forming an a-b-c pattern for Wave 2 up, the Dow should start a decline to the 24,600-26,700 level today in sub-wave ‘b’ down, before rising back over 25,000 for sub-wave ‘c’ up before Wave 2 completes.  BTW, IF sub-wave ‘b’ down stays above 24,600, sub-wave ‘c’ up could reach 25,200+ before Wave 2 up completes.  In other words, we’re probably going to see more volatile trading in the next few days before the next major leg of Major Wave 3 down in the major equity markets begins.  This a-b-c road map is offered to help longer-term traders looking for opportunities to establish short positions for the ride down to the 23,000 level.  While there are NO guarantees that the a-b-c pattern will unfold like I expect, here’s the thing:  IF this a-b-c pattern develops in the days ahead, it will increase the odds that the current wave structure is in fact part of corrective Wave 2 up and that Wave 3 of Major Wave 3 down is just around the corner.

For holders of the transports, Major Wave 3 down has already started.  Students should note that the 50 is now below the 200-day moving average on the trannies. So, IF the trannies rally back to the 200 in the days ahead, it might also be a good time to look for opportunities to exit or short the trannies.  Students should note how the Bollinger Bands are now becoming tighter as IYT trades between the moving averages and its lower Bollinger Band.  This tells me a Big Move is coming in the transports.  Remember, in my Class About Nothing, one of the sectors I highlighted as a potential short for 2019 was the transports.  IYT has been on a Weekly Sell signal since 12 October.  Yesterday, ITY closed at 186.95, down 0.21 cents.  The Hockey Stick Pattern on the Weekly chart suggests the next major wave down will test the 167 level.

The Sector Ratio fell to 2-22 negative after yesterday’s session.  The only two Strong Sectors were Real Estate and Telecoms.  Both sectors were not that strong as their RS Rankings were only 1 and zero.  Seeing weak numbers like this should not be ignored.  Students should think back to the early days of October when the Sector List started to change.  The List was warning then, and it continues to warn now.  It’s telling us we’re in a Bear Market.

Gold and mining stocks were relatively flat yesterday.  Gold (the metal) remains on a Buy Signal with the miners still on a Neutral Signal.

Crude Oil continues to fall with UCO down 0.84 cents after yesterday’s session.  The price of UCO is now half what it was in early October when my timing indicator for Crude gave its Sell Signal.  I continue to watch for a turn around in Crude as one of my Money Flow indicators is beginning to show some strength.  With the favorable months for trading crude only a few months away, I continue to watch UCO with great interest.

For today:  Because the wave count for the equity indexes suggests a down day today, I will be looking for opportunities to scalp the downside today, exiting my positions at the close. Then if the market rallies early next week in sub-wave ‘c’ up, I will look to re-establish my short positions from higher levels.

That’s what I’m doing,

h

Market Signals for

12-07-2018

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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