Professor’s Comments February 15, 2019

Posted by OMS  at February 15th, 2019

The markets were mixed yesterday in choppy trading.  The Dow finished with a decline of 118 points, closing at 25,439.  The NASDAQ was up 6 points while the SPX was down 7 points.  Volume on the NYSE was moderate, coming in at 102 percent of its 10-day moving average. There were 71 new highs and 8 new lows. For the second consecutive day, the new highs were less than the previous day’s new highs.  However, they were not enough to change the direction of my breadth indicators.  This is one of the things I’m watching closely now as a change in The Tide would be significant.

The wave count on the Dow still appears to be a completing wave 2 up within Wave 3 down.  The markets remain at critical moving average resistance levels. Yesterday’s early pullback after testing moving average resistance was followed by an afternoon rally that re-tested the resistance which again failed. So, it appears that overhead resistance is holding.  Once the second re-test failed, the markets pulled back into the close.  This is important because large institutions usually do most of their buying and selling near the close, in the final hour of trading.

For the past few weeks, institutional traders have been mostly buyers in the last hour, pushing prices up.  Yesterday was the first time in weeks that I saw the big boys selling in the last hour.  It’s something to watch.  BTW, for scalp traders, the final hour can be a nice place to trade IF you’re already holding long positions.  During a rally phase of the market, like we’ve had for the past few weeks, you tend to have nice moves in the last 20 minutes as buying comes in from BOTH the intraday short scalpers who are covering their positions and the institutions. This late buying usually produces some nice outsized moves into the close.  But again, yesterday was different as the institutions were selling, not buying.  This change in institutional behavior is something that should be watched in the days ahead.

Yesterday’s trading caused the volume portion of my VTI-volume indicator on the Dow to turn negative. So once again the overall timing signal for the Dow is Neutral.  The NASDAQ, SPX and RUT remain on Buy Signals.

The Tide and Dean’s List remain positive.

I continue to see negative divergence in the Split Volume Moving Average (SVMA) and On-Balance Volume (OBV) indicators. Yesterday, the SVMA fell into negative territory, so now, not only is the indicator diverging from price, it’s now negative. This non-confirmation is one of the classic signs that the markets are developing an important top.

The Sector Ratio fell slightly after yesterday’s session. The Ratio is now at 17-7 positive.  Students should continue to watch for changes to the Strong and Weak Lists.  Once wave 2 up completes, the Sector Ratio and the Lists should begin to reflect the new change in direction.

The Strong List was led by Semiconductors, Household Products, Transportation, Technology, and Computers.  The Retail Sector fell out of the top five yesterday after the Commerce Department reported that Retail Sales fell 1.2 percent in December, the largest monthly decline since September 2009. On-line sales, which fell a whopping 3.9 percent, were of interest.  Makes me wonder if the previously reported ‘strong holiday sales’ numbers came from?  As many of you know, I have been watching a developing Head and Shoulders Pattern on Amazon (AMZN).  Last week the stock broke below the right shoulder of the pattern for the first time.  So now if that low (1567) doesn’t hold, it would be very negative for the stock and the retail sector in general.  Students should note that even though AMZN has rallied off its 24 December low, it’s STILL in a down trend as defined by its 50 and 200 day moving averages. My combination VTI-volume indicator on AMZN remains Neutral, but the indicator is at a level where it could turn Negative in a heartbeat.

The Weakest Sectors were Energy, Telecoms, Food, Autos and Food Drugs.

Gold (GLD rose mildly yesterday, gaining 0.60 cents to 124.06.  GLD still appears to be develop a small wave 2.  GLD remains on a Buy Signal.

Crude Oil (UCO) rose 0.35 cents after my market timing signal for crude turned positive on Wednesday. UCO appears to be in the process of completing a small wave 2 along its 50-day moving average.  With tight Bands and rising volume, IF UCO can begin to move above its early February high of 19.15, it should test the overhead resistance of its 200-day moving average located at 23.48.  I’d still like to see UCO move above its early February high before buying.  BTW, I did see some institutional buying of UCO yesterday. I’m watching to see if more institutions come in today.

That’s what I’m doing,

h

Market Signals for

02-15-2019

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