Professor’s Comments February 7, 2019

Posted by OMS  at February 7th, 2019

The markets traded in a very narrow range yesterday and appear close to rolling over.  The wave count suggests that sub-wave ‘c’ up of Wave 2 up could be complete.  However, any time I see a market trade in a narrow range with positive indicators, there’s always a possibility that it can make one more thrust higher, perhaps to 25,500 on the Dow, before it throws in the towel.  We’ll see.

One thing that could change the above is a strong down day now.  A break of the 25,300 level on the Dow and 2,730 on the SPX would move both indexes below the lower trend lines of their Ending Diagonal Patterns.  So, IF the SPX begins to trade lower than 2,720 today or below 25,200 on the Dow, it would likely begin to turn some of the indicators negative.  Then once the decline begins, students should watch for changes to The Tide, Dean’s List and Sector ratio which would confirm the decline.

Because the Dow only dropped 99 points at its low yesterday, the move may or may not have been the Big Move predicted by Tuesday’s small change in the A-D oscillator.  Yeah, I know that 99 points is close to the 100 points I normally expect in a Big Move. But given that the Dow has seen several 150+ points move this week without a small change signal, I still MUST be on the lookout for a move more than 99 points. Especially if the move is going to be to the downside.

The Dow finished the day down 21 points at 25,390.  The NASDAQ and SPX were down 27 and 6 points, respectively.  Volume on the NYSE was low, coming in at 89 percent of its 10-day moving average. There were 61 new highs and 6 new lows.

The Dow, NASDAQ, SPX, and RUT remain on Buy Signals. As long as the market timing indicators for these indexes remain positive, the markets can continue to push higher. The Tide and Dean’s List also remain positive.

Note: Now that the pattern on the Dow appears complete, students should watch for a change in the market timing signals on the cockpit.

The Sector Ratio weakened slightly yesterday.  It now stands at 18-6 positive.  If Wave 2 up is complete, students should watch for the Ratio to turn negative.  Students should also watch for changes to the Strong and Weak Lists.  If Wave 3 down is about to begin, the Sector Ratio and the Lists should begin to reflect the new change in direction.

After yesterday’s session, the Strong List was led by Household Products, Semiconductors, Real Estate, Technology, and PharmaBio.  The Weak Sectors were Telecoms, Food Drug, Healthcare, Energy, Autos and Food.  If/When the markets start to head down, many of the defensive sectors currently on the Weak List should begin to move to the Strong List.  Students should note that the defensive Household Products Sector (toothpaste and toilet paper) has moved to the top of the Strong List. This List and the Sector Ratio will tell you more about what’s going on with the market than any commentator on CNBC or Fox Business news.

Gold (GLD fell 0.84 cents yesterday to 123.44.  GLD appears to be starting a small wave 2 pullback.  It remains on a Buy Signal.

Crude Oil (UCO) remains on a Neutral Signal.  UCO continues to trade along its 50-day moving average causing its Bollinger Bands to narrow.  If UCO starts to move higher from its ‘band squeeze’ and causes the timing signal for Crude to turn positive, I’m a buyer.

That’s what I’m doing,

h

Market Signals for

02-07-2019

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