Professor’s Comments January 16, 2019

Posted by OMS  at January 16th, 2019

The markets rose yesterday on weak breadth and light volume.  The Dow finished 156 points higher at 24,066.  The NASDAQ and SPX were up 118 and 28 points, respectively.  Volume on the NYSE was only 94 percent of its 10 day moving average.  There were 13 new highs and 12 new lows.

There were no changes to my market timing signals for equities.  The Dow, NASDAQ, SPY, and RUT remain on Buy Signals.  The overall pattern, which is likely Wave 4 within Major Wave 3 down, appears to be nearing completion. However, as long the timing indicators remain on Buy Signals, the markets can continue to push slightly higher. The 50-day moving average on the Dow is currently located at the 24,205 level and should provide strong resistance to the current rally. Once the current rally completes, the Dow should decline to the 21,500 level or lower as Wave 5 of Major Wave 3 down unfolds.

There was a small change in the A-D oscillator yesterday, so we need to be on the lookout for a Big Move within the next 1-2 days.

Yesterday, the 2-period RSI on the Dow closed with an overbought reading of 80.32 and the VTI showing NO Trend. The A-D oscillator is also EXTEMELY overbought with a reading of 251.75.  So, with overbought conditions and NO Trend in place, the markets should start to pullback within the next few days.

One of the things that should begin to factor into the markets is the government shutdown.  In October 2013, the 16-day shutdown resulted in a 0.3 percent reduction in real GDP growth.  Yesterday, I heard a reporter say the current shutdown could shave 0.1 percent per week off the current GDP growth rate of 3.2 percent. If that’s true, and the 0.3 percent decline in 2013 seems to bear it out, the markets are not reflecting impact of the current shutdown on the GDP growth and should begin to decline very soon.

The Sector Ratio remained at 18-6 negative after yesterday’s session. The Strong List was led by Consumer Products, PharmaBio, Service, Retail and Media.  Except for the top sector, the RS ratings of the Strong Sectors remains weak, mostly 1s and zeros.  This is another reason why I believe the current Wave 4 rally is nearing completion.

Because of this, I continue to watch the 35-period CCI on the 60 min bars of the DIA, waiting for it to turn negative.  Once the CCI turns negative, I will start buying and holding inverse index ETFs as they start to appear on the Dean’s List.  Be patient.

Gold (GLD) fell 0.21cents to 121.88.  GLD remains slightly overbought at current levels.  While gold (the metal) is still on a Buy Signal, the gold miners remain on a Neutral Signal.  If the miners move to a Buy Signal, I’ll start looking to buy the miners aggressively.  But right now, I’m just waiting.  I still view the 118-119 level as a buying opportunity for GLD. 

That’s what I’m doing,

h

Market Signals for

01-16-2019

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