Professor’s Comments January 17, 2019

Posted by OMS  at January 17th, 2019

The markets rose again yesterday and have now reached the strong resistance of their 50-day moving averages. The Dow finished 142 points higher at 24,207.  It got as high as 24,289.  The NASDAQ and SPX were up 11 and 6 points, respectively.  Volume on the NYSE was only 94 percent of its 10-day moving average.  There were 22 new highs and 9 new lows.

Yesterday’s rally was the Big Move predicted by Tuesday’s small change in the A-D oscillator.  There was another small change signal in the A-D oscillator last night, so we need to be on the lookout for another Big Move today.  With the markets EXTREMELY overbought and at their 50-day moving averages, this time the Big Move could be to the down side.  

Several of the stocks I watch made ‘inside days’ yesterday.  An inside day occurs when the price of a stock trades between the high and low of the previous day.  When this happens, its usually a sign the stock is ‘tired’, and a reversal is at hand. 

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.

Yesterday, the 2-period RSI on the Dow closed with an overbought reading of 90.97 and the VTI showing NO Trend. The A-D oscillator is also EXTEMELY overbought with a reading of 253.26.  So, with overbought conditions and NO Trend in place, the markets should begin to pullback.  This is the time to watch the 35-period CCI on the DIA.  If it turns negative, I will start buying and holding inverse index ETFs as they start to appear on the Dean’s List.   

The Sector Ratio turned negative after yesterday’s session.  This is an important development as the Sector Ratio was one of the first indicators to signal the start of the Wave 4 corrective rally.  Now the Ratio is 10-14 negative.  The Strong List was led by Real Estate, Consumer Products, PharmaBio, Service, and Retail.  The RS ratings of the Strong Sectors continues to remain weak, with the top sectors only showing ratings of 1s and zeros.  Also, the RS ratings of the Weak Sectors are becoming weaker with most sectors now showing -2s and -1s.  In other words, all sectors are becoming weaker. This is another reason why I believe the current Wave 4 rally is nearing completion.

Gold (GLD) rose 0.39 cents to 122.27.  GLD appears to be forming a small triangle on its Daily chart.  If so, it could move another 1-2 points higher in the next few days to complete the pattern.  However, with the uncertainty of Brexit back on center stage now, the Dollar is getting stronger.  My combination VTI-volume indicator on the Dollar is getting close to generating a Buy Signal. If this happens, it will likely put pressure on gold causing it to pullback.  The pattern suggests the pullback would be a wave 2, which at this point is needed.  Also, the gold miners remain on a Neutral Signal.  So for now, I’m just waiting and watching gold.  I still view the 118-119 level as a buying opportunity for GLD. 

That’s what I’m doing,

h

Market Signals for

01-17-2019

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