Professor’s Comments January 3, 2019

Posted by OMS  at January 3rd, 2019

The markets opened lower to start the New Year, but then rallied into the close.  The Dow was down almost 400 points in early trading but rallied to close up 19 points at 23,346.  The NASDAQ and SPX were up 31 and 3 points, respectively. Volume on the NYSE was low, coming in at 84 percent of its 10-day moving average.  There were 8 new highs and 63 new lows.

Yesterday’s down-up action was corrective.  It was typical of what one would expect at the conclusion of final wave ‘c’ within sub-wave 2 up.  Yesterday, the Dow reached a high of 23,413 before it started to weaken.  When the sub-wave 2 rally started, I thought it would complete near the 23,300 level, but then revised my target to 23,700 after watching the wave action.  However, after seeing the extreme weakness as the Dow approached 23,400, it’s possible sub-wave 2 up is complete.

If this is the case, the markets should start a series of impulsive moves to the downside as wave 3 of Wave 3 down begins to develop.  My target for Wave 3 down on the Dow remains near the 21,300 level which is where the 200-week moving average is currently located. 

There were no changes to any of my major market timing signals after yesterday’s trading.  The Dow, NASDAQ, SPY, and RUT remain on Sell Signals.

The Sector Ratio remains at 0-24 negative.  In other words, there are NO strong sectors in the market.  Everything is weak.  Even the Materials Sector, which includes gold, is on the Weak List, even though my VTI-volume indicator for gold remains on a Buy Signal.  I’m still expecting gold to begin a significant rally as the overall market declines, so it will be interesting to see if gold can lift the Materials sector onto the Strong List by itself.

Bonds (TMF) also remain on a VTI-volume Buy Signal.  BTW, TMF rallied for the third consecutive day yesterday.  When Bonds begin to rally in the final stage of a corrective rally in equities, it usually leads to lower equity prices during the following week.  Smart money is using corrective rally to sell equities and move money into Bonds.

If sub-wave 2 up is over, the next wave down of the Bear Market is about to begin.

Protect yourself.

That’s what I’m doing,

h

Market Signals for

01-03-2019

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