Professor’s Comments January 31, 2019

Posted by OMS  at January 31st, 2019

The markets opened higher and then rose sharply higher after the Fed raised interest rates 25 basis points to 2.5 percent.  Apparently, the markets liked what Fed Chairman Powell said about the economy and keeping future rate hikes ‘gradual’, as appropriate. The Dow was up 435 points, closing at 25,015.  The NASDAQ and SPX were up 155 and 41 points, respectively.  Volume on the NYSE was moderate, coming in at 109 percent of its 10-day moving average.  There were 70 new highs and 14 new lows.

From a pattern perspective, the Dow still appears to be nearing completion of sub-wave 2 up.  In yesterday’s Comments I talked about how the Dow appeared to need one more final ‘pop’ to complete sub-wave ‘c’ up within sub-wave 2 up.  It got the ‘pop’ yesterday. So now the markets are overbought and at several critical resistance levels. They should begin to head down soon. If they don’t, it’s possible that a new Bull Market rally leg is starting.  However, with the moving averages still in a down trend, it’s too soon to call any change to the Bear Market.

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 Dean’s List and Tide also remain positive

The Sector Ratio increased to 18-6 after yesterday’s rally. The Strong List continues to be led by Semiconductors, Banks, Transportation, Material, and PharmaBio.  The Weak List continues to be led by Food Drugs, Telecoms, Autos, Food, and Household Products

One of the things I’m watching is the RS ratings of the Sectors on the Strong List. Right now, even though the Strong List has increased, most of the RS ratings remain relatively weak, mostly 1s and zeros.  If you recall, the Sector Ratio was neutral going into yesterday’s session, so seeing it rise to 18-6 after yesterday’s rally was no big deal. However, IF the number of sectors AND the RS ratings continue to rise, it would be another indication that a new rally leg is starting.  But right now, with the market at key resistance levels, the low RS ratings suggests most sectors will likely have a tough time overcoming resistance.  Also, today is the last day of the generally positive end of month trading period, so things could begin to change as we move into February. We’ll see.

Gold (GLD rose another 0.71 cents to 124.67.  During the day, it hit my target of 125, so now I’m expecting it to begin a Wave 2 pullback.  If GLD begins to pullback now, it would be very positive for the metal as it would suggest a major Wave 3 rally leg will begin after Wave 2 down completes.  I continue to look for buying opportunities near the 120 level.

That’s what I’m doing,

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Market Signals for

01-31-2019

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