Professor’s Comments July 20, 2018

Posted by OMS  at July 20th, 2018

The markets were mixed yesterday.  The Dow was down 135 points, closing at 25,065.  The NASDAQ and SPX were down 29 and 11 points, respectively.  Small cap issues on the Russell 2K were up 9 points.  Volume on the NYSE was moderate, coming in at 112 percent of its 10-day moving average.  There were 81 new highs and 40 new lows. Those 81 new highs were enough to turn the Hi-Lo indicator back to positive.

Not much changed after yesterday’s session.  The Dow continues to remain at a critical juncture, testing upper trend line resistance of the large triangle pattern that started last January.  If it can break through this resistance, and start trading above the 25,250 level, it will be a good indication that Major Wave 5 up is underway.  Otherwise, it’s possible that the Major Wave 4 triangle is still not complete, and prices could fall back to the 24,000 level to complete sub-wave ‘c’ of Wave ‘e’ down

Yesterday, even though the Dow finished down over 100 points, the breadth of the market was not all that negative.  The number of advancing issues led those declining by 1771 to 1185.  That’s a pretty big difference for a big down day.  The positive internals caused The Tide to turn positive.  So even though the Dow appears to be struggling with resistance at the Upper Trend Line of its triangle, stocks on the other indexes look like they want to move higher. 

My combination VTI-volume indicator on the NASDAQ and SPX remains on a Buy Signal and in the Trend Mode.  The same indicator on the Dow remains on a Buy, but the VTI is still only showing a reading of 69.  It needs to move above 70 for the Dow to enter the Trend Zone.  If the indicator can move above 70, it will increase the odds that the Dow will start to move above the 25,250 level, telling me that the final Wave 5 rally is on.  Until this happens, it’s still possible that the Dow can re-test the 24,000 level.

It was somewhat of a surprise to see the Sector Ratio increase to 19-5 after yesterday’s session.  However, the Strong List continues to be dominated by the defensive sectors and until this changes, I don’t see how the market can rally back to or above the January highs. Last night, the Strong Sector List was led by Retail, PharmaBio, Consumer Products, Food Drugs, and Transportation.  Computers dropped out of the top 5, with Semiconductors near the middle and the Cap Goods, Financials, and Technology at the bottom.  The Banking Sector moved from the Weak List to the very bottom of the Strong List.  Several of these ‘‘aggressive’ sectors need to move to top onto the Weak List if this market is going to rally.  It’s not happening yet. 

The Weak Sector List was led by Household Products, Materials, Leisure, Autos, and Energy.  I would avoid these sectors now, especially IF the Dow can’t punch through the 25,250 level.

Gold and the miners continue to look awful.  UUP is still on the Dean’s List, with the Materials Sector on the Weak Sector List.  I’m avoiding the metals until the indicators turns positive, and UDN replaces UUP on the Dean’s List.  Right now, the Dollar is still too strong for gold to rally. 

BTW, GLD is now down almost 6 points since my combination VTI-volume indicator turned negative. Pay attention to this indicator if you want to trade gold.

That’s what I’m doing,

h

Market Signals for

07-20-2018

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