Professor’s Comments July 21, 2016
Posted by OMS at July 21st, 2016
The Dow rallied for the ninth consecutive day, closing up 36 points at 15,595. Intraday, the Dow hit a new all-time high of 18,622. Volume was moderate, coming in at 96 percent of its 10-day average. There were 195 new highs and only 3 new lows.
It is possible that the markets topped yesterday. If not, I believe they are getting very close. Both the Dow and the SPX either reached or came very close to reaching pattern targets of 18,600 and 2,180 for this rally. The SPX got as high as 2,176 before closing at 2,173.
So now what?
Given that the current rally still has a lot of momentum behind it, I want to see some of this momentum subside before I start to establish a few shorts. As a minimum, I want to see a few of the cockpit indicators, especially the VTI, start to turn negative.
Right now the VTI on all of the major indexes is still moving up and in the Trend Mode. I want to see it turn down. Since the VTI turned positive on 29 June, the Dow has moved 900 points higher. The SPX has gained over 102 Points. So because of the respect I have for the VTI indicator, I’m going to wait until it tells me that the momentum has shifted.
If the markets start to pullback during the next few days, the VTI should catch the start of the next down move very early, probably within a day or so of the move. Then we should start to see elements of The Tide start to turn negative.
Two days ago, the Hi-Lo indicator turned negative before turning positive again last night. So we know that it is weak and will likely be the first breadth indicator to turn. If you have been watching the number of new highs vs. new lows during this rally, you probably observed how when the current rally was starting, the number of new highs was running close to 375-400 every day. But for the past few days, as the rally approached the pattern targets, the number of new highs has started to pull back. This is exactly what happens at market tops.
Gold continued to pull back yesterday with GLD dropping 1.82 points to close at 125.39. The VTI on GLD has moved out of the Trend Mode, and is now at 61.24. The 2-period RSI Wilder is buried deep in oversold territory with a reading of 8.16. So with no trend and oversold conditions, GLD should get a pop today.
As the market rallied during the past wee, gold has been pulling back. Yesterday I heard a commentator say that the reason for the pullback was because the market believes the Fed will be raising interest rates later this year. And if interest rates rise, it will strengthen the Dollar and cause gold to weaken. My, my…. how quickly they forget.
Wasn’t it only about two weeks ago that these same commentators were talking about the Fed lowering interest rates? The market was concerned about the Fed could even go to negative interest rates, like what’s happening in most of Europe and Japan. Hey guys, December is a loooong way off. And before we get to the cooler months, we still need to get through a summer market that is being marked by a pretty major topping pattern. If the pattern holds, the Dow could be trading significantly lower in a few months, and if this happens, all of the talk about a Fed rate increase will disappear. All the problems and concern about Europe and Japan will still be there. Their problems will not be going away soon. The Banks in Italy are looking like they are about to go belly and if this happens, the problems in Europe are going to get a lot worse before they get better. If this starts to happen, gold could be a very nice place to be. At this point, I’m not negative at all about gold and continue to look for buying opportunities on pullbacks..
Watching gold and looking for a momentum shift in the equity markets.
That’s what I’m doing.
h
Market Signals for
07-21-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
VTI | POS-T |
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