Professor’s Comments July 22, 2016
Posted by OMS at July 22nd, 2016
The Dow fell 78 points, closing at 18,517. Volume was moderate, coming in at 102 percent of its 10-day average. There were 169 new highs and only 4 new lows.
Not much changed after yesterday’s trading.
Even though the Dow pulled back from pattern highs, it was not enough to produce a momentum shift in the VTI. It’s still positive and in the Trend Mode.
The Hi-Lo indicator was the only indicator to turn negative yesterday. This is the reason The Tide was changed to neutral.
On a very short-term basis, yesterday’s pullback caused the 2-period RSI Wilder to dip to the 30 level. (30.14), relieving the overbought conditions of the past 9 trading days. So now the market is mildly oversold with an Up Trending VTI. In other words, it should see a small bounce. Students should watch this bounce to see if it produces any divergence in the indicators.
Remember, the market reached pattern targets on Wednesday, and pulled back yesterday. So with a positive VTI, it would be normal for the market to attempt a re-test of the pattern highs during the next day or so. If the market moves higher and the internals continue to weaken, the divergence between price and breadth will produce the momentum shift.
One of the reason’s I believe the market is topping near these levels is because of the divergence between the Dow Industrials and the Transports. As I have mentioned several times during the past few weeks, the Industrials have made a new all-time record high, but the Transports have not. The Transports made their all-time high of 931.03 in November 2014. And so far, they have not even reached the wave 2 rally high of 814.90 made on 20 April. Last week, on 14 July they got as high as 804.81 and have been falling ever since reaching 785.86 yesterday. This is Classic negative divergence.
Right now, the VTI on the Transports is still in the Trend Mode, which resulted from the indicator turning positive on 29 June at the 741 level. In other words, trading the VTI on the Transports resulted in a 63 point move in 10 days. That’s about an 8.5 percent return! The reason I’m mentioning this today is because yesterday’s decline caused the VTI on the Transports to turn down. So given major negative divergence between the Transports and the Industrials, and now the VTI turn down, I would be very careful with transportation stocks now.
If the VTI on the Dow Industrials starts to turn down in the next few days, stocks from the Transportation sector will be among the first I will be looking to short.
Gold rallied from oversold conditions yesterday as expected. GLD was up 1.91 points to 127.3. The move was enough to turn the VTI back to positive. However, the VTI reading on GLD is now only 62, so it is still a bit shy of entering the Trend Mode. If the VTI can move above 70 in the next day or so, it will increase the odds for GLD to move toward 134, possibly higher.
That’s what I’m doing,
h
Market Signals for
07-22-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | POS |
VTI | POS-T |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
Category: Professor's Comments