Professor’s Comments July 23, 2019

Posted by OMS  at July 23rd, 2019

The markets were slightly higher yesterday. The Dow finished with a gain of 18 points, at 27,172. The NASDAQ and SPX were up 58 and 8 points, respectively.  Volume on the NYSE was moderate, coming in at 96 percent of its 10-day moving average. There were 125 new highs and 74 new lows.  Students should note that the number of new lows is starting to approach the number of new highs.  This is what usually happens when the market approaches a major top.  If you’re still Bullish, the one thing you don’t want to see now is the new lows start to exceed the new highs. Not with the Dow in the process of completing an Ending Diagonal Pattern.

There were NO CHANGES to the market timing signals for equities after yesterday’s session.  The Dow and NASDAQ remain on Neutral Signals. The SPX and Russell 2K remain on weak Buy Signals.  

The Tide remains Negative and the Dean’s List is Neutral.  The reason the Dean’s List is Neutral is because the inverse ETF for the Russell 2K is back on the List. The Money Flow indicators on both the Dow and NASDAQ have turned negative. 

Since its high on 15 July, the Dow has been making a series on intraday rallies, trying to push higher.  However, each of these intraday rallies have failed to exceed the 15 July high of 27,365, with each rally seeing less and less volume and Money Flow. This is something that needs to be watched as it is a sign of an EXTREMELY tired market.  At some point, probably within the next week or so, the institutions will recognize that buying the dips is no longer a winning strategy and will begin to sell.  This will cause the momentum, which is still positive, to join the volume in negative territory turning the Market Timing Signals Negative.  In other words, I’m telling you to watch both the intraday rallies and intraday declines now.  Once the intraday rallies start breaking down and lead to closes below the open, the decline should begin. Remember, institutional investors tend to buy at the close, not at the open.  So, if you see selling into the close, you’ll know what the institutions are doing with their money.  Watch what happens in the last hour of trading this week.

There was a small change in the A-D oscillator yesterday, so we need to be on the lookout for a Big Move within the next 1-2 days.  If the Big Move is an early move up, watch what happens into the close.  

Same for the VIX.  After yesterday’s low volatility session, the VIX pulled back to 13.53.  Aggressive traders should watch the VIX now for any move above 14.7.  If the VIX moves above 14.7, the pattern suggests a move to the 23-24 level is in the cards.  This would likely lead to a significant decline in the equity markets.

The Sector Ratio remained at 16-8 Positive after yesterday’s session. However, 11 of the 16 positive sectors on the Strong List have RS Ratings of 1 or zero. In other words, the Strong List is not that strong. One good down day could turn it negative. The Strong Sector List was led by Household Products, Semiconductors, Material (includes gold), Insurance, and Media. The Weak Sector List was led by Service, Retail, Energy, PharmaBio, and Autos.  

Model Portfolio:  There were NO CHANGES to the Model after yesterday’s session.  The Model still holds 500 shares of TBT, the inverse ETF for Bonds and 800 shares of UGL, a 2X leveraged ETF for gold. 

After yesterday’s session, the Model is up 20.62 percent. This translates to an annualized gain of just under 60 percent.  The Model continues to hold a lot of cash, waiting for high probability opportunities to put the cash to work.  

The Model also continues to look for opportunities to add shares to its current position in gold.  From a technical perspective, gold and mining stocks appear to be completing a sideways to down wave 2 pullback.  Once wave 2 completes, gold and mining stocks should begin a wave 3 rally that should lead higher prices later this year.  I still view pullbacks in gold, mining stocks and silver as buying opportunities.  Look for times when the 2-period RSI is oversold on the Daily or 60 minute charts.

The Model Portfolio is being shown for educational purposed only.  The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio.  Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.

Market Signals for

07-23-2019

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.