Professor’s Comments July 24, 2018

Posted by OMS  at July 24th, 2018

The markets were mixed again yesterday.  The Dow was down 14 points, closing at 25,044.  The NASDAQ and SPX were up 22 and 5 points, respectively.  Small cap issues on the Russell 2K were down 5 points.  Volume on the NYSE was moderate, coming in at 98 percent of its 10-day moving average.  There were 77 new highs and 34 new lows.

There were no changes to the major indicators after yesterday’s session.  The indicators on the Dow remain positive, but prices need to break above resistance provided by the upper trend line of the large triangle pattern.  If the Dow 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 pull back to the 24,000 level to complete sub-wave ‘c’ of Wave ‘e’ down.

My combination VTI-volume indicator on the SPX (SPY) remains on a Buy Signal and in the Trend Mode.  However, the same indicator on the NASDAQ-100 (QQQ) has moved to a neutral signal, as the volume portion of the indicator has turned negative.  I’m not concerned about this as long as the momentum remains positive.  If the momentum turns negative and moves out of the Trend Zone, it would generate a Sell Signal.  But this hasn’t happened yet. The Dow remains on a Buy, but the VTI is still only showing a reading of 69.4.  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. 

The Bottom Line with the markets is that they have been resting for the past few days.  The short-term patterns are basically upward slanting channels that suggests higher prices.  However, the fact that the Fed is tightening the money supply causing interest rates to rise, and the potential for a full-blown trade war with China is causing headwinds for the final rise to a top.  Eventually, the pressure from one or more of these events, especially from the Fed, will win out and the next Bear Market will begin.  But I don’t see that happening yet.  Maybe in a few months from now, but not now.  The patterns and my indicators continue to suggest higher prices, especially if 25,250 on the Dow is broken.

The Sector Ratio increase to 17-7 positive 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 Consumer Products, Retail, Food Drugs, PharmaBio, and Computers.  So Computers are back in the top 5 sectors.  This is a positive.  The Semiconductors, Cap Goods, Financials, and Banks are all on the Strong List near the bottom.  A few of these ‘aggressive’ sectors need to move to top onto the Strong List if this market is going to rally and break above 25,250. 

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

Gold and the miners fell slightly on Monday.  My combination VTI-volume indicator for GLD and SLV remains on a Sell Signal.  The VTI-volume indicator turned negative on GLD on 15 June with the ETF trading at 121.34.  Yesterday GLD closed at 116.   I’m not doing anything with the metals until my VTI-volume indicator turns positive. 

That’s what I’m doing,

h

Market Signals for

07-24-2018

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