Professor’s Comments July13, 2018

Posted by OMS  at July 13th, 2018

The markets rose sharply yesterday, gaining back all of Wednesday’s loses and then some.  The Dow finished up 224 points, closing at 24,925. The NASDAQ and SPX were up 107 and 24 points, respectively. Volume on the NYSE was moderate, coming in at 98 percent of its 10-day moving average.  There were 94 new highs and 40 new lows.

Yesterday’s rally was likely the completion of Wave 1 up within Major Wave 5 up.  If this is the case, the markets should see some choppy down-up-down trading during the next few days to develop a develop a small Wave 2.  The pullback would set the stage for the next rally leg which should take the Dow toward the 26,000+ level.

After yesterday’s rally, the 2-period RSI on the Dow finished with a slightly overbought reading of 73.7.  The VTI-volume indicator is still NOT in the Trend Mode.  So, with these slightly overbought conditions, it’s likely the Dow will pause to catch its breath.  If the ‘pause’ results in a pullback, students should watch the 2-period RSI on the Daily chart to help identify buying opportunities.  

There were no changes to the cockpit indicators after yesterday’s session.  All the indicators, including my combination VTI-volume indicator, are on Buy Signals.

After yesterday’s session, the Sector Ratio increased to 17-7 positive.  This remains a very positive ratio. It tells me that over 70 percent of the sectors in the S&P 500 are moving higher. This is the type of market breadth that one would expect during a major rally. Once the impulse wave of the sequence (Wave 3 up) begins, look for the Sector Ratio to get even stronger. On the other hand, IF the Sector Ratio starts to turn negative, it would be a major warning.

The Strong Sector List had a few noteworthy changes.  Computers moved to the top of the List, followed by Consumer Products, PharmaBio, Food Drugs, and Utilities.   Computers and PharmaBio are aggressive sectors that can lead the market significantly higher. So, it was nice to see them move to the top of the List.  The Semiconductors, Cap Goods, and Financial Sectors are still near the bottom of the Strong List.  I would like to see one or more of these sectors move into the top 5 sectors. Once that happens, it will likely signal that Wave 3 up of Major Wave 5 up is underway. 

Gold and the miners rose slightly yesterday. GLD finished up 0.49 cents at 118.13.  My combination VTI-volume indicator for GLD and SLV remains on a Sell Signal.  However, the volume portion of the indicator rose significantly yesterday, so the metals could be forming a bottom.  Since the VTI-volume indicator on GLD turned negative, the ETF is down almost 5 points. Students should continue to watch gold and HUI, the gold miners index now. If the HUI starts to move above its 200-day moving average in the days ahead, it would be a Major positive for the miners.  It would likely signal that Major Wave 3 up is starting.  

That’s what I’m doing,

h

Market Signals for

07-13-2018

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