Professor’s Comments June 1, 2018

Posted by OMS  at June 1st, 2018

After two days of large down-up moves, Wednesday was another volatile day as concern over Italy and tariffs continued.  The Dow finished down 252 points, closing at 24,416.  The NASDAQ and SPX were off 20 and 19 points, respectively.  Volume on the NYSE was heavy, coming in at 110 percent of its 10-day moving average.  There were 102 new highs and 66 new lows.

Those 102 new highs on a down day in the markets was a surprise.  They caused the Hi-Lo indicator, A-D oscillator, and Summation Indicator to move higher, not lower.  So now 3 of the 4 indicators that make up The Tide are positive. Once the Up-Down oscillator turns positive, The Tide will be positive again and could trigger the next leg higher in the markets.

The BLS will release the May Jobs report at 8:30 this morning.  Given that the down-up-down trading action we’ve see for the past three days appears to be associated with wave ‘e’ down within a large triangle, a positive Jobs Report could start things rolling. We’ll see.

My combination VTI-volume indicator on the Dow remains neutral while the same indicator on the NASDAQ remains positive and in the Up-Trend Zone.  This is one reason I still ted to favor stocks on the NASDAQ and Russell 2K over the large cap internationals.  The strong dollar is another.  Students should note that UUP, the ETF for the Dollar, and EUO, the short Euro ETF are still on the Dean’s List.  As long as these ETF remain on the List, large cap international stocks like Boeing (BA) and Caterpillar (CAT) will continue to be under pressure.  However, the Dollar appears to be close to topping, so IF it begins to pullback, most of these dollar dependent stocks should start to move higher.

Another thing students interested in stocks like CAT and BA should watch is for the CapGoods Sector to appear on the Strong List.  Right now, the sector is on the Weak Sector List near the bottom.  But the 4 month triangle pattern the sector is in since January closely mirrors the Dow’s triangle, so any breakout in CAT or BA will likely take the Dow with it.  Why am I mentioning this now?  Why not just focus on the Dow and buy it on any breakout? Hmmm?  Because the Dow contains a lot other junk.  If the markets start to move higher, I believe that stocks in the top sectors will lead the way. 

They will not only lead, they will gain more on a percentage basis.  We saw this happen late last year with the semis, when the Dow gained 6-7 percent, but most semiconductor stocks were up over 20 percent.  I believe the same thing will happen this time around IF the market breaks out of its triangle and starts to move higher.

Currently the Sector Ratio is 7-17 negative.  So it’s not something to get excited about. The Strongest Sectors are Energy, Healthcare, Utilities, Consumer Products, FoodDrugs, and Computers.  This is NOT the kind of leadership I want to see on the List.  Utilities, FoodDrugs, and Consumer Products are followers, not leaders.  The Weakest Sectors are Household Products, Service, Banks, Financials, and Technology.   The makeup of the Strong List needs to change IF the market is going to move higher.  Be patient.

Gold and most miners fell modestly yesterday.  GLD finished down 0.27 cents at 123.10.   My combination VTI-volume indicator on GLD remains on a neutral signal. I’m still holding the gold shares I have accumulated.

Waiting for the Jobs Report.

That’s what I’m doing,

h

Market Signals for

06-01-2018

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