Professor’s Comments June 21, 2018

Posted by OMS  at June 21st, 2018

The markets were mixed yesterday.  The Dow finished down 42 points at 24,658 while the NASDAQ and SPX were up 56 and 5 points, respectively.  So, once again, we saw weakness in the big cap international stocks while technology and small cap domestic stocks on the NASDAQ and Russell 2K are making new highs. Volume on the NYSE was moderate, coming in at 95 percent of its 10-day moving average.  There were 115 new highs and 38 new lows.

There were no changes to any of the cockpit indicators after yesterday’s trading. Both The Tide and Dean’s List remain neutral with 3 of the 4 positive index ETFs still on the Dean’s List.  However, my combination VTI-volume indicator on the Dow is close to generating a Sell Signal.  If this happens, it likely means that the current wave structure on the Dow, which I previously thought to be a wave 2 within Wave 3 of Major Wave 5 up, is morphing.  It brings up the possibility that Major Wave 4 is NOT complete yet, and the 11 June high of 25,403 was only Wave ‘d’ up within the triangle with Wave ‘e’ down to go.  If this scenario is occurring, it means that the Dow could fall as low as the 23,750 level before Wave 4 completes.  That’s over 900 Dow points from current levels.

At this point, the above scenario is still NOT my primary scenario.  However, IF the VTI-volume indicator turns negative, it will become the primary scenario.  IF this happens, it will likely bring the NASDAQ and SPX down with it.  The SPX, currently trading near 2,763, could fall to 2,650.  The NASDAQ and RUT should be less affected as they are both in different (stronger) patterns.  The NASDAQ and RUT appear to be in Wave 5 up.  As we’ve seen for the past few days, large cap international stocks are being impacted by a potential trade war with China.  So, if you’re holding these type of stocks, you could experience some short-term weakness during the next few weeks.

On a larger scale, the large triangle pattern that has developed on the Dow since late January still appears solid.  So once Wave ‘e’ down (if it’s a wave ‘e’) within the triangle completes, prices should move significantly higher as Wave 5 up unfolds.

The Sector Ratio remained at 18-6 positive after yesterday’s session.  The Strong Sector List continues to be led Retail, Healthcare, FoodDrugs, Media, Consumer Products, and Computers.  The Weak Sector List was led by Household Products, Leisure, CapGoods, Telecoms, and Materials.  Students should note that the Materials Sector, which includes gold, has moved to the Weak List.

Gold and the miners were down again yesterday. GLD dropped 0.31 cents to 120.8.  My VTI-volume indicator on GLD and SLV moved from Neutral to a Sell Signal.  As long as UUP, the ETF for the Dollar, remains on the Dean’s List, the metals and large cap international stocks will remain under pressure. 

That’s what I’m doing,

h

Market Signals for

06-21-2018

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