Professor’s Comments June 27, 2018

Posted by OMS  at June 27th, 2018

The markets rose mildly yesterday.  The Dow finished up 30 points at 24,283.  The NASDAQ and SPX were up 30 and 6 points, respectively. Volume on the NYSE was moderate, coming in at 100 percent of its 10-day moving average.  There were 45 new highs and 65 new lows.  New lows continue to outnumber the new highs.

After a positive start, it was apparent that yesterday’s trading lacked the characteristics that would identify it the start of Wave 1 of Major Wave 5 up.  It was NOT impulsive.  If it was, the Dow should have finished on its high, and held its intraday gains.   So, given that the move appeared corrective, it’s likely the Dow has not completed its corrective wave ‘c’ of Wave ‘e’ down.   

Corrective wave ‘c’ down should complete somewhere above the triangle’s lower support boundary line, which for the current pattern is near the 23,750 level.  We’ll know that the pattern is complete when the indicators turn positive.

Right now, most of the indicators I follow are negative.  My combination VTI-volume indicator on the Dow, NASDAQ-100 (QQQ), and SPX (SPY) remains negative.

Yesterday’s trading caused the Up-Down oscillator to turn positive, which turned The Tide neutral.  I wouldn’t get too excited about this, because of the four breadth indicators that make up The Tide, the Up-Down oscillator is the least reliable.  The most reliable breadth indicators are the Hi-Lo indicator and the Summation Index, and as of last night, both were still negative.  Yesterday’s 65 new lows did not help either of these indicators.

So, we wait.  BTW, IF the markets decline early today, and then STABILIZE after the decline, they may present us with a nice place to establish a few ‘trial’ positions.  For example, let’s say the Dow drops 150-250 points early and stabilizes near the 24,000+ level.  If a student believed that the Wave ‘e’ down of the Wave 4 triangle will complete near this level, the student could establish a longer-term position near Dow 24,000 with a stop at 23,750.  In other words, the student would risk 250 Dow points for a potential gain of approximately 2,600 Dow points, assuming the Dow rallies back to its old high at the 26,617 level.  Having trading opportunities with better than 10-1 odds are NOT something you often see in the markets.  For the record, when I trade I like to have odds of 2.5:1 or better.  

After yesterday’s session, the Sector Ratio rose to a neutral 12-12.  The Strong Sector List continues to be led by defensive issues like FoodDrugs, Healthcare, Retail, Media, Utilities, and Consumer Products.  Students should continue to watch this List closely in the days ahead. If the market is going to stage a rally, sectors like Technology, Cap Equipment, Computers, Banks and Financials should sat to appear. Right now, these Sectors are on the Weak List, near the bottom.  Students should also watch for the Materials Sector, which includes gold, to move to the Strong List.  As long as gold is weak, it means the Dollar is strong, which will preclude any significant rally in large cap international stocks.

The Weak Sector List was led by Household Products, Leisure, Materials, Service, Technology, and CapGoods. 

My combination VTI-volume indicator for GLD and SLV remain on Sell Signals. 

That’s what I’m doing,

h

Market Signals for

06-27-2018

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