Professor’s Comments June 29, 2018

Posted by OMS  at June 29th, 2018

The markets rose modestly yesterday. The Dow finished up 98 points at 24,216.  The NASDAQ and SPX were up 59 and 17 points, respectively. Volume on the NYSE was moderate, coming in at 98 percent of its 10-day moving average.  There were 40 new highs and 56 new lows.  

After an opening decline, the market stabilized and spent the rest of the day recovering.  It was the kind of action that one would expect to see IF the market was putting in a bottom.  It’s even possible that the rally off the low and late pullback were sub-waves  1 and 2 of the next 5 wave sequence up.  If this is the case, the markets could start an impulsive sub-wave 3 rally today.  This would provide us with an additional clue as to what’s going on, and hopefully start turning some of the cockpit indicators positive.  We’ll see.

Once again, the thing we’re watching for now is impulsive action to the upside.  Wave ‘e’ of the triangle reached a low of 23,997.  From a theoretical perspective, I was looking for Wave ‘e’ to end somewhere between 23,750 and 24,400.  So, 23,997 is just about in the middle of that range.  Now the markets need to start moving higher.  If they don’t, something else is going on.  The thing we DO NOT want to see now is a break below 23,750.  Stay on your toes and pay attention.  The initial waves of Major Wave 5 up could be starting.

The Sector Ratio improved to 11-13 negative after yesterday’s session.  The Strong Sector List is still being led by defensive sectors like Utilities, FoodDrugs, Healthcare, Retail, and Consumer Products.  This needs to change in the days ahead.  If the market is going to rally to new all-time highs, I would expect Technology, Cap Equipment, Computers, Banks and Financials sectors to lead the way higher.  The Dow will not go to 26,660+ on food, toothpaste, and toilet paper.  So, watch for Technology and Cap Equipment to get strong.  And for them top get strong, we need a lower dollar.

Yesterday UUP, the ETF for the Dollar, finished unchanged.  So, why am I mentioning this? What’s the big deal, hmmm?  Well, the BIG DEAL is that since 20 April, the VTI-volume indicator on UUP has been positive and on a Buy Signal.  During that time, the ETF rose from 23.72 to 25.14.  On the surface, this doesn’t look like much, but remember, we’re talking about the Dollar.  Trading the Dollar ETF is like watching grass grow.  It’s not very exciting.  It doesn’t matter how much it’s been rising.  The fact that it has been rising is all you need to know. Even a tiny rise in the Dollar can hammer the Cap Equipment makers. But something very important happened yesterday. My VTI-volume indicator on UUP turned negative and generated a Sell Signal.  I can’t tell you how important this is to stocks doing business overseas.  So now, let’s see if stocks like Boeing (BA), Caterpillar (CAT), and others can start to move higher.  If they do, they just might take the Dow with them.

My combination VTI-volume indicator for GLD and SLV remains on a Sell Signal.  If the Dollar starts to decline, I would expect gold and silver to strengthen.  But right now, the indicators are still too weak for me to be interested in trading them.

That’s what I’m doing,

h

Market Signals for

06-29-2018

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