Professor’s Comments June 5, 2018

Posted by OMS  at June 5th, 2018

The markets rose sharply higher yesterday, with the technology laden NASDAQ and small cap Russell 2K making new all-time highs.  The Dow also had a big day, closing up 178 points at 24,814.  Volume on the NYSE was moderate, coming in at 106 percent of its 10-day moving average.  There were 102 new highs and 66 new lows.

Yesterday’s rally was enough to turn the combination VTI-volume indicator on the Dow positive, generating a new Buy Signal on that index.  The same indicator on the NASDAQ remains positive and in the Up-Trend Zone.  However, breadth on the NYSE remains neutral as the Up-Down oscillator remains negative keeping the Tide neutral. So even though the indicators on the Dow are improving, I still don’t have an all out Buy Signal for the large cap index yet.  Remember, The Tide is one of the indicators I use to trigger purchases from the Dean’s List and Member’s Watch List. So as long as The Tide is neutral, I can’t get too aggressive, but I am starting to buy a few selective issues.

Also, while the VTI-volume indicators on the NASDAQ and Russell 2K are in the Trend Zone, the Dow is not. The VTI-volumn indicator on the Dow is only at 56.2.  It needs to be above 70 for the Dow to trend. So, with the 2-period RSI on the Dow slightly overbought at 78.2 and NO Trend in place, the possibility of a small pullback exists.  If this pullback occurs, I would view it as a Buying opportunity to add to my positions.  I’m still favoring technology stocks on the NASDAQ and smaller cap stocks.

One of the stocks I was buying yesterday was Royal Caribbean (RCL). The DMI is still negative on the stock, but my combination VTI-volume indicator turned positive generating a Buy Signal.  The stock has been under pressure recently because of the rise in crude oil prices.  However, crude prices appear to be topping and the TLB pattern and the narrowing of the Bollinger Bands suggest a turn-around is possible.  Also, the Leisure Sector has moved back on the Strong Sector List, near the bottom.  If RCL can move above 109.80, it would suggest a possible move to the 125-127 level, which is the interim high between the first two lows of the TLB pattern.  Right now, I’m just buying a few shares to establish a ‘trial’ position.  I’d LOVE to see the DMI turn positive on RCL at these levels!  It’s close.

The Sector Ratio moved to 19-5 positive after yesterday’s session.  The Strongest Sectors are Healthcare, Utilities, Consumer Products, Semiconductors, Computers and Energy. Also appearing on the Strong List now are the Banks, Cap Goods, Financials, Technology and Materials.  This weekend I mentioned how I wanted to see the Cap Goods sector move to the Strong List.  It’s there now.  So, the List is starting to show the kind of leadership that could support a significant rally.  The Weakest Sectors are Household Products, Media, Service, Foods, and Telecoms.  I don’t see any reason to own stocks in these sectors now.  I’d much rather own stocks in the Strong Sectors.

Gold and most miners fell modestly yesterday.  GLD finished down 0.12 cents at 122.37.   My combination VTI-volume indicator on GLD remains on a neutral signal with the 2-period RSI in oversold territory, so a bounce is possible.  On the other hand, UUP, the ETF for the Dollar, is still on the Dean’s List with the VTI in the Trend Mode.  So, until UUP moves off the DL and UDN appears, I’m not looking for any sustained-up move in gold.

That’s what I’m doing,

h

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06-05-2018

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