Professor’s Comments March 12, 2019

Posted by OMS  at March 12th, 2019

After an initial early decline, the markets rallied hard into the close.  The Dow finished with a gain of 201 points, closing at 25,561.  The intraday rally from EXTREME oversold conditions was the large move predicted by Friday’s small change signal in the A-D oscillator. The NASDAQ and SPX were up 150 and 40 points, respectively.  Volume on the NYSE was moderate, coming in at 99 percent of its 10-day moving average. There were 108 new highs and 24 new lows.  The increase in new highs turned The Tide back to Neutral.

Yesterday’s rally Dow also turned my VTI-volume indicator on the Dow back to Neutral from a Sell Signal. The same indicator is showing a Neutral Signal for the NASDAQ-100 (QQQ), S&P500 (SPY), and Russell 2K.

After the market opened yesterday, I commented that it was not unusual for the market to rally the day after it made three consecutive lows last week.  Friday’s jobs report was disappointing, and whenever this happens in the week before options expiration, the markets usually rallies on Monday, sometimes into Tuesday, and then spends the rest of the week moving lower. Also, there were several major buy programs that came in on Friday, and whenever these programs fail to lift the market after a Jobs Report, the market usually pops on Monday, but then resumes its decline later in the week.  So, we’ll see if this tendency happens again this week. 

Yesterday’s rally had all the markings of a corrective rally wave within a larger decline.  Once the initial decline was checked, some institutional buying came in to start the rally and then short covering took over.  Last week I mentioned that IF corrective Wave 2 has started, which should take the Dow down to the 24,500 level, it won’t be straight down.  Yesterday’s rally was a good example of what I meant by this comment. 

OK, so did yesterday’s rally tell us anything new as to the next major move in the markets? The short answer is NO.  It’s still likely that yesterday’s rally was a corrective wave within wave ‘a’ down within Wave 2 down.  But it’s also possible that the rally was the start of the final rally wave (wave 5 up) within Wave 1 up.  We’ll just have to see what happens during the next few days.  If the market begins to fall again later this week, the odds will shift in favor of the Wave 2 decline.

In Friday’s comments, I also talked about my concern about the strength of the Sector Ratio.  I noted that the Sector Ratio was still very positive at 23-1 positive.  I said the fact that it remains so positive ‘troubles me’.  The Strong Sector ratio was one of the reasons the Model Portfolio hasn’t committed more of its cash to inverse equities.  After yesterday’s rally, the Sector Ratio was still strong at 23-1 positive.  The Strong Sector List continues to be led by Household Products, Real Estate, Semiconductors, Technology, and Computers.  The fact that three ‘technology’ sectors are still on the Strong List is a concern for any Bearish scenario.  These ‘tech’ sectors need to drop off the Strong List if corrective Wave 2 down is going to develop. The only Weak Sector was FoodDrugs.

Gold and mining stocks resumed their decline yesterday.  GLD fell 0.60 cents to 122.2.  GLD still appears to be working its way through a Wave 2 pullback.  I’m just waiting for the pullback to complete.  Be patient and watch for a signal change.

Crude Oil (UCO) moved back to a Buy Signal (from Neutral) after yesterday’s session.  UCO has now completed five waves within a small triangle on the 15-min bars and could begin to test the high of the triangle at 20.24.  A break above 20.24 would project a move to the 23+ level.

Model Portfolio:  There were NO CHANGES to the Model Portfolio after yesterday’s session.  The Model remains 25 percent invested in Crude Oil (UCO), 25 percent invested in DXD, the inverse ETF for the Dow, and owns 1,000 shares of TZA, a 3X leveraged ETF for the Russell 2K.  The remainder of the Model, just under 40 percent, is in cash.  The Model is being shown for educational purposed only.  The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should not be considered as recommendations for trading an actual portfolio. 

That’s what I’m doing,

h

Market Signals for

03-12-2019

One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.