Professor’s Comments March 22, 2017
Posted by OMS at March 22nd, 2017
One day after entering the Fibonacci Cluster Turn Window I have been talking about for weeks, the Dow plunged 238 points, closing at 20,668. Volume was heavy, coming in at 119 percent of its 10-day average. There were 105 new highs and 53 new lows.
The VTI generated new Sell signals on the Dow, S&P500, NASDAQ and Russell 2K.
Yesterday’s decline was the worst since the Trump rally began in early November 2016. It more than doubled the decline on 2 March, the day after the Dow made its record high of 21,169.
When the Dow dropped below the 9 March low of 20,777, it established the 1 March high of 21,169 as the top of the Ending Diagonal Pattern that began in February 2016. Ending Diagonals are major Wedge Patterns that usually form as the final leg of a Major Bull Market. This Ending Diagonal began February 2016, and is likely the final leg of the Major Bull Market that began in March 2009.
The target for this Ending Diagonal is where it began, or near the 15,500 level. The decline won’t be straight down, but it should consist of five Major Waves. Each of these Major Waves will have many sub-waves. Yesterday’s decline was likely the start of minor wave 3 down within Major Wave 1 down. My target for Major Wave 1 down is the 17,883 level. This low is where the rally began just after President Trump was elected.
Yesterday’s Sector Report was little changed. The report had 20 strong sectors and 4 weak. The Semiconductors, Banks, Leisure, Transports, and Material were the top five strongest sectors. Service, Energy and Retail were the weakest. One thing I noted on the Sector Report was that even though yesterday’s decline was strong, only 10 of the strong sectors are showing negative Trend Scores. This tells me that it’s likely there will be some backing and filling before the major decline begins. The Financials and Insurance Sectors had large changes in Delta Trend Scores. These Sectors also have negative Trend Scores.
Because of this, I will start looking to establish short positions in the Financial and Insurance Sectors on any bounce. With DDM and QLD still on the Dean’s List, I’m still a little cautious about establishing short positions in large cap stocks. However now that TWM and RWM, the inverse ETFs for the Russell 2K are back on the List together with SH and SDS, the two inverse ETFs for the S&P500, I will tend to focus on the smaller issues to get started.
The reason I’m not getting too aggressive with my shorts yet is because last night when I ran The Professor, he only had 13 shorts. If wave 3 down is starting in earnest, he should be highlighting 40-50 or more shorts. So by only seeing 13 shorts from The Professor and only half the sectors on the Strong Sector Report with negative Trend Scores, it’s telling me it’s still early in the turning process. Early in this case means that there could be some backing and filling before the downdraft begins. Backing and filling also means that there could be several better opportunities (higher prices) to establish short positions.
But do NOT mistake my cautious approach for establishing short positions as a sign of indecision. All I’m trying to now is get a good price. I’m going to buy a few short positions now, and then see if I can add to them over the next few days.
Here’s the Deal: Now that the Dow has moved below the 9 March low of 20,777, as a technician, I CAN NO LONGER CONSIDER THIS A BULL MARKET. I must start trading it as a BEAR! The danger of the Dow trading to the 15,500 level or below is real. I cannot ignore the fact that a Major Ending Diagonal Pattern has formed and the market turned exactly where it was supposed to. If something walks, quacks, and waddles like a duck, I have to assume it’s a duck! But I’m going to enter my short positions slowly.
As stocks plunged, gold and mining stocks had a nice day. GLD rose 0.98 cents to 118.54. The VTI on GLD continues to move up and is now showing a positive bias with a reading of 57.
It’s still not clear if GLD has completed its minor wave 2 correction or whether it needs another wave down (wave ‘c’ down) to complete the pattern. With the 50 still below the 200, another small move down is always possible. However, if the VTI continues to move up, and rises above the 70 level, it would eliminate this possibility. A VTI on GLD above 70 would tell me that wave 3 up is underway.
My plan for gold and mining stocks is to continue to pick-up shares as they become oversold and wait for the wave 3 rally which should take GLD to the 135+ level. Currently, gold (the metal) is trading near the 1247level. I’m looking for it to trade near 1,550 when wave 3 of 5 completes. This is why I’m being very patient with my gold shares.
BTW, the Material Sector which contains gold, has moved up to the Number 4 position in the Strong Sector Report. The overall Sector has a negative Trend Score and a VTI that it still showing a negative bias of 44.6. Students that are trading gold should not get too excited about the fact that the Materials Sector is moving up on a weakening Strong Sector Report. Remember, the overall sector rallied hard without gold when the Trump rally started back in November. So, it’s hard to tell if gold is the reason why the Materials Sector is showing strength. We’ll see.
Buying/holding gold and looking for opportunities to establish short positions in a few inverse index ETFs.
That’s what I’m doing,
h
Market Signals for
03-22-2017
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG |
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
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The Hockey Stick Pattern
The Creation of Waves and Trends
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Category: Professor's Comments