Professor’s Comments March 26, 2019

Posted by OMS  at March 26th, 2019

The markets closed mixed yesterday after some choppy low volume intraday trading. The Dow finished up 15 points at 25,517.  The NASDAQ and SPX were down 5 and 2 points, respectively.  Volume on the NYSE was moderate, coming in at 92 percent of its 10-day moving average. There were 72 new highs and 62 new lows.  The increasing number of new lows and deteriorating breadth caused the Tide to turn negative.

Yesterday’s choppy session appeared to be associated with the correction of Friday’s 460 point decline.  The correction might have another day or so to go before the next declining wave gets underway.

There was a small change in the A-D oscillator after yesterday’s session, so we need to be on the lookout for a Big Move within the next 1-2 days.

As expected, my market timing signals for the Dow and SPX (SPY) turned negative after yesterday’s session, joining the RUT on a Sell Signal.  The NASDAQ-100 (QQQ), remains on a Buy Signal.  So, at this point, my market timing signals for equities are mixed.

The Tide has turned negative, but the Dean’s List is still Neutral.

The Sector Ratio stayed at 18-5 positive. The Strong List was led by Household Products, Semiconductors, Utilities, Technology, and Computers.  The Weak Sectors are Media, Consumer Products, Autos, Banks and Leisure.  Students should note that the Consumer Products Sector is now on the Weak List.  Consumer spending represents about 70 percent of the American Economy, so seeing the Consumer Products and Bank Sectors on the Weak List is not something you want to see if you’re Bullish. Same for the Utes…Bulls should be concerned about seeing them on the Strong List too.

BTW, after yesterday’s session, nine of the Sectors on the Strong List had RS ratings of 1 or zero.  This tells me that even though the Sector Ratio is 18-5 positive, it could turn negative in a heartbeat given one or two down days. 

Gold and mining stocks rose yesterday. GLD gained 0.95 cents to 124.92.  Gold still appears to be completing wave ‘b’ up of a Wave 2 ‘Handle’. If this is the case, wave ’c’ down could take gold (the metal) back down to the 1250 level before wave ‘c’ down completes.  This would mean that GLD could trade back down to the 120 level. The 120 level is approximately where the 200-day moving average is located.  The CCI on GLD is still not in the Trend Mode and the 2-period RSI is overbought.  So, gold should begin to pullback soon.  This is one of the reasons the Model is on the sidelines with respect to a position in gold.  It’s just waiting for a better opportunity.

Same for Crude Oil.  UCO was flat yesterday the day after it pulled out of the Trend Mode.  BTW, for the intermediate term, Crude Oil appears to be developing a large consolidation triangle that should limit its gains for the next several months.  One of the things I’m trying to do with the Model Portfolio is keep it invested in sectors that have patterns that suggest they are either in a Trend or are about to enter the Trend Mode.  I see no point in risking money in a leveraged ETF when it is not trending.  It’s way too risky.  This is the reason the Model sold UCO just after yesterday’s open.  Also, when an issue is not trending, it becomes more susceptible to whip-lashes, something that annoys students, especially in the current environment.

Model Portfolio:  There were several changes to the Model after yesterday’s session.  Just after the open, the Model sold UCO at 20.70.  It bought a half position (645 shares) in SKF, the 2X inverse Banking ETF.  It also bought a half position (1,234 shares) in TZA, a 3X inverse leveraged ETF for the Russell 2K.  The Model also used an oversold RSI on the 30 min bars to wade into a full position (883 shares) of DXD, the inverse ETF for the Dow at an average price of 29.08.    

The remainder of the theoretical $100,000 portfolio, $51,255, remains in cash.  Since inception, the Model is showing a gain of $2,950.24 without commissions, or an IRR of 2.91 percent vs. 0.08 for the SPX.  

BTW, when the Model looks to enter a trade, it tries to get a ‘fair’ price, which is not always the ‘best’ price.  This means that once a Buy Signal appears on the cockpit, it usually waits for the short-term RSI on the 30 min bars to become oversold to enter a long position.  But sometimes, when the equity enters the Trend Mode on the short-term bars, this buying ‘On Sale’ can’t be done, so the Model must pay full price.  When this occurs, the Model usually only buys a partial position.

If the markets rally today, students should look for periods when the securities they are interested in purchasing are ‘On Sale’.  Remember, the markets are likely still in the process of retracing some of Friday’s decline, so there could be opportunities to establish long positions in a few inverse ETFs.

The Model Portfolio 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.  Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.

That’s what I’m doing,

h

Market Signals for

03-26-2019

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

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