Professor’s Comments March 5, 2019

Posted by OMS  at March 5th, 2019

The markets fell hard early yesterday, then recovered about half their losses by the close.  The Dow finished 207 points lower, closing at 25,820. The NASDAQ and SPX were down 18 and 11 points, respectively.  Volume on the NYSE was moderate, coming in at 102 percent of its 10-day moving average. There were 120 new highs and 14 new lows.

The pattern for the markets is still unclear.  Yesterday’s decline on the Dow was the 4^th in five trading days, so it could be part of a small wave 4 within a five wave sequence leading to a top during the 8-11 March Fibonacci cluster period.  On the other hand, the decline could be the start of the a-b-c Wave 2 pullback I talked about in the WSR.  At this point, it’s too early to tell if the decline has started, so we need to keep paying attention to the indicators.

There were no changes to my market timing signals for equities.  All major equity indexes remain on Buy Signals.  However, the volume portion of my VTI-volume indicator on the Dow turned negative yesterday, which makes its timing signal Neutral.  Neutral is NOT a Sell Signal. It’s only a warning that the signal could be getting ready to change.

Two of the four breadth indicators that make up The Tide also turned negative yesterday.  So, with a negative Summation Index and a negative A-D oscillator, The Tide is now Neutral.  The Dean’s List remain Positive.  Students should note that the A-D oscillator, which has been positive since 31 December, has now turned negative in two of the last three trading days.  A negative A-D oscillator means that more stocks on the NYSE are moving down than moving up.  Hmmm?

Again, one of the reasons I’m watching the breadth closely now is because IF The Tide turns negative, it increases the odds for a corrective Wave 2 a-b-c pullback.  And right now, the pattern in my negative scenario suggests the pullback could drop the Dow to the 24,500-24,800 level.  Again, pay attention to the indicators and watch for a signal change as we move into the 8-11 March cluster period. 

The Sector Ratio remained at 23-1 positive after yesterday’s session. There were a few changes to the Strong List as Semiconductors, Real Estate, Household Products, Technology, and Energy now occupy the top spots on the List.  The only Weak Sector was FoodDrugs.

Gold continued its pulled back yesterday with GLD dropping 0.31 cents to 121.56.  The decline caused my VTI-volume indicator on gold to turn Negative.  This negative signal tends to confirm that gold is working its way through a Wave 2 pullback.  The 200-day moving average on GLD is at the 119.78 level and is a likely target.  Right now, I’m just watching the timing indicators for an opportunity to add a gold position to the Model Portfolio.  BTW, the reason I’m watching the Wave 2 pullback in gold now is because once it completes, the meta) could rise to the 1,600 level on a Wave 3 rally.  Be patient and watch for a signal change.

Crude Oil (UCO) rose 0.45 cents yesterday, after pulling back and becoming oversold on Friday.  Crude Oil remains on a Buy Signal.  UCO oil still appears to be developing a small wave 2 ‘Blade’ along its 50-day moving average.  This might take a few more days to complete.  I still believe the ‘Blade’ on UCO should enable the ETF to test its 200 currently near the 23 level.  If UCO can move above the 23 level in the days ahead, it would be a significant accomplishment as a break of 23 could lead to a move to the mid to high 20s. 

With the Energy Sector moving up on the Strong Sector List, Students should continue to watch the longer-term inverse Head & Shoulders Pattern on Crude Oil.  This pattern has been developing since late November 2018 on the Daily Charts.  If West Texas Crude stays above 54, it has a good shot at the 66 level in the next 4-6 weeks.  This pattern along with positive indicators is one of the reasons UCO remains in the Model Portfolio. 

Model Portfolio:  The Model remains 25 percent invested in Crude Oil (UCO) and 75 percent in cash.

That’s what I’m doing,

h

Market Signals for

03-05-2019

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