Professor’s Comments March 6, 2019

Posted by OMS  at March 6th, 2019

The markets were flat to slightly lower on Tuesday. The Dow finished 13 points lower at 25,807. The NASDAQ and SPX were down 19 and 3 points, respectively.  Volume on the NYSE was moderate, coming in at 93 percent of its 10-day moving average. There were 81 new highs and 22 new lows. Students should note how the number of new highs is beginning to decrease while the number of new lows is increasing. If this continues it will lead to a change in the Hi-Lo indicator which is usually one of the better tells for a change in market direction.

Yesterday’s decline on the Dow did not do anything to change the short-term pattern.  It’s still possible that the decline is 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 remains negative, so its timing signal Neutral.  Neutral is NOT a Sell Signal. It’s only a warning that the signal could be getting ready to change.

BTW, my custom volume Money Flow indicator on the Dow also turned negative last night. This tells me that a few of the institutions are starting to take money out of the market.

The Tide is Neutral with the Dean’s List still positive.

I continue to watch the Tide’s breadth indicators because if The Tide turns negative, it increases the odds for a corrective Wave 2 a-b-c pullback.  If the market starts this type of Wave 2 correction, it could drop the Dow to the 24,500-24,800 level. So, 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 no changes to any of the Sector Lists.  The Strong Sector continues to be led by Semiconductors, Real Estate, Household Products, Technology, and Energy.  The only Weak Sector is FoodDrugs.

Gold continued to pull back yesterday. GLD fell 0.16 cents to 121.72.  It got as low as 121.03 in intraday trading. GLD appears to be working its way through a Wave 2 pullback.  Support at the 200-day moving average near 119.80 on GLD remains a likely target. Once the timing indicator for GLD turns positive, I’ll be adding a gold position to the Model Portfolio. Be patient and watch for a signal change.

Crude Oil (UCO) was flat yesterday and remains on a Buy Signal.  UCO oil still appears to be developing a small wave 2 ‘Blade’ along its 50-day moving average.  The past few days of trading have caused a small triangle to develop on the 15 minute bars.  The high and low of the triangle is between 18.79 and 20.02.  So far waves 1-4 of the triangle appear to be complete with wave ‘e’ down currently in progress.  Triangles are continuation patterns so, once wave ‘e’ completes, the pattern should enable the UCO 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 continuing to move 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

03-06-2019

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