Professor’s Comments May 17, 2017
Posted by OMS at May 17th, 2017
The Dow fell 2 points yesterday, closing at 20,980. Volume was moderate, coming in at 94 percent of its 10-day average. There were 180 new highs and 60 new lows.
Yesterday’s early decline and afternoon retracement appeared to be sub-waves 1 and 2 of Wave ‘c’ down of the consolidation triangle forming for Major Wave ‘D’. If this is the case, equity markets should state to fall hard as sub-wave 3 down of ‘c’ unfolds. My targets for Wave ‘c’ down on the Dow is near the 20,500 level. For the SXP, the target is near the 2,340 level, possibly lower if the decline becomes a zig-zag or flat pattern.
BTW, the chart for the SPY I posted on 29 April is still in play. I’ll update the chart in my next WSR, but for now expect the triangle to continue until all 5 waves have played out. I’m still thinking the triangle will complete in mid-June.
I’m still watching the Russell 2K for a break of 1,380. Yesterday’s early decline dropped the RUT to 1,385. The decline was impulsive and appeared to be sub-wave 1 down. The reason I say this is because yesterday’s early decline was part of a 5 wave decline that started the previous day. If you look at the 5-min bars, you can clearly see the 5 waves.
Once the 5 wave decline completed near the 10:30am mark, the index began a 3-wave retracement into the close. Five waves down followed by 3 waves up is an indication of the primary trend, in this case the trend is down.
If I’m right about the wave count on the RUT, sub-wave 3 down is about to start. It should produce a nice increase for shares of TWM, the inverse ETF for the Russell 2K.
BTW, even though the markets didn’t do much yesterday, the internals weakened considerably. The A-D oscillator reversed itself after turning positive for one day on Tuesday. It also had a relatively small change, going from +8 to -16. Ordinarily, I wouldn’t pay too much attention to a change like this, but with the reversal, the A-D oscillator has now been negative for 9 of the past 10 days. This is important because it’s telling me that most stocks on the NYSE are moving lower, despite all the positive press coverage the markets are receiving. It always pay$ to listen to the indicators and not the press.
Gold is another story the media isn’t covering. Yesterday the metal quietly rose again as it continues to develop its bullish pattern. GLD rose 0.51 cents to 117.65. It’s now only inches away from crossing above its 50 and 200, located at 118.40 and 118.03 respectively. Remember, GLD is already in an UpTrend with its 50 above the 200. So, a move above 118.40 should start things rolling. I’m on a Buy Signal for gold.
Gold is NOT a trade here. I’m buying a Basic Position to hold for a move to the 134+ level. Once gold starts to move up, I’ll use Rifle Trading techniques to add to my position. The shares I buy with Rifle Trades will be the ones I will use to trade.
For my new students, Rifle Trades are accomplished on stocks or ETFs already in an UpTrend. This is when I use the 2-period RSI to purchase additional shares for trading when the ETF becomes oversold.
Yesterday’s Sector Report continued to weaken. The report now shows only 8 strong sectors and 16 weak. This is a total reversal from what the report has been saying for the past few weeks. Now the weak sectors are in the majority.
There were no changes to the top sectors. The Semis, Computers, Leisure, and Healthcare continue to lead with Real Estate, Autos, Telecoms, and Media lagging. Interesting enough, the Material Sector had a large positive Delta Trend Score yesterday (+124). The Material Sector contains the Gold Group. Large Delta Trend Scores (DTS) are usually a tell for which sector will lead the market higher or lower, depending on the value of the DTS. Hmmm?
Students looking for short-term trading (scalping) opportunities should always note large Delta Trend Scores. For example, on Tuesday, the Telecoms Sector had a large DTS. Yesterday the sector was down 3.82 points.
That’s what I’m doing,
h
Market Signals for
05-17-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | NEG |
VTI | POS |
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Category: Professor's Comments