Professor’s Comments May 22, 2019
Posted by OMS at May 22nd, 2019
The markets rose sharply yesterday, retracing all of Monday’s decline and then some. The Dow finished with a gain of 197 points, closing at 25,877. The NASDAQ and SPX finished up 83 and 24 points, respectively. Volume on the NYSE was on the low side, coming in at 92 percent of its 10-day moving average. There were 110 new highs and 56 new lows.
Yesterday’s rally still appeared to be part of a corrective wave structure within large Wave ‘B’ down. At this point, its not clear just what type of wave structure is developing…could be a small triangle for wave ‘b’. But even if this is the case, triangles are continuation patterns, so if this is happening, the markets should still decline in wave ‘c’ down once the triangle completes. I still believe the Dow will test the 25,000 level before Wave ‘B’ down completes.
However, after yesterday’s session, there’s a new, more negative pattern that could be developing.
If you look at a chart of the Dow since February, the rise into February’s high and subsequent pullback into the 8 March low could be viewed as the Left Shoulder of a Head & Shoulders Pattern. The ‘Head’ would be the 23 April top. So, it’s possible that yesterday’s rally could have been the top of the Right Shoulder of this pattern. If this is what’s happening, it puts a whole different perspective on the 25,000 level. That’s because a break of 25,000 would likely mean that the Dow could decline to 24,000 or lower if the ‘Neckline’ at 25,000 is broken. And if this happens, it would change the overall pattern enough that any rally later this year would be far less dramatic. A decline to 24,000 would likely mean that the Dow would NOT reach new all-time highs later this year. So, what happens during the next few weeks will have a significant effect on the future direction of the markets.
There were NO CHANGES to my market timing indicators after yesterday’s session. The NASDAQ and Russell 2K remain on Sell Signals. The Dow and SPX remain on Neutral Signals. So, with mixed signals I still plan to be cautious with my positions. It still appears that the markets are in some type of corrective mode with NO Trend in place. Whenever there is NO Trend in place, we take smaller positions.
The Tide and the Dean’s List remain Negative. The DMIs remain Negative.
The Sector Ratio moved to 15-9 negative after yesterday’s session. The Strong List continues to be led by Real Estate, Household Produces, Insurance, Foods and Telecoms. These are all defensive sectors. This is NOT the List you want to see if you’re Bullish on the markets. The Weak Sector List continues to be led by Service, Semiconductors, Material, Retail, and Energy.
Gold (GLD) fell slightly yesterday, buy my Money Flow indicator on GLD turned positive for the first time in weeks. This means that a few institutions are beginning to take a position in gold. As I mentioned yesterday, gold appears to be in the process of completing wave ‘e’ down of Wave 2 down of Major Wave 3 up. Gold (the metal) remains on a Sell Signal, and the Materials Sector (with gold) is still on the Weak Sector List. However now that I’m beginning to see some positive divergence in the indicators, it’s likely that gold is developing a significant bottom. I still believe that gold could trade down to the 1260 level, possibly 1250. I plan to start establishing ‘trial’ positions near 1260.
Model Portfolio: The Model added a ‘trial’ position (500 shares) of QID, the 2X inverse leveraged ETF of the NASDAQ-100 during yesterday’s session. Price paid for the shares was 33.61. The Model continues to hold a small ‘trial’ position (500 shares) of DXD, a 2X inverse leveraged ETF for the Dow. The Model is also holding a small ‘trial’ position in SCO, the inverse ETF for West Texas Crude Oil. The rest of the Model Portfolio, $60,559, remains in cash.
BTW, as I mentioned in one of yesterday’s Updates, students should continue to watch SCO on the hourly charts. The Bollinger Bands continue to narrow and the CCI could be ready to turn positive. Remember, crude oil appears to be developing a triangle pattern on the daily charts. The next leg of this pattern should take WTC down from where it is now, near 63, to below the 50 level. If this decline starts to occur, and the timing indicator for crude turns negative, the Model will increase its position in SCO.
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
05-22-2019
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEU | 10 May 2019 |
NASDAQ | NEG | 20 May 2019 |
GOLD | NEG | 17 May 2019 |
U.S. DOLLAR | POS | 16 May 2019 |
BONDS | NEU | 21 May 2019 |
CRUDE OIL | NEU | 06 May 2019 |
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Category: Professor's Comments