Professor’s Comments May 24, 2019

Posted by OMS  at May 24th, 2019

The markets fell hard again yesterday with the Dow shedding almost 500 points before recovering about 40 percent of the decline into the close. The Dow finished with a loss of 286 points, closing at 25,490.  The NASDAQ and SPX finished down 123 and 34 points, respectively. Volume on the NYSE was heavy, coming in at 115 percent of its 10-day moving average. There were 78 new highs and 179 new lows.  Students should note that the number of new lows is now exceeding the new highs again.  Not good.

Yesterday’s decline was likely the initial wave down within wave ‘c’ down within Wave ‘B’ down.  If this is the case, once the rally off yesterday’s lows completes, possibly sometime today, there should be additional downside follow through as the Dow begins a choppy decline that should eventually test the 25,000+/- level before Wave ‘B’ down completes.

We still need to pay attention to the area near the 25,000-25,200 because as I mentioned yesterday, this level represents the ‘Neckline’ of a large Head & Shoulders pattern.  IF this ‘Neckline’ is broken, the next target for the Dow is the 24,000 level. So how the Dow approaches and tests the 25,000 level is extremely important.  Pay attention to this! It will determine the future direction of the market.  IF the area near 25,000-25,200 holds, there’s still a good chance that the Dow will rally to new highs later this year.  IF it doesn’t, and the Dow declines to 24,000 or lower, the odds will suggest that a Major Top is in and any subsequent rally will only be Wave 2 of a new Bear Market.

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 remain 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 trade smaller positions and take profits quickly. 

The Tide and the Dean’s List are negative.  The DMIs remain Negative.

The Sector Ratio fell to 19-5 negative after yesterday’s session.  The Strong List was led by Real Estate, Household Produces, Insurance, Telecoms and Foods.  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, Energy, Material, Retail, and Semiconductors.

Gold (GLD) rose slightly yesterday.  The small rally caused a nice rise in the volume portion of my VTI-volume indicator.  The indicator is still on a Sell Signal, buy now I’m starting to see positive developments in two of my key measures on institutional interest: Volume and Money Flow.  This, together with the pattern tells me that gold could be approaching a significant bottom. Be patient

The Energy Department announced that commercial crude oil inventories rose by 4.7 million barrels last week, causing the price of WTC to fall over 2 percent.  This was the second consecutive week that inventories rose, despite expectations for a decline of nearly 600,000 barrels.  The rise in inventories caused a nice pop in SCO, pushing the inverse ETF to EXTREMELY oversold levels.  I never like trading news events, but when unexpected news hands me a nice profit, I take it and then look to re-enter the trade once the news passes.  Remember, crude is in a triangle, so there should be several opportunities to enter and exit this trade on both sides when the indicators are favorable.  The Model is on the sidelines with crude for now.

Model Portfolio:  With the market down over 400 Dow points and EXTREMELY oversold, the Model exited all its positions during yesterday’s session.  Remember, the positions the Model had going into yesterday’s session were NOT in the Trend Mode, so once the positions declined (as expected) there was no point in continuing to hold these positions.  I talked about how the Model planned to trade Wave ‘B’ down several days ago, so when yesterday’s decline happened, the Model booked its profits. If the Dow continues to rally during the next few days, the Model will likely re-establish a few of these short positions. However, yesterday’s decline hit the 25,328 level, which is only 125 points from the upper level of my target for Wave ‘B’ down.  So, it could be that Wave ‘B’ down bottomed yesterday.  I don’t think this is the case, but I want to see if yesterday’s late rally has legs before doing anything else, especially with a long weekend ahead of us.  The Model Portfolio is now 100 percent in cash ($110,730).

Since inception, the Model has gained 10.7 percent which translates to an annualized return of 52.4 percent. This compares to a gain of 1.36 percent for the SPX for the same period.  The Model continues to hold its own against the SPX, even though the conditions the Model was designed to take advantage of (a trending market) have not occurred to date.

BTW, I plan to post the Model’s performance statistics this weekend. I think you’ll find them very interesting.

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

05-24-2019

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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