Professor’s Comments November 1, 2017
Posted by OMS at November 1st, 2017
The markets rose mildly yesterday. The Dow finished up 29 points at 23,377. The NASDAQ and SPX were up 29 and 2 points, respectively. Volume on the NYSE was moderate, coming in at 106 percent of its 10-day average. There were 172 new highs and 55 new lows.
The decline in the Transports continued yesterday with IYT, the ETF for the Transportation Sector, dropping another 0.78 cents. My VTI-volume indicator remains on a Sell Signal for the trannies, so the negative divergence between the Dow Industrials and the Transports continues. IYT is no longer on the Dean’s List.
CSX dropped 1.17 points to 50.43, so now it’s less than a point from the neckline of its Head and Shoulders Pattern. Remember, we don’t want to see it fall below 49.67.
The Tide and the Money Flow indicator on the DIA remains negative. However, the Dean’s List and my VTI-volume indicator on the Dow, NASDAQ, SPX and RUT remains positive, so until this indicator turns negative, it’s likely the current rally in the major markets will continue.
Tuesday’s Sector Report continued to weaken. Two more Sectors (PharmaBio and Leisure) joined the Weak List causing the ratio to drop to 14-10 positive. The Strong Sector List is led by the Semis, Cap Equipment, Banks, Service, and Computers. The Weak Sectors were led by Telecoms, Household Products, Media, Food, and Utilities.
The Energy Sector had a large positive Delta Trend Score (DTS) yesterday (+119), something often seen just prior to large price move. The Sector has been forming a large Hockey Stick Pattern since its low in mid-August. The recent pullback that started in the beginning of October appears to be the ‘Blade’ of the pattern. As of last night, DUG, the negative ETF for Energy was still on the Dean’s List near the bottom. If it falls off and is replaced by DIG, the positive ETF for Energy, the Sector could be a nice place to be in the months ahead. Watch energy.
After yesterday’s trading, 10 of the 14 Strong Sectors still had positive Trend Scores. So, the even though the Sector Ratio is starting to weaken, the overall momentum remains positive. Students should note that all of the top Strong Sectors still have strong positive Trend Scores, and until these scores start to weaken, it’s likely the rally will continue. Continue to stay in stocks and ETFs in the strong sectors and avoid or short those in the weak sectors. Continue to watch the Sector Ratio closely.
Students should also note how the focus of the market is narrowing, causing stocks like Intel (INTC) from the Semiconductor Sector and Microsoft (MSFT) and Apple (AAPL) from the Computer Sector to move higher and higher. INTC, MU, MSFT and AAPL have been at the top of the Member’s Watch List for weeks. This is occurring while stocks in the Weak Sectors, like AT&T (T) from the Telecom Sector and CBS from the Media Sector are making new lows.
So, like I’ve been saying, use the Sector List to screen your stock selections. Remember, The Tide is negative. This means that most of the stocks on the NYSE are moving down. You don’t want to be in any of these stocks. With the leadership continuing to narrow, this is also the time to start thinking about doing some money management and placing stops. Like I always say, “No stock, no matter how good, goes to heaven.” A stock like Intel (INTC) made a low of 43.1 after its recent gap up. If this low is broken, there’s a good change the pattern could turn into an “Island Reversal”. If you own INTC, pay attention to any move below 43.1 now.
That’s what I’m doing,
h
Market Signals for
11-01-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEG |
SUM IND | NEG |
VTI | POS |
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The Hockey Stick Pattern
The Creation of Waves and Trends
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