Professor’s Comments November 15, 2018

Posted by OMS  at November 15th, 2018

The markets rallied early then fell into the close. The Dow finished down 206 points at 25,081.  The NASDAQ and SPX fell 66 and 21 points, respectively. Volume on the NYSE was moderate, coming in at 112 percent of its 10-day moving average.  There were 23 new highs and 172 new lows.

Yesterday’s large intraday swing was the Big Move predicted by Tuesday’s small change in the A-D oscillator.

The lower close produced a large number of new lows turning the Hi-Lo indicator back to negative again. So, with one of the 4 breadth indicators having turned negative, The Tide is now neutral.  The Dean’s List remains negative. 

Yesterday’s early rally to 25,501 on the Dow was likely part of sub-wave 2 within Wave 3 down.  The rally failed its test of the 50-day moving average at 25,598, then fell to test the 200 at 25,000 which held.  So, now the Dow is trapped between the 50 and 200 moving averages.  The Dow will likely continue to trade between the 50 and 200 for a few more days to form a ‘Blade’ to put on the 1,342 point ‘Stick’ before it starts to head lower again.  During this ‘Blade’ forming process we should expect some choppy trading.  Then once the ‘Blade’ is complete, the Dow should start to break below the 25,000 level as wave 3 of Wave 3 down begins to unfold.  BTW, IF the Dow does not exceed the 25,501 level during the formation of its ‘Blade’, subtracting 1,342 points from 25,501 leaves us with a minimum target near 24,159 on the next decline.  The 24,122 level is where Wave 1 down completed on 29 October, so it’s possible that it will only be the target for sub-wave 3 of Wave 3 down.  The two other targets I have for Wave 3 down are closer to the 23,000 level, so for now I’m sticking with my estimate of 23,500+/- .

My market timing indicators for equities remain on Sell Signals.

The Sector Ratio fell to 7-17 negative after yesterday’s session. The Strongest Sectors continue to be defensive in nature, with Household Products, Service, Media, Food Drugs, and Telecoms at the top of the List.  Seeing 17 negative sectors tells me this is an EXTREMELY weak market.  Not seeing any of the typical growth sectors, like technology, semiconductors, cap goods, banking or financial on the List is also something students should note.  These sectors usually lead the market…up or down.  Right now, all these sectors near the top of the Weak List.  Be careful!

Gold bounced yesterday from extreme oversold conditions.  However, the bounce was not enough to change my timing indicator for gold.  It remains on a Sell Signal.

Crude Oil also bounced after twelve days of declining prices.  The bounce caused the price of UCO to close inside the body of the previous day’s candle stick. Students should note that even though the pattern looks like a Harami Candlestick reversal pattern, it was NOT.  The reason is because the closing price was below the opening price. A true Harami reversal should have the price close above the opening. Because this did not happen, its likely that crude oil has not seen its bottom yet.  My market timing indicator for Crude Oil remains on a Sell Signal.

BTW, because I’m expecting the markets to trade sideways for the next few days to form a ‘Blade’ on the indexes, I’ll look to fade any intraday rallies on the short-term bars.  IF these positions are established near or above the 25,300 level, I’ll hold some of these positions overnight, just in case the Dow starts to break down.  At 25,300, I feel the reward-risk level is about 6:1 or better in my favor.  I like those odds.

That’s what I’m doing,

h

Market Signals for

11-15-2018

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