Professor’s Comments November 20, 2018

Posted by OMS  at November 20th, 2018

The markets fell hard yesterday as sub-wave 3 of Wave 3 down begins to unfold. The Dow finished down 396 points at 25,017. The NASDAQ and SPX were down 219 and 46 points, respectively. Volume on the NYSE was moderate, coming in at 95 percent of its 10-day moving average.  There were 47 new highs and 241 new lows.

Yesterday’s decline was the Big Move predicted by Friday’s Small Change signal in the A-D oscillator.  Students should note how yesterday’s decline in the Dow was checked by the 200-day moving average.  The decline in the NASDAQ and SPX was relatively unchecked, mainly because these indexes are now trading below the 200.  Without support from the 200, it’s a lot easier for these indexes to decline.  So, once the Dow breaks below its 200, it will find itself in the same boat with the other indexes and begin to head lower.  My target for Wave 3 down remains near the 23,500+/- for now. However 23,000 or below remains a real possibility. I’ll have a better feeling for these targets once they get a little closer. A lot will depend on how sub-wave 2 forms. If it extends until after Thanksgiving Week, it will likely result in a higher target. If sub-wave 2 has completed and the Dow starts to break below 25,000 before week’s end, I’d put more weight on the lower target.

The VTI-volume indicator for the Dow turned back to negative after yesterday’s trading. So now, my market timing indicators for the Dow, NASDAQ, SPX, and Russell 2K are all on Sell Signals.  Students should note how the VTI-volume indicator for the NASDAQ and RUT started warning about the current decline by generating Sell Signals on 4 October. The troops always know well before the Generals when the time has come to pull back.

The 200-day moving average on the Dow currently at 25,035 is not the only important level of support now.  That’s because yesterday’s pullback on the NASDAQ (QQQ) was stopped at the 161.5 level.  The 160 level also stopped the Wave 1 decline on the Q’s, so the level near 160 now has two important support points that form the left and right shoulders of a small Head & Shoulders Pattern.  If these levels are broken, the pattern projects a decline to the 143 level as a minimum. Yesterday, the Q’s closed at 162.06.

The Sector Ratio increased slightly to 5-19 negative after yesterday’s decline. 

The strongest sectors were Household Products, Media, Insurance, Service and Telecoms.  Service and Telecoms barely made the list with RS ratings of zero.  So even though the List grew by one sector, it’s still an EXTREMELY weak List.  The weakest sectors were Retail, Technology, Energy, Transportation, Banks, Semiconductors and Cap Goods.  All these sectors have RS ratings of 3 or higher.  This tells me the weak sectors are a LOT weaker than the strong sectors are strong.  Students should also note that all of the ‘normal ‘growth’ sectors are now on the weak list.  Markets don’t usually move higher with defensive stocks at the top of the Sector List.  Those defensive stocks are there for a reason: The Big Boys are worried.

BTW, the Materials sector, which includes gold, remains on the Weak List and now supports an RS rating of 1.  This is the reason I continue to be cautious about buying gold.  I’d really like to see the Materials Sector move to the Strong Sector List before I get serious with my gold buying.  Right now, I’m just watching.

Yesterday’s decline on equities caused my market timing indicator for Bonds to turn positive.  So now I’ll be looking for entry points on the short-term bars to buy shares of TMF and TLT.  Bonds had been on a Sell Signal since 4 September.  The Signal turned neutral on 15 November.  Yesterday the Signal turned positive.

Because of the Thanksgiving Holiday on Thursday, tomorrow’s Comments will be my last post until the WSR.

Watch the 25,000 level on the Dow, 160 on the Q’s, and 2,600 on the SPX.  IF these levels are broken, especially now that my market timing indicators for equities are on Sell Signals, they would confirm that Wave 3 down is underway.  Wave 3 down has the potential to be a significant decline.  Protect yourself.

That’s what I’m doing,

h

Market Signals for

11-20-2018

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

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.