Professor’s Comments November 29, 2018

Posted by OMS  at November 29th, 2018

The markets rallied hard yesterday. The Dow finished up 618 points at 25,366.  The NASDSQ and SPX rose 209 and 62 points, respectively.  Volume on the NYSE was moderate, coming in at 108 percent of its 10-day average.  There were 40 new highs and 205 new lows. Advancing issues outpaced decliners by a 4:1 ratio.

Yesterday’s rally was the big move predicted by Tuesday’s small change signal in the A-D oscillator.  The rally was too strong to be a sub-wave within Wave 3 down, so it’s likely part of a larger Wave 2 move that is correcting Wave 1 down.

If this analysis is correct, yesterday’s rally was likely part of an a-b-c correction for Wave 2 that started from the Wave 1 low on 29 October.  The rally into the 8 November top of 26,277 was likely wave ‘a’ up.  The decline into the 23 November low of 24,269 was likely wave ‘b’ down making yesterday’s rally part of wave ‘c’ up of Wave 2 up.  If this is what’s occurring, wave ‘c’ up should complete slightly above the wave ‘a’ high of 26,277.  For now, I’m going to use the 26,300+ level as my target.

The reason I must assume that Wave 2 up is not complete is because all my timing indicators for the equity indexes turned positive after yesterday’s session.  The Tide also turned positive and the Dean’s List turned neutral.  These indicators are now showing too much strength to be associated with a Wave 3 down.  Wave 3 down will likely have to wait until Wave 2 up completes, probably sometime in mid-December. 

Also, the Mutual Funds will likely be doing a significant amount of end-of month ‘Window Dressing’ during the next few days, which should add a positive bias to the markets. Market commentators will likely call this added buying the start of a Santa Clause rally. However, while I believe the markets will continue to rally during the next few weeks, I don’t see anything that is telling me the rally will be anything but a normal correction in a Bear Market.

The Sector Ratio rose to 5-19 negative after yesterday’s session.  The Strong Sector List was led by Media, Household Products, Leisure, Telecoms and Autos. The Weak Sector List was led by Energy, Retail, Technology, Cap Goods and Transportation.   Seeing these normally ‘aggressive’ sectors on the Weak List is another reason I believe the current rally is part of a corrective Wave 2 within a Bear Market.

Gold and mining stocks rose slightly yesterday.  My VTI-volume indicator for gold remains on a Sell Signal.

Crude Oil continued its decline, with UCO dropping 0.93 cents to 16.62.  It still appears that crude is forming a short-term bottom. Yesterday’s decline did not produce a significant change to the VZO, so it’s still possible that the Crude Oil ETF could start its ‘b’ wave rally if the upside momentum begins to pick up. But like I said yesterday, the momentum is still negative, so I’m still waiting for the indicators to turn before buying. BTW, crude oil is EXTREMELY oversold at these levels, which makes it a potential candidate for scalp traders.

That’s what I’m doing,

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11-29-2018

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