Professor’s Comments November 6, 2018

Posted by OMS  at November 6th, 2018

The markets were mixed Monday with low volume. The Dow finished 190 points higher, closing at 25,461.  It reached an intraday high of 25,507.  I remind students that when the Dow was trading closer to 24,000, I projected a strong rebound to about the 25,800+ level before the next decline begins.  So, it’s possible (not likely) that the Wave 2 retracement completed with yesterday’s rally.  The NASDAQ was down 28 points while the SPX was up 15 points. Volume on the NYSE was low, coming in at 76 percent of its 10-day moving average.  There were 30 new highs and 53 new lows. 

Yesterday’s rally on the Dow was likely part of sub-wave ‘b’ down of Wave 2 up.  If the market pulls back today, it could set the stage for a post-election wave ‘c’ rally to complete Wave 2 up.  At this point, wave ‘c’ up could be either a simple rally, moving straight up to 25,800+ or be a more complex 3-3-5 Zig Zag structure.  But given the change in The Tide AND the Buy Signal for the Dow on the Cockpit, it’s likely that we’ll see some type of post-election relief rally.

However, any rally is NOT guaranteed.  Like I said in my WSR, the results of the election could change everything.  The markets are just coming off a 10 percent drawn down month of October, and when I go back and look at previous Octobers with large draw-downs, there’s usually 3-4 percent pullback in November before the market decides on its next major move.  So, it’s also possible for the market to pullback after the election, possibly to the 25,000+/- level before rising to 25,800+.  Students should remember that the current wave structure is likely a complex Wave 2.  This complex wave is correcting the Wave 1 decline.  It is NOT a new rally leg in a Bull Market.  Once this corrective wave completes, the market should resume its decline, falling to new lows.

The Sector Ratio fell to 5-19 negative after yesterday’s session. The Strongest Sectors were Household Products, Media, Service, Food/Drugs, and Telecoms.   Students should note how the list remains defensive in nature and NEGATIVE.  It’s telling you what the Big Boys (the institutions) are thinking and where they are putting their money. 

Gold and mining stocks fell slightly yesterday.  GLD dropped 0.28 cents to 116.37.  It remains on a Buy Signal as it continues to trade between its 50 and 200-day moving averages.  By trading sideways between the moving averages, GLD is setting the stage for a possible ‘Rope Jump’.  If this happens, it will be the start of Wave 3 up in the metal.

Watching gold and scalp trading the indexes.  Because of the extreme volatility that is possible after the election, up or down, I will not be holding any significant positions going into today’s close.  Given all the possibilities of a corrective Wave 2, I prefer to see how the market reacts to the election results before establishing any new positions.  Students should realize that corrective waves do not have to reach their targets.  They can truncate, and impulsive Wave 3 down could begin tomorrow.  Please be careful.  There’s a lot of risk in this market now, and even if the market rallies, this risk won’t go away.    

That’s what I’m doing,

h

Market Signals for

11-06-2018

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