Professor’s Comments November 8, 2017
Posted by OMS at November 8th, 2017
The markets were mostly flat to lower yesterday. The Dow finished up 9 points at 23,557. The NASDAQ was down 19 points; the SPX was flat. Volume on the NYSE was moderate, coming in at 94 percent of its 10-day average. There were 167 new highs and 63 new lows.
Yesterday’s flat session had one major change. The lackluster trading produced a Sell Signal on the Russell 2K as my VTI-volume indicator on TWM, the inverse ETF for the RUT, moved to a Buy. This is the first change in the indicator since 25 August. So now I’m short the Russell.
Other than that, I didn’t see much change in my indicators after yesterday’s session. The volume portion of my VTI-volume indicator on the NASDAQ also turned negative after yesterday’s session, but the VTI remains positive, so I’m now on a neutral signal for the NASDAQ. The same indicators are positive for the Dow. As long as the VTI-volume on the Dow stays positive, it’s likely the Dow will continue to drift higher.
The Dean’s List remains neutral now that TWM, the inverse ETF for the Russell 2K, is on the List. This is not surprising, given what I said last week when I talked about how the new tax plan proposed by House Republicans does little to help small businesses. I think the same thing is starting to happen on the NASDAQ which also contains a lot of small businesses.
The Tide remains negative, so most stocks on the NYSE are now moving down. I never like to trade against The Tide.
Another sign the markets are slowing is the Transportation Index. I’ve been talking a lot about the transports lately, mainly because I see the relationship between the Dow Industrials and the Transports as a historically reliable indicator for measuring the overall health of the market. Yesterday, IYT, the ETF for the Transportation Sector, fell another 1.21 points to 174.01. The ETF remains on a Sell Signal. I’ve been short a few shares of IYT since my VTI-volume generated a Sell Signal on 30 October.
BTW, CSX rallied yesterday even though the transports fell. It appears the rally was an attempt to move back above its 50-day moving average. The rally failed to achieve its objective, and now the move appears to be part of the ‘Blade’ of a negative Hockey Stick Pattern. If the price of CSX breaks below 50.50, the railroad will likely start to test its 200-day moving average near 48.78. A decline to this level would likely continue because the neckline of the Head & Shoulders reversal pattern is now located near 49.80. Any decline below 49.80 would spell major trouble for the stock. The PT indicators are negative on CSX.
Tuesday’s Sector Report weakened slightly. The Sector Ratio decreased by one sector and is now 13-11 positive. The Strong Sector List continues to be led by the Semis, Energy, Cap Equipment, Computers and Financials. The Weak Sectors were led by Telecoms, Consumer Products, Media, Household Products and Food. The top 5 Strong Sectors still have positive Trend Scores, although these scores are not as strong as they were last week. As long as these scores remain positive, it’s likely that stocks in these top sectors will continue to keep the market well bid.
In yesterday’s Comments, I mentioned that the Technology Sector had a large negative Delta Trend Score (DTS) of -114. And if you were watching, technology was one of the sectors that performed poorly yesterday. The poor performance caused my VTI-volume indicator on the Technology Sector to generate a Sell Signal. The Technology Sector is still on the Strong Sector List, and the DMI remains positive, but now with a negative VTI-volume indicator, things could be changing.
Continue to stay in stocks and ETFs in the strong sectors, but think about placing stops and doing some money management. Avoid or short stocks and ETFs in the weak sectors. Continue to watch the Sector Ratio closely. The Ratio is getting close to 50-50. If it starts to turn negative, more sectors will be falling than rising. This will put a lot of pressure on the indexes. BTW, in case you’re wondering, the Sector Ratio turned positive on 6 September. The Dow has gained 1,741 points since the Ratio turned positive. Those 1,741 points represent an 8 percent increase in the Dow. On the other hand, the Semiconductor Sector from the Strong List, is now up over 20 percent. Staying in the right sectors matters. Watching the Sector Ratio also matters!
That’s what I’m doing,
h
Market Signals for
11-08-2017
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | POS |
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The Hockey Stick Pattern
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