Professor’s Comments October 22, 2019
Posted by OMS at October 22nd, 2019
The markets rose moderately yesterday. The Dow finished with a gain of 57 points, closing at 26,827. The NASDAQ and SPX were up 73 and 21 points, respectively. Volume on the NYSE was 104 percent of its 10-day moving average. There were 177 new highs and 30 new lows.
Yesterday’s rally didn’t change the overall technical picture. With positive indicators on the cockpit, the odds continue to favor a continuation of the current rally towards the 27,500+ level to complete Wave ‘D” up. After that, the Dow should decline to the 24,000 level as a minimum.
The alternate scenario is that the Dow has started Wave 1 down of a new Bear Market. In this scenario, yesterday’s rally was part of retracement wave 4 up of Wave 1 down that began from last Thursday’s high of 27,112. If this is the case, the Dow should decline to the 26,600 level before all five waves of Wave 1 down are complete. I give this scenario low odds, probably less than 20 percent.
The reason I say this is because the Sector Ratio increased to 24-0 after yesterday’s session. That’s way too positive to support a sustained decline. However, a down day today could change those odds as it would mean the Dow is now tracing out a five wave decline which is something you see at the beginning of a primary trend. So, we need to pay attention to how the market trades today as it will tell us a lot about what to expect in the days ahead.
The indicators on the Dow, NASDAQ, and SPX remain Positive. The indicator for the Russel 2K has turned Negative.
The Daily DMI on the Dow, NASDAQ, and SPX remains Positive. The DMI on the RUT is Negative.
The Dean’s List turned Neutral, but the Tide stayed Positive after Monday’s session. The reason for the change in the Dean’s List is because both DXD and TWM appeared on the List. BTW, both TWM (inverse ETF) and UWM, the positive ETF for the RUT are on the Dean’s List at the same time. This is a very unusual event but can happen when an ETF is developing the final leg of a Wave 4 triangle. So, if a triangle is forming in TWM, the ETF should begin to rally in the next day or so and produce a change (positive) in the indicators. If not, something larger is going on.
The market remains in a very fragile condition. With positive indicators on the cockpit, the odds still favor a continuation of the current rally before a major top is in. That top could occur within the next few weeks.
Like I said above, the Sector Ratio strengthened to 24-0 Positive after Monday’s session. I can’t get too negative on this market when all the sectors are moving up. The Strongest Sectors were Service, Retail, Consumer Products, Banks and Semiconductors. There were no weak sectors.
Bottom Line: The markets should remain extremely volatile. As long as the market timing indicators AND the Sector Ratio remain positive, the odds still suggest the Dow will move toward the July high of 27,399 and then top somewhere between 27,500-27,700 level during the next few weeks. A change in the timing indicators would negate this Bullish Scenario and likely mean that Wave ‘D’ up has truncated.
Gold (GLD) fell 0.67 cents to 139.79. The decline caused the indicators on GLD to move to a Sell Signal. So, with GLD back on a Sell Signal, it’s now likely that GLD will decline to the 134-135 level before Wave 4 down is complete. Wave 4s are always difficult waves to trade and this one is no exception. I’m avoiding gold for now until I see evidence that Wave 4 down is complete.
Bonds fell yesterday with TMF shedding 0.70 cents to 27.78. Bonds remain on a Sell Signal, but it’s still not clear if the current decline is part of a small wave 4 pullback or the beginning of something larger. If Bonds are going to rally in a wave 5 up, we should know within another day or so. Right now, I’m on the sidelines with Bonds.
Shares of UCO (crude oil ETF) continue to look like the best bet on the Board. Yesterday, the ETF fell early, then rallied into the close to finish down 0.07 cents at 15.87. The indicators on Crude remain on a Sell Signal, but positive volume numbers I’m seeing tells me that money is starting to move into the ETF. Right now, I’m just waiting for the timing indicators to turn positive before I do anything else.
Again, with respect to Crude Oil, the Model is assuming that UCO is in the final stage of completing a Major triangle pattern. A break above the 11 October high of 16.60 would be very positive and project a move toward 16.91 which is where the 50-day moving average is located. If this happens, the next step would be to see if UCO can move above 18. This is where I will start to get serious with crude.
There were NO CHANGES to the Model after yesterday’s session. The Model continues to hold a ‘trial’ position in Crude Oil and $110,575 in cash.
The Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
That’s what I’m doing,
h
Market Signals for
10-22-2019
DMI (DIA) | POS |
DMI (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 11 Oct 2019 |
NASDAQ | POS | 11 Oct 2019 |
GOLD | NEG | 21 Oct 2019 |
U.S. DOLLAR | NEG | 11 Oct 2019 |
BONDS | NEG | 21 Oct 2019 |
CRUDE OIL | NEU | 17 Oct 2019 |
Category: Professor's Comments