Professor’s Comments October 23, 2018

Posted by OMS  at October 23rd, 2018

The markets were mixed yesterday. The Dow was down 127 points at 25,317.  The large cap index had an intraday swing from being up 117 points in the morning, to down 208 points in the afternoon. The NASDAQ finished up 20 points while SPX closed down 12 points.    Volume on the NYSE was low again, coming in at 88 percent of its 10-day moving average.  There were 20 new highs against 285 new lows.  I continue to be troubled by the number of new lows being made by this market.  With the exception of a brief 2-day pause on 16-17 October, my Hi-Lo indicator has been in constant decline for the past 35 trading days.  This is never a good sign for the markets.

Once again, yesterday’s early bounce and reversal appeared to be more corrective than impulsive.  And while the early bounce was expected, the late pullback was not.  In my WSR, I talked about how Friday’s decline was likely part of wave ‘b’ down within Wave 2 up.  I also said that once this ‘b’ wave completes, a significant rally should occur to complete wave ‘c’ up of Wave 2 up.  However, because yesterday’s low volume rally was unable to hold its early gains, it sets up the possibility that Wave 2 completed on 16 October at the 25,818 level and that yesterday’s late decline was the start of Wave 3 down. 

Remember, my market timing signals for the Dow and NASDAQ remain on Sell Signals, telling us to be EXTREMELY cautious about this market.  Same for the Sector Ratio which continues its EXTREMELY negative bias with only 3 sectors on the Strong Sector List.  Also, the fact that the three strong sectors, Utilities, Media, and Household Products, are defensive in nature should tell you something about where the large institutions are putting their money. It’s certainly NOT going into technology!  

There was also a small change in the A-D oscillator after yesterday’s session, so we need to be on the lookout for a Big Move within the next 1-2 days. 

Here’s the thing:  IF the Big Move is down and the Dow starts to move below the 25,244 level, the small ‘Blade’ of the negative Hockey Stick pattern that has developed since the 11 October low could begin to take over.  A break of 25,244 at this point would likely mean that Wave 2 up is over, and Wave 3 down is underway.  Wave 3’s are characterized by impulsive action, so be careful of any break of 25,244.

Same for the SPX which has a H&S neckline near the 2,750 level. Yesterday the SPX closed at 2,756, so it doesn’t have much room before things could start to get ugly.  BTW, as I mentioned last week, my key market timing indicators for the SPX and Russell 2K are also on Sell Signals.

Gold is another thing.  That’s why I spent so much time talking about it this weekend.  Right now, its one of the few indicators, besides the Dollar, that’s on a Buy Signal.  Yesterday while the markets were flip-flopping, gold (GLD) was quietly pulling back, driving its 2-period RSI into the ‘On Sale’ zone.  Were you focused on gold which is on a Buy Signal or were you still watching the equity indexes?  Hmmm?  Tell the truth.

So with gold on a Buy Signal, in an Up Trend, and ‘On Sale’ , I was busy looking for opportunities to buy gold and mining shares yesterday.  We’ll see what happens with gold today.

Last night, I also noted that there was a change in my key market timing indicator for Crude Oil. It turned Neutral from previously being on a Sell Signal.  Hmmm?  Crude Oil is an interesting story now, especially now with Treasury Secretary Mnuchin in Saudi Arabia to about the about the Khashoggi murder.  I don’t have time to talk how this could impact oil prices in these Comments but suffice it to say that IF the indicator turns Green during the next few days, I’ll be very interested in crude oil and energy related stocks. 

But right now, I’m focusing on gold and watching the support levels of the equity indexes mentioned above.

That’s what I’m doing,

h

Market Signals for

10-23-2018

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

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The Hockey Stick Pattern
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