Professor’s Comments October 4, 2018

Posted by OMS  at October 4th, 2018

The markets had another reversal day yesterday, rising 177 points higher in the morning, then giving up most of their gains by the close.  The Dow reached an all-time high of 26,952 but only finished up 54 points at 26,828 by the close.  The NASDAQ and SPX finished up 26 and 2 points, respectively.  Volume on the NYSE was moderate, coming in at 106 percent of its 10-day moving average.  There were 73 new highs and a whopping 262 new lows. 

Once again, the declining issues on the NYSE outnumbered advancers by 1527 to 1475.  So, on a day when the Dow sets another record high, more stocks fell than advanced.  Hmmm?

BTW, by opening higher than Tuesday’s close and then giving up most of its intraday gains, the Dow formed an Evening Star Candlestick pattern.   These patterns are usually seen at the end of a major move in the market.  During the past few days, we’ve seen several of these negative patterns like Tombstone Dojis, Stars, Hanging Men, and others appear. These patterns are another sign that a top of major significance is approaching.

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

There were no changes to any of my key equity market timing indicators after yesterday’s session.  The VTI-volume indicator for the Dow remains positive, while the same indicator on the NASDAQ remains neutral.

The level I’m currently watching on the NASDAQ (QQQ) is 185.30.  If you draw a trendline on a 15-minute chart of the Q’s connecting the three lows that have occurred since last Friday, you will see that the trendline extends to the 185.30 level.  The trendline is also the neckline of a small Head & Shoulders pattern with the ‘Head’ being last Monday’s high.  So, IF the neckline at 185.3 is broken, the pattern projects a move down to the 183 level.  This would put the larger trendline at the 182 level in danger. A move below 182 on the Q’s would be very negative at this point, as it would likely cause several Sell Signals to be generated on various markets.  BTW, I’m still holding my ‘trial’ position in the SQQQ.  I increased my holdings in this highly leveraged ETF after the Q’s broke below the low of yesterday’s first 15 min bar.  If the Q’s start to break below the 182 level, I’ll start looking to short the Q’s by buying long the 2:1 inverse leveraged QID, especially IF it appears on the Dean’s List.

My market timing indicator for gold remains neutral. The indicator turned positive for the Dollar but remains negative for Bonds.  The indicator for Crude Oil remains positive.

The Sector Ratio fell to a neutral 12-12 after yesterday’s session.  The Strong Sector List continues to be dominated by ‘defensive’ sectors like Household Products, PharmaBio, FoodDrugs, Telecoms, and Energy. Now that the Sector Ratio has turned neutral, students should be extremely cautious about the stocks they’re holding.  If the Sector Ratio starts to turn negative, it will put pressure on all stocks, even those in the strongest sectors.

The Weak Sector List continues to be led by Retail, Service, Consumer Products, Real Estate, Leisure and Banks.

Gold (GLD) fell slightly yesterday dropping 0.45 cents to 113.42. My VTI-volume indicator for gold remains on a neutral signal. The VTI-volume indicator for the gold miners remains positive.  I’m still watching gold closely for signs that Wave 3 up is starting.

Watch the 185.30 and 182 levels on the QQQ. These are very important support levels.

That’s what I’m doing,

h

Market Signals for

10-04-2018

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