Professor’s Comments September 14, 2018

Posted by OMS  at September 14th, 2018

The markets continued to rally yesterday in what appears to be the final leg of a well-defined Ending Diagonal Pattern. The Dow closed up 147 points, at 26,146.  It got as high as 26,192, which by moving above the 26,168 is a good indication that final wave ‘e’ of Major Wave 5 up is underway.  The Dow generated its most recent Buy Signal on 11 September when it was trading at 25,971, so the large cap index is now up over 200 points since the Buy Signal was generated.  My target for final wave ‘e’ up remains near the 26,600 level.

The NASDAQ and SPX were up 59 and 15 points, respectively.  Volume on the NYSE was moderate, coming in at 104 percent of its 10-day moving average.  There were 135 new highs and 85 new lows. The bearish divergence between price and breadth continues.  This negative divergence is usually one of the more reliable tells that a top of major significance is approaching.

Yesterday’s rally also caused the VTI-volume indicator on the NASDAQ to turn neutral.  The neutral signal on the NASADAQ is NOT like the signal on the Dow.  When the Dow turned positive, it turned from a neutral signal that had been positive previously, so the change in signal was just a reinforcement of the older positive signal.  In the case of the Dow, the signal change was likely telling us that sub-wave 4 was over and sub-wave 5 up of wave ‘e’ up was starting.  However, in the case of the NASDAQ, the previous signal was a Sell, so by turning neutral, the signal is not as strong. It’s still possible that the NASDAQ topped on 30 August, and yesterday’s rally was one of the sub-waves of Wave 2 down.  As long as the NASDAQ remains below its 30 August high of 8133, I must assume this is the case.  Yesterday, the NASDAQ closed at 8014, well off its 30 August high.

Yesterday’s rally also caused the Hi-Lo indicator on the NYSE to turn positive.  So now, only 3 of the 4 breadth indicators that make up The Tide are negative.  This makes The Tide neutral.  The one indicator that continues to stand out in the current rally is the A-D oscillator. It turned negative of 4 September and remains negative (-37) today.  I can’t overemphasize the importance of a negative A-D oscillator when the Dow is approaching new highs, especially in an Ending Diagonal Pattern.  At the end of the day, its usually the A-D oscillator that wins.  And because of the Ending Diagonal Pattern, a win in this case means the Dow could be trading below the 24,000 in the next month or so.  Be extremely careful with your trading now.

The Sector Ratio weakened to 14-10 positive after yesterday’s session.  So even though the Dow rallied, the scope of the rally was limited.  We continue to see the ‘defensive’ issues leading the way higher, with Transportation, PharmaBio, FoodDrugs, Household Products, and Telecoms at the top of the Strong List.  The Cap Equipment Sector also had a nice pop yesterday, mostly in response to a lower Dollar which remains on a Sell Signal. 

The Weak Sector List was led by Service, Energy, Semiconductors, Retail and Banks. 

Students should continue to hold stocks in the strongest sectors and avoid those in the weak sectors.  

Gold (GLD) rose to 114.78 yesterday before pulling back to close at 113.76. I’m still watching for GLD to move above the 115.18 level, which would constitute a ‘Rope Jump’.  If the ‘Jump’ happens it would be a very positive sign for gold.

All three of the refiners I’ve been watching had nice pops yesterday.  The up moves caused the VTI-volume indicator on HollyFrontier (HFC), Marathon (MRO), and Valero (VLO) to turn positive.  Students should note that even though the indicators have turned positive on these three refiners, the Energy Sector is still in the Top 5 sectors of the Weak List.  I’ve mentioned before that the refiners are often driven by factors that other stocks in the sector are not impacted by. The price difference between Brent and WTI, being one.  Hurricanes being another. So, with Hurricane Florence sitting off the Carolina coast this morning, I have to wonder if yesterday’s pop was caused by the price difference or the threat of damaging winds?  We should know in a few days, once the ‘cane’ passes.

That’s what I’m doing,

h

Market Signals for

09-14-2018

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

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.