Professor’s Comments September 27, 2017
Posted by OMS at September 27th, 2017
The markets were mixed yesterday. The Dow fell 12 points, closing at 22,284. The NASDAQ was up 10 and the SPX was flat (+0.18 points). Volume on the NYSE was moderate, coming in at 96 percent of its 10-day average. There were 144 new highs and 11 new lows.
Not much changed after yesterday’s trading. The markets appear to be approaching a Major Top, but except for the NASDAQ-100, still have not generated Sell Signals. The VTI-volume indicator for the Dow, NASDAQ, and SPX is still on a neutral signal.
There was another small change in the A-D oscillator last night, so we need to be on the lookout for a Big Move within the next 1-2 days.
The Tide remains positive. Once again, after yesterday’s trading I was surprised to see no change in any of the breadth indicators that make up The Tide. New students should recall that as long The Tide remains positive, I refrain from establishing new positions that would be against The Tide. I mention this today because QID, the inverse ETF for the NASDAQ-100, appeared on the Dean’s List last night. So now, only 3 of the 4 major positive index ETFs are on the Dean’s List, making it neutral.
After yesterday’s trading, most markets finished the day oversold without a Trend in place. The 2-period RSI on the Dow had a reading of 10.8. With an oversold RSI and a VTI moving down, the markets should bounce today. The strength of this rally will determine where each market will likely top. The pattern suggests the Dow will test the 22,400+ level and approach a new high. The SPX will likely re-test its recent high of 2508.85. The NASDAQ-100 may have a more difficult time of reaching its 1 September high of 146.59, especially now that QID has appeared on the Dean’s List.
BTW, now that the DMI, Money Flow, and VTI-volume indicators on the QQQ are negative, I’ll be looking to establish a small ‘trial’ short position in the Q’s if they become overbought on the 2-period RSI. I’ll do this by buying QID, the 2:1 inverse leveraged ETF for the NASDAQ-100. Once again, because The Tide is still positive, I can only buy a ‘trial’ position.
Tuesday’s Sector Report strengthened slightly. The Sector Ratio increased to 18-6 positive. The Strong Sector List was led by Energy, Specialty Banks, Transportation, Insurance, and Cap Equipment. The Weak Sectors are led by Consumer Products, Household Goods, Telecoms, Healthcare, and Media.
Gold pulled back yesterday. GLD finished down 1.39 points at 123.14. Yesterday’s pullback rally caused the VTI to turn negative again, putting the VTI-volume indicator for gold back on a Sell Signal.
Yesterday I mentioned that IF the VTI-volume indicator turns positive, GLD could rally back to the 130 level to complete wave ‘B’ up of an a-b-c pattern for GLD. However now that the VTI-volume indicator is negative again, it’s likely that GLD will continue to form a ‘Blade’ along its 50-day moving average. Then once this ‘Blade’ is complete, GLD will likely decline to the 105 level or below. Gold remains at a critical level now within an a-b-c pattern. It should continue to trade near its 50 for the next week or so. With a neutral VTI (45.8) that’s heading down, students should watch the 2-period RSI for overbought opportunities to establish short or inverse positions in GLD.
Remember, the Fed has told you it will start selling some of its $4.5 Trillion stock and bond portfolio in October. This will make the Dollar stronger and gold weaker, so the fundamentals and the pattern are NOT with gold for the intermediate future.
Also, my long-term short in EEM, is doing nicely. Emerging Markets will have a tough time in this market. These countries borrow huge amounts of money from the IMF and the U.S. And now that the Fed is starting to sell, it will tighten the money supply, making less money available for the Emerging Markets. They will also have to pay higher interest rates for any money they borrow. This will be a big negative for these countries and put pressure on the price of the ETF. My intermediate-term target for EEM is near 40. Beyond that it’s the mid-to low 30s. The VTI-volume indicator on EEM is negative. I’ll be looking to add to my short position on any bounce.
That’s what I’m doing,
h
Market Signals for
09-27-2017
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | NEG |
A/D OSC | SM CHG |
DEANs LIST | NEU |
THE TIDE | POS |
SUM IND | POS |
VTI | NEG |
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