Professor’s Comments September 28, 2018

Posted by OMS  at September 28th, 2018

The markets had another large intraday reversal yesterday, moving higher in the morning then giving up a good portion of the gain by the close.  At one point the Dow was up 172 points, but only finished 55 points higher at 26,440.  The NASDAQ and SPX were up 52 and 8 points, respectively.  Volume on the NYSE was moderate, coming in at 93 percent of its 10-day moving average.  There were 45 new highs and 115 new lows. Students should note the bearish divergence in breadth continues.

Yesterday’s trading formed an ‘inside day’ candlestick pattern on the Dow. This pattern occurs when a security trades within the high and low range of the previous day.  Inside days are neutral patterns where neither the Bulls nor the Bears are in control.  But the interesting thing about yesterday candle was that it was also a ‘Gravestone Dogi’, (I love the name) where buyers were able to push the price up during the session but were unable to hold the market at the higher levels, conceding ground to the sellers. A Gravestone Doji has greater significance when it occurs in an up-trend as it usually indicates the market is running out of steam.

The reason that I’m pointing this out to you today is because Wednesday’s Fed Day also saw the market reverse course during the day to form a ‘Hanging Man’ Pattern, another bearish pattern.  So, for two consecutive days we’ve seen candlesticks that occur when the market is tiring.  These bearish candles are also forming at a time when The Tide, which is our primary market breadth indicator, has turned negative.  Hmmm? 

There were no changes to any of my key 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. I should mention that the VTI-volume indicator on the Russell 2K is negative (a Sell Signal). Remember, small cap stocks on the Russell will likely be impacted more by Wednesday’s interest rate increase as they tend to rely on borrowing more than their big cap brothers. They also did not receive as large a tax cut as the big boys. BTW, the reason the Dean’s List is neutral now is because the inverse ETFs for the Russell have moved onto the List. 

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

The Sector Ratio remained at 15-9 positive after yesterday’s session.  The Strong Sector List continues to be dominated by ‘defensive’ sectors like Household Products, PharmaBio, Energy, FoodDrugs, and Telecoms.

The Weak Sector List was led by Real Estate, Banks, Retail, Semiconductors, and Consumer Products.

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

Gold (GLD) fell 1.00 to 112.05.  My VTI-volume indicator for gold remains on a neutral signal.  However, the same indicator for the gold miners remains positive.  I find it interesting that the miners are on a Buy Signal while the signal for the basic metal is neutral.  The divergence in signals is telling me that gold (the metal) could be nearing completion of its Major Wave 2 down, as its usually the miners that anticipate a move in the basic metal.

That’s what I’m doing,

h

Market Signals for

09-28-2018

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

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