Professor’s Comments September 29, 2017
Posted by OMS at September 29th, 2017
The markets were modestly higher to flat yesterday. The Dow finished up 40 points, closing at 22,381. The NASDAQ was up less than a point, with the SPX closing up 3 points. Volume on the NYSE was moderate, coming in at 98 percent of its 10-day average. There were 155 new highs and 14 new lows.
There was yet another small change in the A-D oscillator last night, the fourth in a row, so we need to be on the lookout for a Big Move within the next 1-2 days. Consecutive small change readings are rare, and usually lead to an out sized move. The move could be up or down, so be prepared.
The markets still appear to be approaching a Major Top. However, except for the NASDAQ-100, they have still not generated Sell Signals. Students should watch QQQ, the tracking ETF for the NASDAQ-100, for a possible trend line break below 143.11. If this happens, it will put pressure on the other indexes.
The appearance of QID, the inverse leveraged ETF for the NASDAQ, has turned the Dean’s List neutral. However, The Tide remains positive. So overall, the cockpit indicators remain mixed.
In my recent PT Class, I used the attached flow chart to show students how I use The Tide and the Sector Report to select ETFs and stocks from the Dean’s List and Member’s Watch List. You might want to print a copy and keep it near your computer.
When using the Sector Report to screen for stocks and ETFs, students should realize that not every sector has a matching ETF, especially on the inverse side. This is one of the reasons that I will be leaning toward using inverse index ETFs on the next Tide turn.
I’ll just use the Sector Report as a guide to find the weakest sectors, and pick the inverse index ETF that is the closest match to the weakest sectors. For example, IF the Weak Sector Report starts to show sectors that are made up of mostly large cap industrial stocks, then I’ll buy a few shares of DXD, the inverse index ETF for the Dow. If the Transportation Sector starts to appear on the weak list, I’ll short IYT, the transportation ETF. If the Semis turn weak, that’s easy because there is an inverse ETF for the Semiconductor Sector (SSG). BTW, a lot of semiconductor stocks are traded on the NASDAQ, so when you see semiconductors move to the weak list, you might want to take a look at buying QID, the inverse index ETF for the NASDAQ.
QID and SSG are very closely correlated. Right now, QID is on the Dean’s List near the bottom, but SSG has still not made an appearance. If SSG starts to appear with QID already on the List, I would be very concerned if I owned semiconductor stocks.
Thursday’s Sector Report showed a slight weakening. The Sector Ratio fell to 16-8 positive. The Strong Sector List continues to be led by Energy, Semis, Specialty Banks, Transportation, and Cap Equipment. The Weak Sectors are led by Household Goods, Consumer Products, Healthcare, Telecoms, and Media. I noticed that the PharmaBio Sector has dropped from the Strong Sector List and is now at the bottom of the Weak List. So now the two major Health Care Sectors are on the Weak List. I also noted that the three healthcare ETFs, IXJ, IYH, and XLV, have moved to the bottom of the Dean’s List. The DMI on IYH and XLV has turned negative. Hmmm?
Gold rose slightly yesterday. I bought a few shares of UGLD near yesterday’s low as a pure speculation. I’m not in love with this trade, but gold is oversold now without a trend in place, so it should bounce. There’s a better than 50-50 change that the bounce could continue IF the current decline is sub-wave ‘b’ within an a-b-c pattern for Wave ‘B’ up. If this is the case, GLD could rally to the 130 level before wave ‘B’ up of 2 down completes. Students should note that the 35-period CCI is NOT in the Trend Mode yet. It’s close, but with a reading of only -75, gold should pop because of its oversold conditions. I’ll hold UGLD as long as it does not exceed yesterday’s low.
That’s what I’m doing,
h
Market Signals for
09-29-2017
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | NEU |
THE TIDE | POS |
SUM IND | POS |
VTI | POS |
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Category: Professor's Comments